South32 chief executive-elect Graham Kerr.
Investors are growing wary of South32, the firm BHP Billiton (ASX, NYSE:BHP)聽, as the new company will rely heavily for earnings on South Africa, a region with a known record of not making things especially easy for miners.
According to , there are a number of challenges South32 is likely to face, including potential Black Economic Empowerment ownership concessions, probable power price increases as they聽renegotiate contracts at Eskom, and the need to make a decision on reinvestment in South Africa Coal.
But what is keeping analysts awake at night the most, according to the article, is the fact that the South African government is reviewing the mining industry鈥檚 compliance with rules under the mining charter, which includes a 2014 target of 26% black ownership of companies. And based on聽several reports that figure is likely to be increased.
But chief executive officer elect Graham Kerr has noted that the challenges around Eskom and DMR (South Africa鈥檚 Department of Minerals) are not new and that BHP聽has historically had a good relationship with both.
鈥淚f you look at the DMR policy today, we are fully compliant with the charter, what is probably more important is that South32 believes in the spirit and the intent of South Africa鈥檚 transformation empowerment agenda,鈥� Kerr was quoted as saying.
With a once-off cost of around $738 million before tax, South32鈥檚 will be based in Perth, but the new firm is already setting up a regional head office and global聽shared services centre located in Johannesburg.
Besides a primary listing on the Australian Securities Exchange, South32鈥檚 shares will also be traded at the聽Johannesburg Stock Exchange and London.
All of BHP shareholders will receive shares in South32 if the miner鈥檚 board and shareholders approve the demerger at a shareholders meeting scheduled for May 6.