Questions over Lonmin exec skills

2012-12-04 14:49

Johannesburg - The Cape Town-based Element Investment Managers (EIM) has written a letter to the chairperson of Lonmin [JSE:LON] Board, Roger Phillimore, drawing his attention to a director that has a material conflict of interest.

“We voted against this high profile director at the Lonmin 2011 AGM,” said Mohamed Shafee Loonat, the portfolio manager at EIM, without naming the director.

“Our engagement activity, research, specialist presentations, our Advisory Board and our careful proxy voting all help to provide information for our investment team to better understand the risks of the industry and what action Boards and executives are taking to mitigate them.”

The events at platinum miner Lonmin's Marikana mine where more than 50 people were killed since August when miners went on strike demanding better pay, had been challenging for all stakeholders, including shareholders, he admitted.

“We have written to the Chairperson ... also encouraging Lonmin to work with the platinum industry, through the Chamber of Mines, to engage national government for appropriate infrastructure and to engage local government for bulk services,” Loonat said in a note.

“We have also enquired if the Board is sufficiently diverse with the correct skills to ensure sustainable earnings in the short, medium, and long-term.”

EIM also asked if the company had the right balance of executive skills and experience in place.

It also pointed out its interest in the future action the company planned to take with the housing allowance.

The Mining Charter housing requirement is important, taking into account worker and community challenges. It has been alleged that many miners that live in and around Marikana live there ironically because of the living-out allowance the mines pay so that they don’t have to provide on-site accommodation.

Many critics have asserted that platinum mines have a responsibility to house their workers and, along with the local government, to develop appropriate infrastructure.

“We will continue to use active ownership tools, including ESG integration, engagement and proxy voting to improve investee company leadership, encourage sustainable practices (particularly safety) and transparent disclosure in the mining industry,” Loonat said.

From the Marikana tragedy EIM had learnt that a greater margin of safety is often required for material social risks in the “computation” of South African company fair value.

“We are of the opinion that the Marikana events will encourage the integration of material social issues by mainstream investors in their investment analysis and decision-making in the same way that the BP explosion in the Gulf of Mexico encouraged the integration of environmental and governance issues,” he said.