www.miningmx.com | gold_silver SA's gold sector needs a catalyst like Godsell

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Bernard Swanepoel

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SA's gold sector needs a catalyst like Godsell
Allan Seccombe
Posted: Mon, 11 Aug 2008

[miningmx.com] -- The South African gold sector needs another visionary � or ruthless capitalist -- like former AngloGold Ashanti chief executive Bobby Godsell, to shake it out of its rut, said Bernard Swanepoel, the colourful ex-CEO of Harmony Gold.

There has been a sea change in management of South Africa�s leading gold companies, with the top three chief executives having left within the space of about a year.

Swanepoel is heading up a small entrepreneurial company called To The Point, with the majority of his small staff in the consultancy and advisory business coming from Harmony. He left Harmony abruptly in August 2007 as the company posted a big downward revision in production to be replaced by Graham Briggs.

That catalyst is the thing I don�t see

Gold Fields� Ian Cockerill went to Anglo Coal and he is now based in London. His role was taken by chief financial officer Nick Holland.

Godsell, kept a low profile after leaving AngloGold at the end of September 2007, but was recently appointed as chairman of the troubled power utility Eskom. He was replaced by the dynamic Australian Mark Cutifani, who has placed the company�s assets under very close scrutiny.

Under Godsell�s leadership, AngloGold sold a suite of its marginal mines during the 1990s to empowerment group African Rainbow Minerals (ARM), which formed ARMGold, later forming a joint venture with those assets with Harmony, which subsequently acquired them in their entirety from ARM in exchange for shares.

AngloGold also sold Harmony a number of its older mines.

In these transactions and others, Swanepoel and his team more than quadrupled Harmony�s production to three million ounces over a decade, making the company the fifth largest.

To The Point has acquired 48% of a JSE-listed cash shell called Village Main Reef Gold Mining Company, which Swanepoel wants to use as a vehicle to grow a diversified portfolio, including operating its own mines as well as holding interests in others.

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The most likely asset to come into the company first is coal. There is also a platinum play and Swanepoel has said gold remains a key point of interest, but not quite yet.

�The gold sector is tied up now,� he told Miningmx in an interview. �You need a sort of Bobby Godsell leadership, someone who redefines his company and by doing that redefines the industry.�

�You can say Bobby was a visionary or a ruthless capitalist, but it doesn�t matter. He took shafts that were closed and got empowerment credits. He took shafts his people couldn�t make work and sold them. It worked out phenomenally well for Harmony and the industry as a whole.

�That catalyst is the thing I don�t see,� he said. �It�s very difficult for me to be objective. I�m only one year removed from it and there are too few of the players that I really know now.�

Another way of opening the industry would be through corporate action, either through domestic companies making a play for each other, or an external company acquiring a South African gold miner and shedding unwanted assets.

�Then stuff falls off the table and there are the rats and mice like us who�ll call it a party,� Swanepoel said.

�In the last 12 months the three big players all have new leadership and you�d have expected there�d have been a real chance of a new strategy and a new strategy would create a new space,� he said.

�Quite honestly, I don�t think Harmony or Gold Fields could actually play that leading role. It has to be AngloGold,� he said.

But Swanepoel appears to be drawing a very firm line under his time at Harmony and not repeating what he did there in terms of buying old mines. He emphasises he and his team have a strong entrepreneurial bent though.

He doubts the strategy, which Harmony implemented when it started in 1995, of acquiring tired mines from the majors, cutting costs and management layers right back, and turning them back to profitable operations would work in the current environment.

This is unwelcome news for a company like Pamodzi Gold, which former Harmony man Peter Steenkamp now heads. Steenkamp has told Miningmx in the past the business model for the junior is based very much on that of the old Harmony.

This was the strategy with the Orkney mine Pamodzi bought from Harmony and the President Steyn mine from Thistle. Some market watchers say both operations have had the marrow sucked out of them after a series of owners and there�s very little left for Pamodzi, which has been battling for months now to raise $50m of working capital to kick start those two operations.

�Guess what happens to you if you go to the next rugby world cup with the same game plan of 12 years ago. You will get taken out. The game has moved on. I�m not against re-inventing the past, but there�s a real risk of doing that when the world has moved on,� Swanepoel said.

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