South Africa's ANC plans state mining firm

"To sell gold or iron ore in raw form undermines our mining industry. We sell less value like raw iron ore and buy products such as steel at a higher cost."

But signs of greater state involvement in the sector, which accounts for 7 percent of gross domestic product and nearly half a million jobs, could raise concerns among investors wary of any shift to the left under Zuma. South Africa is the world's top source of platinum and No. 3 gold producer.

Mantashe said the new firm might focus on strategic minerals such as coal, uranium or platinum, and operate in a similar manner to state-owned PetroSA, which competes with private oil firms, particularly in exploration.

The mining sector is subject to intense scrutiny by big foreign groups such as Anglo American (AAL.L), South Africa's biggest mining player, which want the sector handled carefully.

The global economic slowdown has already knocked metals prices and put thousands of jobs on the line.

DOUBTS

Paul Walker, chief executive of London-based metals consultancy GFMS, said state involvement was a bad idea.

"My instincts tell me as a general rule state miners are less efficient than private miners. Making a return on capital for shareholders focuses the mind like nothing else," he said.