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Monday, 20 August 2018 05:45

Business Times reports that gold and platinum miners in SA have made some hard calls to close shafts and cut jobs this year. The market has been largely understanding that tough times require tough action, but this week an announcement that Gold Fields would restructure its South Deep operation is having the government and investors alike baying for blood. And the obvious target is CEO of 10 years, Nick Holland.

The restructuring of South Deep, into which Gold Fields has sunk about R32bn, will entail as many as 1,560 jobs being lost. The aim is to stop the mine from bleeding about R100m a month; the hope is to one day recover some of the investment.

In its interim results, Gold Fields reported a loss of $369m in the first half of the year, with the losses from South Deep largely to blame, although restructuring of operations in Ghana and impairments from a Philppines project added to the woes. The share price reacted strongly to the news and by Friday was down 20% in seven days.

R32bn

Mineral resources minister Gwede Mantashe has called for Holland to step down. And a representative from Bank of America Merrill Lynch asked the company who, if anyone, might fall on their sword over the debacle. Holland has reportedly indicated he would not resign. Gold Fields, meanwhile, told Business Times no further action would be taken until it is seen whether or not the restructuring has worked.

"Any time a company loses R32bn heads should roll," said Peter Major, director of mining at Cadiz Corporate Solutions. But it's not always easy to say who that should be. "As an asset manager I start at the top, with who bought it," said Major.

Despite gold's 38% climb since his appointment in May 2008, and the rand's depreciation against the US dollar, Gold Field's shares have slumped 59% over the course of his tenure. Rivals haven't fared much better, with Africa's largest gold miner, AngloGold Ashanti, falling 54%. Harmony Gold has slumped about 75% over that time.

Anglo American's Cynthia Carroll, Rio Tinto's Tom Albanese and BHP Billiton's Marius Kloppers all stepped down after costly mistakes brought the share of their companies under pressure.

The common thread is that these executives bought other people's assets that had run for years, and bought them at high prices, said Major. Gold Fields purchased South Deep in 2006 under Ian Cockerill as CEO and Holland as CFO. Holland was appointed CEO in 2008. "It was an attractive asset, I just thought they bought it at a crazy price," said Major. Thinking it might lose the asset to other buyers, Gold Fields panicked and acquired it for R22bn, he said. "It was a knee-jerk acquisition. Had they waited they could have bought it at half price."

The unique structure of the ore body at South Deep, it has long been thought, made it ideal for mechanisation. However, so far Gold Fields has failed to make a success of it.

Holland has blamed high turnover of senior management at the mine. Major agreed, but said the CEO was to blame for that.

"Nick had so many teams in there ... I lost track. He's the one constant," he said. "Heads do need to roll, you can't just keep funding this thing year after year."

Analyst at Noah Capital, Rene Hochreiter, said in a note that it was hard to see the operation making a profit anytime soon. After R32bn invested, Gold Fields has taken an impairment and brought the "carrying value" of South Deep down to R20.7bn on its books. "So, only R20bn of impairments to go before the CEO admits to having lost all the money poured into the mine?" Hochreiter wrote. "Perhaps it's time to do an 'Anglo Gold Ashanti' and sell the mine whilst there is still some perceived value in it?"

But Gold Fields said it would not take further action as yet.

"We would only consider closing or selling South Deep or any other actions if the continued losses are not arrested by the restructuring initiatives we have announced this week. By next year we will be able to assess if these restructuring initiatives have made an impact," said company spokesperson Sven Lunsche.

Gold Fields as a group has performed well over the past few years and has met most of its strategic objectives such as diversifying operationally and geographically and reducing its exposure to SA significantly, Lunsche said. "Our international operations are very cash generative ..."

The original of this report by Lisa Steyn appeared on page 6 of The Sunday Times Business Times of 19 August 2018

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Wednesday, 15 August 2018 13:03

Sowetan reports that a war of words has erupted between mineral resources minister Gwede Mantashe, the National Union of Mineworkers (NUM) and mining company Gold Fields, which plans to lay off more than 1 500 workers.

