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The regulatory regime in the South African mining industry is going through a period of fundamental change. Legislation governing mining and empowerment includes, inter alia, the South African Mineral and Petroleum Resources Development Act 2002 ("MPRDA"), the Broad-Based Socio-Economic Charter for the South African Mining and Minerals Industry ("the Charter"), the Charter Scorecard and the Mining Titles Registration Act 1967 (as amended).
This legislation introduces a new system of custodianship and licensing of mineral rights in South Africa and requires mining companies to achieve certain empowerment criteria in relation to their South African assets i.e. ownership of assets by Historically Disadvantaged South Africans (HDSA's).
The legislation provides that, amongst other things, at least 15 per cent of the equity of mining companies (or equivalent units of production) must be owned by HDSA'ss within five years, and at least 26 per cent within ten years. The MPRDA came into force on 1st May, 2004. in addition, mining companies operating in South Africa are required to apply to convert their existing mining licences and prospecting permits into new order mining and prospecting rights.
Prior to the implementation of the above legislation, the majority of mineral rights (which include mining and prospecting rights) in South Africa were privately held and did not vest in the South African State. The new legislation changes the current ownership and regulatory regime so that all mineral rights in South Africa are placed under the custodianship of, and regulated by, the South African State. A wide range of factors set out in the Charter and the Charter Scorecard, including HDSA empowerment, HDSA advancement in the workplace and the development of communities in which the applicant company operates, are considered by the Department of Minerals and Energy when considering applications to convert existing mining licences and prospecting permits. Existing used mining licences must be converted into new order rights within five years, and existing used prospecting permits must be converted with two years. To do so, the Charter and Charter Scorecard criteria must be satisfied, or undertakings given that they will be satisfied within stipulated time periods.
The South African Government is involved in a process to address legacy issues in terms of the uneven distribution of wealth and opportunity in the country post apartheid. As a company we support the Government's aims and are committed to delivering the requirements of the Mining Charter. We welcome the opportunity to transform Lonmin into a model for fairness and equality in the new South Africa.
We worked hard during 2005 to gain our new order mining licences and although this has not yet been achieved we have made considerable progress with our Social and Labour Plan during the year. Through 2006 our focus on this area will continue as we work towards achieving the Social and Labour Plan targets. Discussions with our local Klerksdorp office of the Department of Minerals and Energy in relation to the conversion of our Marikana mining licences continue and we thank them for all their help and assistance with the process. We believe we now have in place all the elements to achieve the conversion of our mining licence Platinum production in 2010. This year has seen Lonmin make considerable progress on our journey of transforming into a world class natural resources company.
Incwala Resources (Proprietary) Limited is a South African registered company specifically incorporated for the purposes of enabling broad-based equity participation by Historically Disadvantaged South Africans (HDSA's) in Lonmin Platinum.
Lonmin Plc and the International Development Corporation both own 23.56% of Incwala, with the remaining 52.88% being held by HDSA owned consortia. Lonmin Plc, facilitated, inter alia, by means of loans amounting to $33.8m in total and guarantees, the purchase by the consortia of the Incwala shares. Incwala then used these funds to purchase an 18% holding in the share capitals of Eastern Platinum Limited and Western Platinum Limited.
The Company was incorporated on 2 July 2003 and has its head office in Sandton, South Africa. The vision of Incwala is to become a flagship for black economic empowerment in the South African mining industry, enabling broad-based participation by HDSA's in the mineral wealth of South Africa.
In June 2006, Incwala Resources was included as an 18% shareholder in Lonmin Platinum Limpopo when we refinanced our acquisition debt and transferred the Limpopo operations into Western Platinum. In addition, Incwala Resources acquired a 26% stake in our Akanani project in July 2007.
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