South Africa weighs handover of mines

Shares in mining stocks slumped sharply yesterday after it emerged that the South African government was considering plans that could force mining companies to relinquish control of their assets to black empowerment groups.

Xstrata, the Swiss-based mining and metals group that listed on the London stock market earlier this year, and Anglo American led the fallers in the FTSE 100, plunging 12 per cent and 11 per cent respectively, while shares in Lonmin, a platinum and gold miner, fell 12 per cent.

Analysts said that the draft proposal for the new South African mining charter could see black investors gain control of all existing and new mines within the next 10 years. The move is part of a continuing debate in South Africa about how to transform the mining sector, which like the rest of the country's industry is dominated by white businessmen.

Anglo American, which relies on South Africa for almost half of its sales, swiftly attacked the plans as "not feasible" and "unacceptable". A spokeswoman said that while it was still too early to quantify the outcome, Anglo could "have to pass over various portions of our assets to [black empowerment] groups".

Under the draft plans, black empowerment groups could wind up with 30 to 51 per cent of mining companies' existing assets. The proposals would also affect all future mining licences.

John Meyer, a mining analyst at SG Securities, said: "This will be taken very negatively by the market. Investment funds are going to look on this as a worse case scenario." David Bird, at ABN Amro, said: "If it all comes true it is extremely, extremely bad not just for mining but for South Africa." Another market watcher called the move "akin to nationalisation or government interference", adding that "South Africa needs to make a very clear and strong statement".

A spokesman for the South African Department of Minerals and Energy sought to underline that the proposals were still a long way from being finalised. He said the document was the government's "first position", which was being "submitted for discussion" with the industry.

Anglo American, the world's second-biggest mining company, said it would work with the South African government and other industry players to produce a charter that was "well considered" and "practically feasible". Its shares fell 105p to 854p.

A spokesman for Lonmin, which is almost wholly dependent on its mines in South Africa, said it was "not appropriate to comment" at this stage. "We recognise that black empowerment is a requirement and have always done so. This has been in the offing for some time," the spokesman added. Lonmin's shares fell 117p to 868p. Xstrata, which reports it maiden first- half results on Monday, saw its shares fall 80p to 565p.