Gold Fields has been hauled over the coals over its massive job cuts announcement yesterday, allegedly without following proper processes, which include giving the minister notice as per section 52 of the Mineral and Petroleum Resources Development Act.

“We are beginning to notice a worrying trend where some mining companies do not meaningfully engage with the department on their restructuring plans, and only brief us as a mere formality or tick-box exercise, ignoring processes outlined in the law, which are binding to every mining rightholder,” Mantashe said.

The company announced that it planned to retrench around 1 100 permanent employees and 460 contractors from its workforce of 4 550 at its South Deep mine, west of Johannesburg. The mine is one of the largest and deepest gold mines in the world.

The announcement followed similar job cut announcements by big platinum producers Impala and Lonmin that will jointly cut more than 25 000 jobs in the next few years.

Livhuwani Mammburu, NUM spokesperson, said mineworkers had become “sacrificial lambs” in mining companies’ quest for profit. “This is a bloodbath of job losses in the mining industry … NUM is very worried about Gold Fields’ decision to retrench workers,” he said.

Gold Fields spokesperson Sven Lunsche said they differed with Mantashe and the union on the interpretation of the laws.

Gold Fields had announced that persistent issues at the mine that influenced the decision to cut jobs included rising operating and overhead costs.

Mantashe said he had met with Gold Fields executives on Monday where he was briefed on the company’s plans and where he “requested the company to follow the processes outlined in Section 52”.

“It is our view that the spirit in which Gold Fields is engaging contravenes the agreed approach and the laws governing the sector,” Mantashe said.

Lunsche said prior to the public announcement of their restructuring, they had met with the leaders of the representative unions NUM and UASA, as well as Mantashe.

“This was to advise all parties of the impending processes … it is our intention to adhere to both the spirit and the letter of the LRA [Labour Relations Act] in seeking mitigating solutions to the challenges faced at South Deep.”

The original of this report by Isaac Mahlangu appeared on page 2 of Sowetan of 15 August 2018

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Monday, 13 August 2018 04:19

Business Times writes that, if there was ever a comment to come back and bite mineral resources minister Gwede Mantashe, it was his saying that there wasn't a crisis in the platinum sector apart from the self-made one of poor relationships with employees and communities.

Since he made these comments at a platinum conference in Johannesburg in April, there has been little good news from the sector, with Impala Platinum unveiling plans to cut its workforce by 13,000 people by closing or selling five mines and cutting platinum production by nearly 250,000 oz.

Lonmin, the world No 3 platinum miner, is forging ahead with the 12,600 job cuts it announced in December 2017 as it stops unprofitable shafts and prepares for a takeover by Sibanye-Stillwater.

While the conversation might be different behind closed doors between Implats management, Mantashe and the Association of Mineworkers and Construction Union (Amcu) leadership, the public statements from the minister and union leadership show the deep divisions so prevalent in SA's mining industry and the ongoing lack of trust between the players.

Mantashe and Amcu might have preferred to keep the extent of the Implats restructuring out of the glare of public scrutiny, but Implats has a duty to inform shareholders of material events likely to move its share price. The radical restructuring of its flagship asset base, reducing its workforce to 27,000 people from 40,000, would certainly qualify.

Implats managed to reduce its workforce by 2,700 during 2017 without resorting to forced retrenchments and, probably more importantly, without strikes or adverse and attention-grabbing outbursts from Mantashe and Amcu president Joseph Mathunjwa.

Implats CEO Nico Muller warned of some pushback by the government and unions, but the response has been harsh, with Mantashe accusing Implats of "arrogance" and being "unethical", while Mathunjwa said Amcu would not allow 13,000 to be put out of work and threatened to stop all production at the company's South African mines.

Implats has struggled for more than six years to cut costs to the minimum and mine more efficiently and productively. But it's been an exercise in futility and the company is now in a position where radical measures are needed to not only save the world's second-biggest platinum miner but to send a message to the market about reducing the oversupply of the metal.

"This is designed to take Implats down the cost curve and that's good. It's the only place to be in the PGM [platinum group metals] market," said Nedbank mining analyst Leon Esterhuizen.

