Moody's: Revised mining charter negative for SA miners

The ratings agency says the requirements of the revised mining charter will add to cost of operating mines.

Picture: AFP.

JOHANNESBURG - Ratings agency Moody's say the revised mining charter is credit negative for South African mining companies as the requirements will add to the cost of operating mines, reducing free cash flow generation.

It adds that the higher BEE equity holding requirement is credit negative and will likely require miners to use cash or raise debt.

"We expect that current shareholders are unlikely to support a further dilution of their equity interests."

It adds that the revised charter is not clearly drafted and is ambiguous in many areas, allowing for a number of different interpretations.

Last week Mineral Resources Minister Mosebenzi Zwane released the government's revised mining charter, raising the minimum threshold for black ownership of mining companies to 30% from 26%, and giving resource companies 12 months to meet the target among a raft of other regulations.

The African National Congress has since requested an urgent meeting with the minister, while the Chamber of Mines has threatened court action to oppose the document.