THE GAME is changing. What used to be enough is no longer,
and we, as an industry, need to step up to the plate. These are the words
conveyed by outgoing Anglo CEO, Cynthia Carroll last week at an industry
It's ironic that Carroll, who has been heckled as late for
not being South African enough, chose a baseball metaphor: stepping up to the
plate. The cynics among us would probably find a more appropriate metaphor in
stepping away from the trough, which is a more fair description of the root
problem in the mining sector.
Be that as it may, as Carroll puts it “what used to be
enough is no longer”. The question now remains, what is enough in the new
As your columnist has been forecasting since that fateful
Marikana moment, the industry is transforming by and large to the detriment of
Last week began the slow march to divestiture and risk
mitigation – strategies that mine company boards are all debating – with Gold
Fields [JSE:GFI] spinning off its older assets into a separate entity, Sibanye Gold.
The move in isolation makes perfect business sense; older
assets require different strategies and managers. While part of a larger
portfolio the KDC and Beatrix mines which are now Sibanye, received broader
attention and will now benefit from dedicated management attention and cash
What makes even more sense for Gold Fields is that
international shareholders have been appeased. Like the exorcising of an
ingrown toenail, shareholders can maintain their exposure to the gold sector while decreasing their need to limp
along with the Rainbow Nation handicap (Gold Fields still maintains heavy SA
exposure through its South Deep Mine with 40m ounces in reserves).
Gold Fields has, is and will continue to sing off the song
sheet that these moves have been mooted for eons, and they have indeed. What
strategy session would be complete without debating lobbing the axe and
spinning off department so and so – what marks a watershed in the industry is
that they actually did it - and did it while the gold price is soaring without Icarus
Before exploring how this 'Sibanye Slice' will rinse and
repeat throughout the sector, it's important to contextualise how much of a
game changer this event is.
Sibanye starts out with prior knowledge of wage inflation
and a deep familiarity with geopolitical risk, so their next steps are
indicative of the new mining paradigm, their actions are precursors to the
tectonic shifts rumbling through the nations ore sources.
To this point, Sibanye CEO elect Neal Froneman articulated
that "the ability to preserve employment in deep level gold mining by
extending the life of mines will depend on effective co-operation between
management, trade unions and the workforce”. CEO speak for we're cutting jobs
but it’s your fault!
Undoubtedly they will reduce labour, gearing up for
increased mechanisation, implementing lessons learnt at South Deep. No doubt
they will cite geological reasons for this, but hey, who are you kidding?
Another reduction will be in corporate overheads. This move
is long overdue and should be welcomed by shareholders – miners tend to forget
what exactly it is that they do when they spend too much time in London and
Sandton. Going to work in those stylish, reflective boiler suits does wonders
for recalibrating executives.
Another telling message which government will obviously
ignore is what Gold Fields will do with its Sibanye bounty, equally obvious is
that whatever it will do, it will not remain in South Africa – or to quote Gold
Fields press release:
"Following the unbundling, Gold Fields will focus
on... growth through the expansion and
life extension of its existing mines in Ghana, Peru and Australia..."
For my readers who accuse me of scaremongering, please note
the absence of South Africa, but not Africa.
Companies vote with their feet – they make a noise when they
build schools, clinics and bird feeders, but they are rather quiet when they
diversify billions into foreign countries.
Who’s next in line for the Sibanye Slice?
Carroll inadvertently gave us the answer.
As she has stated she intends remaining in the position
until a replacement can be found. Fair enough, it's quite acceptable not to
leave a $40bn company rudderless, but she has also highlighted that she intends
to see through the completion of the review of Anglo Platinum.
Anglo Platinum [JSE:AMS] (Amplats) is the world’s largest platinum
miner; Anglo American [JSE:AGL] owns 80% of it. Why Carroll links her departure to the
Amplats review is testimony to her erudition and character.
With her parachute already on, the best gift she could
bequeath her successor is a fighting chance.
The spinning off of Amplats – Sibanye style – would be a
death march for any chief executive. By Carroll executing the divestiture she
immunises her replacement without the need to fall on any sword; the political
dromedaries will castigate her non-the-more, they've never had much time for
facts anyway. Bravo Cynthia!
No doubt mining companies will have to up their game, but
the root cause lies elsewhere.
Politicians and labour unions best make their way to the
SA currently produces 7% of world gold, down from 67% in the
1970's. Politicians best maul the nationalisation issue fast and furiously
before it drops to nada. Union bigwigs best alight from their SUV's and align
with their electorate, while both are still employed.
Sibanye means we are one, herein lays the kernel to solving
the nation's woes: labour, government and industry must unite in order to
succeed – one country, one destiny, one solution.