South Africa to announce iron and coal as 'strategic minerals'

The South African government is poised to announce iron and coal as "strategic minerals", which analysts say would have a negative impact on mining company profits.

Ngoako Ramatlhodi, South Africa's minister for mining, on Tuesday said that a new bill being put before the president could reclassify certain minerals such as coal and iron ore as "strategic" in order to support local industrialisation.

As a strategic mineral, the South African government could decide how much of a commodity must be sold and at what price.

"If that bill is signed into law, then it will give the minister the ability to declare certain minerals strategic for purposes of industrialisation in South Africa," he said.

Under the bill, Ramatlhodi said strategic minerals "will be sold for production costs excluding transportation. That is the mine-gate price. And the industry is comfortable with that, because they negotiated that formula," he said.

He added that iron ore and coal were "obvious" minerals for the reclassification.

This would hit mining companies such as Anglo American, via its Kumba Iron Ore subsidiary, as well as BHP Billiton.

Issuing a 'sell' on Anglo, Liberum said: "The bulk of Anglo American's iron ore and coal is for export, which commands much higher prices than domestic prices. We do not know the exact pricing mechanism that the government will enforce, but it will be a negative imapct on profits."