DEPARTMENT OF MINERALS AND ENERGY

1
DEPARTMENT OF MINERALS AND ENERGY

• Presentation to ME PPC on
• Diamond Amendment Bill
• Precious Metals Bill

2
THE TEAM

• Department of Minerals and Energy
• South African Diamond Board
• MINTEK

3
OVERVIEW

• Background
• Highlights per Chapter
• Comparisons

4
BACKGROUND

• SOUTH AFRICA
• Largest producer of gold Contributes 15 of the
  world supply of gold
• 4th largest producer of rough diamonds,
  Contributes 12 of the world production
• Produces 70 of the world platinum supply
• Trainable work-force
• THERE IS OVERALL NEGLIGIBLE VALUE ADD IN ALL THE
  ABOVE MINERAL COMMODITIES

5
BACKGROUND Contd.

• Rationale for amending the LAW
• Accesibility of raw material
• Maximise value addition industry
• Encouraging FDI and foreign skills in South
  African beneficiation projects
• Encourage investments in both trading and
  manufacturing
• Growth of supply side such as manufacturers of
  diamond cutting equipment and servicing equipment
• SA becoming major international diamond cutting
  centre and trading hub
• Infrastructure development
• Increased participation throughout the value
  chain

6
DIAMOND AMENDMENT BILL
7
Chapter 1 Definitions

• Critical new definitions
• Beneficiation - polishing or setting in tools or
  setting in jewellery of diamonds,
• Kimberley Process Certification Scheme - the
  international certification scheme for the
  international trade in unpolished diamonds
  negotiated in the Kimberley Process.

8
Chapter 2A State Diamonds Trader
Diamond Act Amendments
No provision made for the local supply of rough diamonds State Diamond Trader estadlished Power to purchase a age of mine production Distribution of the diamonds to local beneficiators Board of Directors State funded

9
Chapter 2B Diamonds and Precious Metals Regulator
Diamonds Act Amendments
South African Diamond Board Board of Directors dominated by Industry Funded through levies South African Diamond and Precious Metals Regulator Representative Board of Directors State Funded
10
Chapter 3 Illegal Acts
Diamonds Act Amendments
No declaration of synthetic diamonds Assistance allowed to local buyers and sellers at the Diamond Bourse or Trading House Search and seisure not alligned with Constitution of SA Declaration of diamonds being synthetic Assistance to local buyers or sellers prohibited except at Diamond Exchange and Export Centre Search and Seizure alighned with the Constitution of SA
11
Chapter 4 Licences and Permits
Diamonds Act Amendments
Diamond Cutting License and Tool Making Licence Consolidated Diamond Beneficiation License
Period of validity is one year Period of validity is five years
Diamond trading House license facilitates local buying and selling of unpolished diamonds in South Africa Retained in the Bill
12
Chapter 5 Diamond Trade
Diamonds Act Amendments
Diamond Exchange privately owned Establishment of State Controlled Diamond Exchange and Export Centre
13
Chapter 6 Export of Diamonds
Diamonds Act Amendments
Section 59 agreements for Export of rough Unpolished diamonds for export to be offered at export centre and export duty payable
Exports from local trading houses No exports from local trading houses
No distinction between economically cuttable and non-cuttable diamonds Distinction made between economically cuttable and non-cuttable diamonds
14
Chapter 7 Control measures
Diamonds Act Amendments
Section 77 dealing only with control of production of diamonds Section 77A added Minister must determine terms and conditions under which all producers must offer unpolished to diamonds beneficiation
Determine classes of economically cuttable diamonds
Regulator may exempt non-economically cuttable diamonds from export duty
15
Chapter 8 Offences and Penalties
Diamonds Act Amendments
Synthetic diamonds not an issue Protection of natural diamonds through obligatory disclosure of synthetic diamonds
16
Chapter 9 General
Diamonds Act Amendments
No recognition of socio-economic empowerment Guidelines for the implementation of broad-based socio-economic empowerment to be established
Imposition of levies Levies no longer payable
17
PRECIOUS METALS BILL
18

• Presently governed by Chapter 16 of the MINING
  RIGHTS ACT, 1967
• The BILL provides for
• Acquisition
• Possession
• Local beneficiation
• Disposal of Precious Metals

