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Inside Bernard Swanepoel’s Last Mile Fund

Nov 09 2017 09:37
David Mckay

Bernard Swanepoel, former CEO of Harmony Gold and Village Main Reef. (Wynand Van Der Merwe)

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Inside Bernard Swanepoel’s Last Mile Fund

 

If ever there was evidence that former Harmony Gold CEO Bernard Swanepoel had dealt with the past, it was surely the decision to induct his erstwhile rival – Ian Cockerill, the former CEO of Gold Fields – into the Mining Hall of Fame.  

The Mining Hall of Fame is an invention of Swanepoel’s Joburg Indaba intended to recognise prominent contributors to the mining sector as well as add a bit of nostalgia and even celebrity to the function’s gala dinner, which opens the annual event.   

Up stepped Cockerill to accept his award from Swanepoel.

The two were sworn enemies, at least during Swanepoel’s hostile takeover attempt of Gold Fields, which ended in failure and signalled the beginning of the end for “the Harmony Way”, a type of mining strategy that depended on breathing life into nearly – but not quite – exhausted gold assets.   

Since those days, Swanepoel has reinvented himself as both a non-executive elder (Impala Platinum, Extract Group) and as social conscience, which he achieves through the Joburg Indaba, embroiled as it is in the day’s controversies and debates.   

Now, however, Swanepoel is at the forefront of a new private-equity creation – Last Mile Fund – which sees him team up again with Patrice Motsepe who is still chairman of Harmony. Swanepoel told finweek that the purpose of the fund is to identify existing businesses where he and his co-investors can add scale. 

“We would look at a company that might already be a supplier to, say, Mooinooi [platinum mining town in the North West] and see if it could be a supplier to other areas, maybe to sub-Saharan Africa,” he says.
  
The structure of the fund is interesting. Motsepe’s African Rainbow Capital will match every rand that Swanepoel’s group of investors bring to the table. A fund of between R1bn and R1.5bn is envisaged with perhaps three to four major investments. 

Swanepoel is assisted by Clinton Halsey, one of his partners at To The Point, his business strategy consultancy that is a shareholder in Last Mile. 

In its first investment – the R180m takeover of Mooiplaats, a thermal coal mine placed on care and maintenance by its former owner, Coal of Africa – Swanepoel is joined by Sipho Nkosi, the former CEO of Exxaro Resources, and Don Turvey, the former CEO of Continental Coal and former director of BHP.
  
In the case of the Mooiplaats transaction, which formally closed at the end of October, the Last Mile Fund formed a consortium, MCH, which has the intention of keeping as much equity in Mooiplaats available for distribution to incentivise black professionals who would run the mine, as well as employees and community members who would benefit from reopening the operation.  

Says Swanepoel: “We will take a high return from our investment, but the equity remains available, which allows us to do things.

We will take a preference share [which means Swanepoel and Motsepe would receive dividends before ordinary shareholders] that will be used to pay back debt and/or a revenue royalty, so the fund can participate from day one.” 

There is no management fee per se, which one would expect of normal private equity.  

“Mooiplaats is well positioned in Ermelo relatively close to the Richards Bay Coal Terminal and produces a kind of coal where we can easily get offtake agreements with people who can market the coal.

Because of the way mineral rights in the coal industry were awarded, there are plenty of synergies with properties near Mooiplaats, while the R600m wash plant is still there; the machinery is all still there and is being serviced as we speak.” 

Mooiplaats has 45m tonnes in coal reserves with opportunity for expansion into bordering properties, Swanepoel says.  

“It’s a case of pressing a button and something will start up,” says Swanepoel of the mine. “There is some 10 years life of orebody, which currently achieves a R1bn net present value.

The funder of this will take about 30% of that, and the remaining 70% is left for the people who will build the company.”

This article originally appeared in the 16 November edition of finweek. Buy and download the magazine here.

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