Charter scares off more of mining's few stockholders
Sector starved of foreign cash is being banned in investor mandates
Mining stocks are a no-go zone for even more investors after the release of the Mining Charter heightened risk for the sector - and some investment mandates now specifically exclude South Africa's mining industry.
Industry commentators said there would be more domestic and foreign investors exiting the mining industry after the value of mining stocks plunged in response to the release of the charter.
Adele de Jager, head of mining tax and a director at KPMG, said it was becoming increasingly difficult for investors to invest in an industry with so much uncertainty.
In private equity, some have a mandate to stay away from the mining sector "because of risks associated with it", De Jager said.
R2.7-billion in pension fund investments were lost on the JSE after the Mining Charter was released
Peter Major, a mining analyst at Cadiz Corporate Solutions, said most traditional foreign investors - pension funds, general mutual funds and private wealth - had mandates that were structured so as to make investing in South African mining very unlikely - and increasingly "not possible at all".
Major said many mandates precluded gold and diamond shares in any country.
However, each day that goes by sees South African mining shares being further excluded from consideration by the international investment and banking communities.
Major said it was "much harder now attracting foreign money into South African mining than it ever was in the days of apartheid sanctions on the country in the latter 1980s".
Given that situation, Major said, "how can you put an old lady's pension there or a kid's college fund?"
The combined market capitalisaton of JSE-listed mining companies fell by about R51-billion on the day the Mining Charter was released.
About R2.7-billion of this was pension fund investments.
Roger Baxter, CEO of the Chamber of Mines, said the industry had lost two investments since the charter was released. He would not disclose the details.
Some analysts said that while they did not have mandates to stay away from mining stocks, they preferred to look at diversified miners, such as Glencore and BHP Billiton, that had little to no exposure to South Africa.
Drikus Combrinck, portfolio manager at Capicraft Investment Partners, said even companies such as Northam Platinum would probably still be affected by the charter because they might not meet other new requirements stipulated by the new charter.
One way or another, all mining companies would be affected by the Mining Charter, he said.
"Within and of themselves [mining stocks] are very risky.
"That is why they get the biggest discount factor with their stocks," he said.
Risk in the sector is also heightened by commodity prices and the rand.