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DRDGOLD boss defends R10m payday
Allan Seccombe
Posted: Mon, 06 Nov 2006
[miningmx.com] -- DRDGOLD CEO, Mark Wellesley-Wood, defended R10m in emoluments as disclosed in the company’s 2006 annual report, claiming the package is reward for having saved the company. “Shareholders should be grateful DRDGOLD still exists after the mistakes of the past. My board reflects that rescuing DRDGOLD has been taxing on its executives and that’s part of the reward,” he said in an interview.
And although Wellesley-Wood’s salary is remarkable – given that DRDGOLD produces a fraction of the gold of its JSE-domiciled peers – a recent survey shows mining bosses are among the most well paid in South Africa’s corporate sector.
According to the 2006 Mabili Directors’ Remuneration Report, South African mining and resources company executives raked in far more cash than their peers in other JSE-listed firms last year. It would also appear that some mining wage packages are continuing to show chunky advances again this year.
Mining CEOs took home an average package – basic salary, bonuses and benefits – worth R6.6m, versus the average R5.35m for the 184 companies included in the survey.
So which mining companies paid their executives the most? Hardly surprising, it was the major multinational companies with dual listings. BHP Billiton CEO, Chip Goodyear, took home a tidy R84.3m a year before gains on share options.
It hardly seems right to single him out when he heads the world’s largest resources company with relatively little exposure to South Africa. His salary is paid in US dollars.
Cross industry analysis - CEO packages
(Click on image to enlarge)
Source: Mabili Directors' Remuneration Report 2006
Narrowing the focus to South Africa’s gold sector, AngloGold Ashanti CEO, Bobby Godsell, received the largest rand-denominated pre-options package of R9.4m in 2005. While that’s an impressive salary, bear in mind that AngloGold is by far the JSE’s biggest gold producer, plus operations worldwide, that produced 1,41m ounces of gold in the three months to end-September this year. Annualised, that would be around 5.6 million oz.
A surprise in third place – behind Ian Cockerill, CEO of Gold Fields – is Wellesley-Wood, who received a pre-options salary of R5.2m. Apart from producing less gold, DRDGOLD also recorded a pretty poor performance over the year.
DRDGOLD could justifiably call last year its annus horribilis. It sold its troubled earthquake-affected North West Operations, bringing the group’s gold reserves down by 5.1 million oz to 6.6 million oz and nearly halving its resources, a future source of gold.
Bernard Swanepoel, CEO of Harmony Gold, which also had a pretty dismal 2005, saw his wage packet halved to R2.1m due to a withheld bonus.
Interestingly, Wellesley-Wood was paid a R1.65m bonus in 2005. Wellesley-Wood’s wage packet has since doubled to R10m, including a performance bonus payment of R4.66m, according to DRDGOLD’s 2006 annual report.
“It’s a very, very difficult company to run. He deserves something, but it’s a bit much because I don’t think he’s running it particularly well. If he really was doing a good job, you could justify that,” said an analyst.
Wellesley-Wood’s basic salary of R3.6m reflects a 7% increase and part of his bonus is that he’s honour bound to buy DRDGOLD shares after the company scrapped its share options scheme, says Wellesley-Wood. “The bumped up bonus number is misleading,” pointing out that he’s spent R2m buying shares on the open market.
A Deloitte survey shows general staff pay increases for lower skilled workers up to mid-management of between 6.1% and 6.3%, lower than increases of 6.6% last year and 7.2% in 2004.
DRDGOLD’s remuneration committee benchmarked Wellesley-Woods’s wage package against international gold and metals companies and slotted his in the 50% median, he said.
DRDGOLD produced an attributable 527,401oz of gold in its full 2006 financial year, half of what output was when Wellesley-Wood joined the board in 2000. DRDGOLD’s reserves have fallen 44% to 8.8 million oz and resources declined 47.5% to 47 million oz over that time. The number of shares in issue has grown 164% to 320 million. A share now accounts for 0.03/oz of reserve gold. In 2000 it was 0.13/oz.
Harmony’s 2006 annual report showed that Swanepoel earned a pre-options package of R2.4m. Gold Fields’ Cockerill earned R7.4m, including a R2.6m bonus. Gold Fields’ 2006 output was 4 million oz and Harmony’s 2.4 million oz.
In the platinum sector, Impala Platinum CEO Keith Rumble earned a pre-options package of R6.48m, edging ahead of Ralph Havenstein, CEO of world number one platinum producer Anglo Platinum, who earned R5.3m pre-options.
However, those salaries were left in the dust by Aquarius CEO Stuart Murray whose dollar-denominated wages translated into R8.6m, predominantly on the back of a R5.7m bonus.
Merafe Resources, which is a partner with Xstrata on its South African chrome operations, came in for bit of a savaging.
“Of the companies that show a profit after tax, Merafe Resources’ executives are shown to represent the least value for money, with the highest executive pack to profit after tax ratio,” the Mabili report said. The ratio is 21.36%.
BHP Billiton came out tops when looking at that ratio despite its very high wage bill for its executives, the report said, showing the executive’s board total cost represented just 0.15% of its $6.2bn post-tax profit.
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