Analysts at the Royal Bank of Canada (RBC) yesterday (27th November) expressed their concerns over the challenges facing the South African platinum industry in the coming months, Moneyweb reports.

The country's mines have been plagued in 2008 by a combination of January's Eskom power crisis, falling platinum and PGM prices and a number of safety-related issues and worker deaths.

Now RBC employees Leon Esterhuizen, Yuen Low and Arnold van Graan have spoken about their concerns, not least in relation to the much-vaunted black economic empowerment (BEE) drive.

They noted on Moneyweb.co.za: "The current low metal price environment, particularly in the PGM industry, is suddenly crystallising some of the core shortcomings of this drive as many of the recently created BEE companies find themselves without any cashflow to service debts and with asset values at fractions of what they used to be."

With mining law in South Africa now dictating that BEE stakes must be at least 26 per cent, the analysts expressed concern that some BEE companies are now important shareholders who cannot contribute to capital raisings.

They added that the whole BEE theory could be tested in the next few months and could even lead to the creation of a mining company fully owned by the government.

And although they claimed that such consequences were not "highly probable", they noted that heavy government involvement could lead to new rules and regulations "or even active currency devaluation".

Source:

SA mining - The politics of profits (27/11/08)
http://www.moneyweb.co.za/mw/view/mw/en/page662?oid=239849&sn=Detail