Citi said the "new strategy has a better chance of delivering value for shareholders than previous strategies . Clearly, a lot depends on execution, and we expect pushback from labour unions."

Implats has recorded impairments of R9,4bn against its assets since 2014, incurring deeper and deeper losses as the rest of its assets in SA and Zimbabwe subsidise the unprofitable Rustenburg mines. In the past six years, Implats has raised more than R10bn in equity and bond issues.

Break-even mines

It is critical for Implats to succeed in stopping the haemorrhage of cash from its Rustenburg mines in the next two years, with its plans setting its remaining six mines up to be at best break-even if the prevailing prices for the basket of metals remain largely unchanged in that period.

Implats has convertible bonds worth R6.5bn due in 2022. It either needs to renegotiate the terms or find the cash. It is burning through R1.5bn-R2bn a year at its unprofitable Rustenburg mines.

A critical part of the strategy will be finding a buyer for two of the five shafts, which have a life of an estimated eight years, and possibly a third, which can be revived if neighbouring Sibanye-Stillwater agrees to a deal to allow mining into its resources that are unlikely to be mined by the gold and PGM miner for years to come.

Analysts raised the question of who would be brave enough to buy old, deep-level mines with conventional, labour-intensive operations where productivity was a problem and the outlook for platinum prices was clouded.

Mathunjwa has demanded the state nationalise the mines Implats plans to close or sell, or offer them to a junior miner with the additional sweetener of one of the remaining six mines thrown into the mix to ensure sustainability for the new entrant.

The problem is Implats has just two profitable mines of the six it is keeping. Two are large, new shafts that the company is ramping up to full production over the next two years and they still need capital, while two more are unprofitable but with the expectation they can be managed to profit quite quickly.

The original of this report by Allan Seccombe appeared on page 7 of Sunday Times Business Times of 12 August 2017

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Tuesday, 07 August 2018 13:56

Sowetan reports that higher education and training deputy minister Buti Manamela wants to change the perception that Technical and Vocational Education and Training (TVET) colleges are for stupid people.

This is because TVET colleges are seen as inferior compared to universities by many.

Manamela, who studied electronics engineering at Tshwane North College, formerly Mamelodi College, after completing his matric in 1997, says the department has embarked on a massive campaign to encourage youngsters to register at TVET colleges, previously known as further education and training colleges.

However, TVET colleges are underfunded and many of them have leadership and infrastructure problems and the department has set up a task team to address some of the challenges facing them.

Manamela has invited former TVET college students who are doing well in their careers to accompany him when he visits TVET colleges.

“I go with an artisan to motivate them. TVET colleges are not for stupid people,” Manamela insists on a Friday morning as we sit outside at a restaurant in a shopping mall in Bedfordview, east of Johannesburg.

The 39-year-old deputy minister, who is wearing running shorts, says he has just finished jogging.

“I have just run 6kms,” he says as he drinks lemon water.

He joined thousands of enthusiastic international and local runners at this year’s Comrades Marathon in KwaZuluNatal, which he finished for the first time. Talking about that experience, Manamela says it was a good feeling.

“There is no greater feeling compared to being a Comrades Marathon finisher. I’m not sure I will do it again, but the journey was a great lesson in many regards. I run for girls, so for every kilometre in every official race I have participated in, we raise 1 000 sanitary pads and school shoes together with some people in the private sector,” he says.

He also tells me that he believes in the power of fasting as it is good for one’s health.

Manamela has moved out of his official residence in Waterkloof, Pretoria, because he wants to have his own property.

“JZ [former president Jacob Zuma] was reshuffling…” he says jokingly.  

I ask him why the department has declared August TVET Month?

“At that time when I was studying at the TVET college there were a lot of challenges, which I still identify with now. But, of course, there are certain improvements,” he says.

The department is using TVET Month as a platform to encourage young people to consider college programmes. It has embarked on programmes such as Khetha that it uses to expose colleges to young people.

SA has 50 TVET colleges, with close to 200 campuses, as opposed to 26 universities.

