Foreign investors, as well as smaller mining businesses, new entrants to the industry and companies operating marginal mines could be badly affected by the South African government's plans for a Royalty Bill based on gross revenue.

President and chief executive of Canadian firm SouthernEra Patrick Evans says the bill would deter foreign investment in South Africa's mining sector, warning that the platinum sector and the mining industry in general could face problems.

SouthernEra has a 70.9 per cent stake in JSE Securities Exchange SA-listed Messina and is planning to expand its platinum production to 1 million ounces a year by adding to its workings there.

The company, he told Business Day, already paid a royalty to the government because it mines in state reserves.

However, this payment was calculated on the basis of company profits rather than gross revenue, which at least took into account the company's profitability in real terms.

Under the new terms Mr Evans is worried that excessive taxation might deter investment and blight companies attempting to boost their production.

Small domestic mining firms are similarly concerned. They do not have the flexibility to stop operations when they become unprofitable and then begin when they improve, with the result threatening to derail some of the emerging mining companies.