1. DEPARTMENT OF MINERALS AND ENERGY Presentation to M&E 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]  4 th 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.  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 BACKGROUND Contd.

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 ActAmendments No provision made for the local supply of rough diamonds State Diamond Trader estadlished: (a) Power to purchase a %age of mine production (b) Distribution of the diamonds to local beneficiators (c) Board of Directors (d) State funded

9. Chapter 2B: Diamonds and Precious Metals Regulator Diamonds ActAmendments 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 ActAmendments 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 ActAmendments 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 ActAmendments Diamond Exchange privately owned Establishment of State Controlled Diamond Exchange and Export Centre

13. Chapter 6 : Export of Diamonds Diamonds ActAmendments 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 ActAmendments 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 ActAmendments Synthetic diamonds not an issue Protection of natural diamonds through obligatory disclosure of synthetic diamonds

16. Chapter 9 : General Diamonds ActAmendments No recognition of socio-economic empowerment Guidelines for the implementation of broad- based socio-economic empowerment to be established Imposition of leviesLevies 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

19. 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 Diamond&Precious metals Regulator

20. 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 ActPrecious 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. MINING RIGHTS ACTPRECIOUS 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 ADMINISTRATION OF THE ACT

23. Mining Rights ActPrecious 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 jeweller’s permits SPECIAL PERMITS FOR UNWROUGHT

24. Mining Rights ActPrecious 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 CONSIDERATION OF APPLICATIONS FOR LICENCE, PERMIT OR CERTIFICATE

25. MINING RIGHTS ACTPRECIOUS 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 EXTRACTION, SMELTING, REFINING LICENCE

26. Mining Rights ActPrecious 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 PRECIOUS METALS BENEFICIATION LICENCE

27. Mining Rights ActPrecious 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 JEWELLER’S PERMIT

28. Mining Rights ActPrecious 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. IMPORT PERMIT & TRANSPORT PERMIT

29. Mining Rights ActPrecious 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 SAPS POWERS; OFFENCES; PENALTIES