Manamela was the Young Communist League national secretary when the league started the campaign for free sanitary towels.

“I still continue to insist that government should provide free sanitary towels to those in need,” he says.

According to Manamela, the government made a mistake by shutting down teacher training colleges.

“We should not have closed them, closing them was a mistake” Manamela says.

The government shut down training colleges between 1996 and 2000 and merged them with other institutions.

Former higher education and training minister Blade Nzimande announced plans to reintroduce teacher training colleges in 2013 but nothing has happened.

Manamela reveals that the department is constructing new TVET colleges in Thabazimbi in Limpopo and Nkandla in KwaZulu-Natal.

He says TVET colleges are important and could play a vital role in transforming the skills shortage in the country.

TVET colleges produce skilled carpenters, welders and boilermakers. The National Development Plan has identified TVET colleges as crucial in addressing skills shortages in the country.

Asked if he still enjoys his drink, Manamela confidently says: “I still drink.”

Manamela, who has a master’s degree in policy and development management, says his political career began in his home town of Phagameng in Limpopo.

“I studied further because my work requires me to have some understanding of policy development and implementation process, therefore the Wits master’s [degree] was crucial in this regard.”

He was re-elected as an ANC MP after the general elections in 2014 and subsequently appointed by Zuma as deputy minister in the presidency for national planning, performance, monitoring and evaluation.

Manamela is married to Vuyo Mhlakaza and they have two children.

His wife was recently elected onto the ANC Gauteng executive committee and was previously a board member at the SABC.

The original of this report by Ngwako Modjadji appeared on page 13 of Sowetan of 6 August 2018

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Tuesday, 07 August 2018 11:10

Business Report writes that Royal Bafokeng Platinum (RBPlat) said on Monday that it was currently not planning any retrenchments at its operation, but chief executive Steve Phiri said the miner could not completely rule out the possibility.

The platinum industry is struggling to shrug off high costs coupled with subdued platinum prices.

Last week, Impala Platinum (Implats), the world’s second largest platinum producer, said it would cut 13,000 jobs over two years as part of a strategic restructuring process.

Implats said it had already laid off more than 2 000 workers last year.

Lonmin has also said it would cut 3,000 jobs in the current financial year as part of its plans to release 12 600 workers in the next three years.

“We have done two in two years,” Phiri said. “It might come, you can never say never in this industry.”

Phiri said the industry could, however, benefit from Mineral Resources Minister Gwede Mantashe, whom he described as fair. He said unlike under his predecessor, Mosebenzi Zwane, sentiment in the industry had improved under Mantashe.

“We have seen things normalising quite substantially since the departure of the other gentleman (Zwane),” Phiri said.

“Most of the visits (Section 54) we got last year, particularly in the fourth quarter of the year, had nothing to do with safety concerns, but rather had more to do with protecting the interests of the Indian family (Guptas).”

In October the mid-tier platinum group metals producer was ordered by mining inspectors to suspend operations at its North shaft, the second such closure in about a week.

At the time unions and other role-players said the closure of the shafts was a retaliatory move after the mine terminated a contract with a Gupta owned company.

RBPlat said its net revenue improved 4.1 percent during the period from R1.5 billion in the first half of 2017 to R1.6bn for the first half of this year, while gross profit margin increased from 0.7 percent in the comparative period to 9.4 percent for the six months under review.

The group said Styldrift production levels and delivered grades continue to improve as ramp-up progresses towards achieving the 150 000 tons per month production milestone during the fourth quarter of 2018.

“Good progress has also been made with the rehabilitation and construction of Silo 4 which, as explained in our 2017 integrated report, had been impacted by worse than expected geotechnical conditions,” said outgoing chief financial officer Martin Prinsloo.

Last month, RBPlat appointed a new chief financial officer and executive director. Hanré Rossouw will take over from October 1. Prinsloo resigned in April, having been in the position since March 2009.

RBPlat declined 3.81 percent on the JSE yesterday to close at R25.

The original of this report by Kabelo Khumalo appeared on page 17 of Business Report of 7 August 2018

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