Pay this man more

[miningmx.com] -- Miningmx's X-Factor takes a look at the pay of CEOs of junior companies, with one who really needs an increase.

Why is DiamondCorp issuing shares? We take a look at what Anooraq is doing different at the Lebowa (now Bokoni) mine that Anglo Platinum has run up to now.

Pay Jan Nelson more

Now that the misers from Metorex are no longer running Pan African Resources may we suggest the remuneration committee do something about improving CEO Jan Nelson’s pay.

Nelson has to be one of the most poorly paid CEOs running a junior mining company despite the fact that he is one of the most successful. Pan African made a mining profit of ₤22m (about R275m) in its financial year to end-June and reported a taxed profit of ₤8.1m (about R100m).

For that Nelson was paid ₤92,168 (about R1,15m) “total cost to company.” He got no share-based payments last year. For financial 2008 he made ₤88,715 (about R1m) “total cost to company”.

The 2009 Pan African annual report reveals he was awarded a total of 18m share options in 2007 at 2p each so the nominal cost of that to the company is ₤360,000 (about R4.5m).

Let’s take a look a couple of other junior gold company CEO jobs starting with Marc Watchorn - CEO of Wits Gold which is an exploration outfit.

Watchorn made R2.29m in the financial year to end-February consisting of R2.1m in salary and R211,000 in share incentive bonus. For financial 2008 he made R2.6m consisting of R1.8m in salary and R714,000 in share incentive bonus.

He’s shown as having an “indirect beneficial” holding of 822,698 shares in Wits Gold - second only to chairman and founder Adam Fleming who holds 2.64m also as “indirect beneficial.”

But Watchorn’s payments pale into insignificance compared with what former Central Rand Gold CEO Greg James has made over the past two years for running a company that has failed miserably to deliver.

In 2008 James was paid US$513,000 (about R3.8m) in salary and a further $2.2m (about R16.3m) in share-based payments for a total of about R20m.

In 2007, James got $471,000 (about R3.5m) in salary and a further $1.5m (about R11m) in share based payments to make a total of R14.5m.

He was supposed to be bringing into production a mine that would produce 100,000z of gold this year and build up to 1m oz of annual gold production by 2012.

Instead Central Rand should produce 20,000oz this year and should produce at about 40,000oz annually for the next few years depending on the outcome of the trial mining which is still underway.

DiamondCorp spins a good tale.

Staying with the pay theme there was a very interesting SENS announcement this week from diamond junior Diamondcorp to the effect that it had issued 145,000 shares to settle its investor relations bill for the 12 months to November 13.

At the current share price of about 16p that works out to about ₤23,200 (about R290,000). Either Wills & Co Registrars have great faith in Diamondcorp’s prospects or the company has done some serous arm twisting as part of its cash conservation efforts.

We strongly suspect the latter given that on November 3 Diamondcorp announced it was placing 6m shares to raise ₤600,000.

According to Diamondcorp the issue was necessary otherwise “it may not be able to meet its financial commitments as and when they fall due.”

The company added that, “the working capital provided by this placement will not be sufficient for the next 12 months and the company will need to raise additional capital in 2010.

Diamondcorp is bringing the Lace mine near Kroonstad into production and is also involved in an exploration JV in Botswana.

Angloplats muzzles Anooraq

Investors are getting a different perspective on operations at the former Lebowa Platinum Mine - renamed Bokoni Platinum Mines – now that Anooraq Resources is managing it instead of former owners Anglo Platinum (AngloPlat).

Bokoni is held 51% by Anooraq and 49% by AngloPlat and the September quarter results are the first to reflect the impact of Anooraq’s management.

That mine has underperformed for as long as anyone can remember and one of the key questions flung time and again at CEO Philip Kotze has been what precisely Anooraq will do to change things.

There are two key issues that immediately stand out from these results - labour and concentrator efficiencies.

According to Kotze, labour accounts for 60% of the operating costs at Bokoni with the mine’s own labour force accounting for 55% and contractors for another 5%.

Rule of thumb for a deep-level gold or platinum mine is that labour costs should make up about 40% to 45% of total operating costs.

According to Kotze, not only are there too many people at Bokoni but the mix is not right with too many employees working on the services side and not enough on production at the mining face. Management intends making major changes here.

Kotze reported an immediate improvement in concentrator efficiencies – to 92% for Merensky Reef and 89% for UG2 - but his presentation did not provide any comparative figures for when the plant was run by AngloPlat management.

Asked about this Kotze said AngloPlat does not want those numbers revealed because they were not previously in the public domain.

Now why would AngloPlat want to keep those performance figures under wraps we wonder?

There’s an obvious second question. Just what are the staffing levels like on AngloPlat’s other mines given the situation now revealed at Bokoni?

The answer to that can probably be deduced from the AngloPlat quarterly production update released in late October.

This reported that the group had retrenched 11,715 people by end-September, well ahead of the 10,000 head count reduction it had planned for the full year.