Questions hover over Wild Coast mining deal

Some have been arguing from the outset that the valuation of $18 million which Xolco have to pay for their 26% stake (minimum BEE criteria) was baseless, and proved that no negotiation took place with truly affected parties; as they obviously never took negotiable access rights and royalties into account.

Yet Ehlobo Heavy Minerals, the original BEE partners who walked away from the deal because of environmental issues and other implications, were only going to pay a third of that price for their majority stake.

Read TFA from Business Report:

Questions hover over Wild Coast mining deal
August 14, 2008

By INGI SALGADO

There are perplexing questions around last week's granting of mining rights in a 7km stretch of pristine coastline at Xolobeni, part of the Wild Coast that would be most inaccurately named were heavy metal extraction to proceed.

In fact, there are so many questions that the department of minerals and energy may be wishing that the application for prospecting rights had never landed on its desk some years back.

The decision to award mining rights to the local subsidiary of Perth-based Mineral Commodities (MRC) is likely to set in motion a legal challenge from the anti-mining lobby that may involve questioning the constitutionality of legislation that provides for new-order mining rights.

Not since the battle for St Lucia was waged by conservationists in the early 1990s has a mining application received so much opposition - this time from a cross section of interest groups, including community representatives, traditional leaders, environmental groups and the department of environmental affairs and tourism, which prefers ecotourism for an area that contains more plant species than the UK.

The minerals and energy department, on the other hand, appears more interested in Xolobeni's description as one of the 10 largest mineral sand resources in a world hungry for minerals such as titanium (although this is disputed by some geologists).

It might be interested in protecting itself from litigation - ironically enough, from MRC. When the department granted MRC prospecting rights for four blocks at Xolobeni in 2005, it appeared to be unaware that part of this 22km of coastline fell within a protected coastal reserve designated by Bantu Holomisa, the ex-leader of the apartheid-era Transkei homeland.

The existence of the protected area would certainly have come to the department's attention last year, when the appeal court upheld the reserve's status by ruling against 16 cottage owners in the area.

The department's decision to award mining rights in just one of the four blocks - the one that falls outside of the reserve and is deemed the least environmentally sensitive - appears to acknowledge the pickle it now finds itself in. There is speculation that granting MRC these partial mining rights is an attempt to prevent a lawsuit to reclaim the company's prospecting costs from the state, which some estimate at tens of millions of dollars.

But the decision leaves the state open to litigation from the anti-mining lobby. If the original prospecting licence was flawed, then it would seem logical that the mining licence on which it was based would be too.

The department has yet to explain why it granted an application with such obvious shortcomings, chief among them blatant disregard for community participation.

The Human Rights Commission concludes in a report released last year that the Xolobeni community was not adequately consulted and that a vast majority of people are against the mining. Since then, allegations have surfaced of intimidation and fraud relating to a pro-mining petition.

The Xolobeni project is touted as a potentially suitable case to take to the constitutional court to test mining legislation against constitutional provisions that lay the basis for state expropriation of land.

There are disturbing aspects related to MRC's empowerment partner, Xolco, which replaced Ehlobo Heavy Minerals when it walked away from the deal. The R135 million that Xolco is touted to pay for its 26 percent stake is nearly three times as much as Ehlobo was to have paid for a majority stake. There is no evidence in a shareholders' agreement that Xolco, which has strong connections to local politicians, will transfer dividends to locals as claimed.

( Source: http://www.busrep.co.za/index.php?fSectionId=553&fArticleId=4557859 )