Running a mining company is not beer and skittles at the best of times, but there are a number of industry bosses who are under particular pressure at the current time. finweek identifies those with the most to prove and what they must do to keep their seats.
CEO: Impala Platinum
Appointed: April 2017
Impala Platinum mines palladium, which is doing rather well at the moment, but its main product – platinum – is stubbornly resistant to price improvement. The rand has also firmed as currency speculators line up the possibility of improving business conditions in SA.
While this is good for mining firms in the long term, it’s not great for the revenue lines of struggling miners in the short term.
Set against these conditions, Muller is faced with a mountain of a task in judiciously cutting unprofitable ounces from Implats’s Rustenburg mines.
Unions will oppose him, however, which is dangerous given that retrenchments – estimated to be 2 500 people in the first iteration of the firm’s restructuring – will heap pressure on communities in a sensitive region of the country.
What’s interesting about Muller, however, is that in addition to cutting ounces, he’s invested R400m for a 15% stake in the Waterberg project of Platinum Group Metals, a company listed in Toronto.
Implats also has the option to take control of the project for a total cost of R2.5bn, giving the firm operational flexibility for the future.
It seems odd to point to Neal Froneman as an under-pressure mining CEO, especially following a year in which the company gobsmacked Johannesburg by splashing out R30bn to buy Stillwater Mining, a US company.
This enormous transaction was followed up with the £285m proposed takeover of Lonmin; and yet another in which Sibanye-Stillwater has an option over control in DRDGold.
But Froneman’s task is making all these spectacular corporate moves coalesce into a single, coherent strategy of geographic and mineral diversification.
Dividends – once described by Froneman as the basis of Sibanye’s investment case – have been put on hold while net debt is pretty high, ?so the last thing Froneman needs is to ?falter operationally.
CEO: Pallinghurst Resources
Appointed: September 2007
Ten years is a long time to have been a CEO, especially given that the share price of the company has fallen just over 10% in that time and only two dividends have been paid.
But then Pallinghurst Resources is not exactly a mining company in the traditional sense. In fact, 2018 will be the first year it’s considered an operating company. For the previous 10 years it was an investment firm.
That strategy, which coincided with the meteoric rise and fall of mineral prices, has not yielded the return that Pallinghurst’s very loyal shareholders would have desired.
The plan for Frandsen now – and hence the pressure – is to restructure the company so it has meaningful exposure to the commodities in which it wants exposure.
It has already seized full control of Gemfields, a coloured gemstones company, which it delisted (amid some minority shareholder opposition); and has suggested entering into joint venture in its Fabergé brand through which it markets the gemstones.
It’s also questionable that Pallinghurst will want a long-term exposure to Sedibelo Platinum Mines, an unlisted firm that is burning cash. It does, however, want a greater piece of its manganese investment – the Tshipi mine which it owns indirectly through Jupiter Mines, an Australian firm.
As one can see, the Pallinghurst investment universe sprawls. So Frandsen has to tidy it up and give shareholders comfort that there is an actionable plan that makes money.
President & CEO: Platinum Group Metals
Seventeen years after founding Platinum Group Metals, Jones has precious little to show for it. The firm’s mine – Maseve – has been shut and its processing facilities sold off to Royal Bafokeng Platinum.
All that’s left is the Waterberg project, a large palladium and platinum deposit which is being touted as the next big thing.
At least Jones has extracted some value out of this project by selling a 15% stake to Impala Platinum, but the pressure is on to turn promises into monetary returns, and try not to spend another 17 years trying to achieve that. Nobody has that long.
Interim CEO: Acacia Resources
Appointed: November 2017
Being “the interim guy” is no fun; just ask anybody at Eskom, or the significant number of individuals serving in SA government departments which have redefined the term. In the case of Peter Geleta, a South African running UK-listed Acacia Resources (formerly African Barrick), it’s like being the fattest turkey during Advent.
A massive run-in with the Tanzanian government around disputed tens of billions of dollars in unpaid tax, and newly promulgated regulations requiring free-carry government investment in selected mining firms, resulted in the firm’s CEO and chief financial officer quitting on the same day.
In stepped Geleta, previously human resources. His job is to keep Acacia ticking over even though its flagship mine has been put on care and maintenance while the firm’s 64.9% shareholder, Barrick Gold, has undertaken – on Acacia’s behalf, mind you – to pay $300m to the Tanzanian government in compensation for the tax claims.
First, though, minority shareholders in Acacia must approve the tax payment; then begins the process of negotiating the free-carry sale of shares in the company to the government. Who’d be a CEO?
This article originally appeared in the 18 January edition of finweek. Buy and download the magazine here.