BUSINESS DAY, April 28/98
Outcome of diamond dispute lies in government's hands
THE battle between Toronto-listed SouthernEra and heirs to diamond-mining property prospected by the Canadians sends ominous signals to other offshore mining firms wanting to invest in SA, says mining reporter David McKay.
GOVERNMENT says it will not take sides in a legal dispute between Canada's SouthernEra and NGS Minerals, the enterprise claiming ownership through inheritance of a diamond-rich farm already prospected by the Canadian mining company.
However, deputy director-general Jan Bredell of the minerals and energy department said government was not sitting on the fence.
He said government had a part to play in the destiny of the mineral rights, located on the Marsfontein farm in the Northern Province.
Bredell said SouthernEra had asked the minerals and energy department to implement section 24 of the 1991 Minerals Act, in terms of which the Marsfontein farm could be expropriated by the state.
It now remains for Minerals and Energy Minister Penuell Maduna to decide whether such a step would be appropriate.
Analysts believe the implication of Section 24 is akin to the philosophy of a recently published green paper in which a new mineral policy is suggested. The main thrust of the proposed mineral policy is that the state gets "the final say", particularly in handing over the right to mine specific mineral rights.
According to Bredell, had the green paper been in effect, the dispute between the heirs and SouthernEra might have been pre-empted.
SouthernEra was not the first mining company to prospect Marsfontein but it was first in deciding the resource was viable.
It invested money in prospecting and has said it spent time unsuccessfully seeking out possible heirs to the farm.
The aim was to compensate the heirs while SouthernEra developed the area. The heirs eventually emerged but only after SouthernEra was ready to push the button on mining the area. After several months, the heirs decided to house their business interests into NGS Minerals and now appear to have gained control of Marsfontein.
Some analysts believe this is a pity.
The Marsfontein diamond resource was effectively sterilised until SouthernEra decided to mine it.
It is unclear whether the heirs had any intention of mining the prospect in the past.
A complication is the involvement of diamond giant DeBeers.
It is understood that De Beers has lodged an application with the minerals and energy department to prospect the Marsfontein farm itself.
What is certain is that De Beers has already agreed to pay NGS Minerals for the mineral rights should NGS successfully rebut the claim of SouthernEra that the land is theirs.
In offering to buy the land from the heirs, for a sum thought to be between R70m and R75m, De Beers was making the struggle of the heirs a lucrative endeavour, analysts said.
However, the Marsfontein farm is comparatively small business to De Beers.
De Beers produced 9,6-million carats from its SA mines in its last financial year and 50% of the world's gem diamonds by value, both from its own mines and in partnership with the governments of Botswana, Namibia and Tanzania.
In comparison, the section of the Marsfontein farm under dispute comprises mineral rights estimated to yield between only 1-million to 2-million carats over its entire life.
For its part, De Beers says small joint ventures are part of its business strategy and it has already concluded a number of joint ventures for small pockets of diamonds.
There is, however, a minor irony in De Beers' involvement. The loss of the mineral rights by a foreign-based investor, which had already spent money prospecting the rights, does nothing to instil confidence in SA among other potential offshore miners.
The effect of De Beers' involvement in the issue is at some variance with chairman Nicky Oppenheimer's statement in the group's latest annual report, in which he said the group wanted to be a "constructive player in the economic resurgence of Africa".
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AFRICAN MINING NEWS, April 28, 1998
De Beers signs agreement on Marsfontein mineral rights (AMB)
De Beers has signed an agreement to purchase mineral rights from
NGS Minerals, who succeeded last month in registering mineral rights
on certain portions of the farm Marsfontein. De Beers says it will not
take transfer of the mineral rights until mid-May at the latest to allow a local court to consider an application for an interdict restraining NGS Minerals from alienating or encumbering its Marsfontein mineral rights.
In another development, SouthernEra Resources (who have been exploring and developing on the property), has issued a statement
suggesting the matter is far from resolved. SouthernEra cites a foreign newspaper report in which South African Minerals and Energy Minister Penuell Maduna is quoted as saying the state will defend the matter against the 29 heirs represented by NGS Minerals.
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