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RATIONALE FOR REDRAFTING

• Deregulation of
• Silver
• Possession of and trading in Minted Bars
  (Investment product)
• Restrict fabricators to Semi-fabricated Precious
  metals
• Transport Permit deleted
• Act administered through the SA DiamondPrecious
  metals Regulator

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RATIONALE FOR REDRAFTING Contd

• Introduction of a Beneficiation license for
  fabrication
• Security matters
• Fabricators (Jewellers and beneficiation
  licensees) may not purchase Unwrought Precious
  Metals
• Provision for stolen Precious Metals to be
  returned to original mine owner if traced
• Introduction of an Import Permit

21
DEFINITIONS
Mining Rights Act Precious Metals Bill
MINTED BAR Dimensions, mass, and precious metal contents, marks and registration - prescribed.
SEMI-FABRICATED PRECIOUS METAL Precious metal alloy in the form of sheet, tube, wire or grain
UNWROUGHT PRECIOUS METAL Means Unmanufactured precious metal in various forms UNWROUGHT PRECIOUS METAL excludes minted bars Proviso that precious metal will be regarded as unmanufactured if not refined beyond 99.9 purity
22
ADMINISTRATION OF THE ACT
MINING RIGHTS ACT PRECIOUS METALS BILL
By National Treasury mainly Roles for Mining Commissioner, SAPS Commissioner Receiver of revenue By Minister of Mineral and Energy through the SA Diamond and Precious Metals Regulator Role for National Commissioner

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SPECIAL PERMITS FOR UNWROUGHT
Mining Rights Act Precious Metals Bill
Permit for unwrought required for scientific purposes or in connection with any trade, industry or profession (not jeweller). Permit for unwrought required for scientific purposes or by holders of precious metals beneficiation licences or jewellers permits
24
CONSIDERATION OF APPLICATIONS FOR LICENCE, PERMIT
OR CERTIFICATE
Mining Rights Act Precious Metals Bill
No regard to socio-economic empowerment Regulator must have regard to the promotion of equitable access and orderly local beneficiation of precious metals and May have regard to the requirements of the broad-based socio-economic empowerment Charter for the Mining Industry
25
EXTRACTION, SMELTING, REFINING LICENCE
MINING RIGHTS ACT PRECIOUS METALS BILL
Recovery works licence 1. Issued by SARS for a magisterial district 2. Included silver processing 3. Issued for a quarter, or a year and subject to renewal Refining licence Issued by Regulator, but not restricted to a magisterial district Issued for 10 years and subject to renewal. May only sell precious metal in semi-fabricated form to jewellers and precious metal beneficiation licensees
26
PRECIOUS METALS BENEFICIATION LICENCE
Mining Rights Act Precious Metals Bill
Permit for unwrought precious metal required in connection with any trade, industry or profession. Temporary or once-off Precious metals beneficiation licence to buy semi-fabricated precious metal, and to fabricate it into articles other than jewellery. Issued for 10 years renewable Must keep proper books of account in accordance with GAAP. May not purchase unwrought precious metal
27
JEWELLERS PERMIT
Mining Rights Act Precious Metals Bill
Issued by SARS for a magisterial district to buy and fabricate unwrought Issued for a year and subject to renewal Must keep a prescribed register and exhibit to SAPS when requested. Issued by Regulator to buy semi-fabricated precious metal, and to fabricate it into jewellery. Issued for 5 years and subject to renewal Must keep proper books of account in accordance with GAAP
28
IMPORT PERMIT TRANSPORT PERMIT
Mining Rights Act Precious Metals Bill
Transport permit to transport unwrought precious metal Copy of licence, permit, right or certificate needed to transport unwrought or semi-fabricated precious metal Import permit to import precious metal. Documentary proof of origin required.
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SAPS POWERS OFFENCES PENALTIES
Mining Rights Act Precious Metals Bill
Penalty for very serious offence R50 000 or up to 10 years imprisonment. Penalty for less serious offences R2 thousand or up to 6 months imprisonment. Powers of police to inspect, search, seize - updated. Penalty for very serious offences increased to R1 million or up to 20 years imprisonment. Penalty for less serious offences increased to R500 000 or up to 10 years imprisonment