[miningmx.com] – BLACK owned mining companies that cannot compete should be allowed to fail as “propping them up” did a disservice to new black business, said Mark Cutifani, CEO of Anglo American.
In a wide-ranging address to the Gordon Institute of Business Science (Gibs) in which he commented on unemployment, state-owned enterprises, and the negative effects of policy uncertainty, Cutifani said job losses in the mining sector would accelerate if ways could not be found to have mines work longer hours.
He also said that seeking a declaratory order from the High Court on a key principle in the mining charter that was under dispute was “the second best mechanism” and that the courts should not be allowed to decide on the industry’s future.
But it was his comments about black economic empowerment (BEE), that the mining charter is supposed to frame, that struck the most controversial chord.
“The tough reality is that if BEE business is failing, maybe it should be allowed to fail. If we prop up those that can’t be successful, we do those who can be [successful] a disservice,” he said.
“This is something we are thinking about very carefully. If we have a partner, we will do everything to make it successful, but sometimes you have to make tough calls,” he said.
Anglo American Platinum (Amplats), the 80% listed subsidiary of Anglo, is currently selling its stake in black-owned Atlatsa Resources, a Johannesburg-listed business that operates the unprofitable 120,000 ounce a year Bokoni Platinum Mine.
Atlatsa said on July 1 that some C$42.4m (R422m) in financial support from Amplats, intended to tide Bokoni Mines over until 2016 amid a period of capital expenditure, had failed owing to deteriorating market conditions.
“We looked at a potential financial package, but a number of issues proved to be too challenging,” said Joel Kesler, commercial director of Atlatsa, at the time. He added that talks were continuing with Amplats and the Department of Mineral Resources (DMR).
Cutifani’s comments about BEE also have wider implications given that a number of black-owned mining companies have been refinanced after dividend flow and share prices under-pinning vendor-financed loan deals failed.
This list included Ponahalo Investments, the empowerment partner of De Beers in which Anglo has an 85% stake, as well as Northam Platinum and Aquarius Platinum which also recently re-financed their empowerment partners after shares they owned in the mining firms were sold in order to honour loan agreements.
Said Cutifani in his Gibs address: “Some things I have said may damage relationships but you have to take the decisions as a leader”.
ONCE-EMPOWERED, ALWAYS-EMPOWERED
Cutifani said that it was the wrong option to have the High Court decide on how to interpret the matter of once-empowered, always-empowered as set down in the mining charter. “Don’t let the courts decide the industry’s future,” he said.
On March 31, the Chamber of Mines and the DMR said they would seek a declaratory court order on the matter after the two sides disagreed on the results of an audit with the chamber saying its members had largely met the targets set down in the charter.
The chamber argued that all of its members had met the 26% empowerment ownership target, but the DMR said the figure was closer to 20% because it did not count BEE deals where the entity had ceased to exist.
This raised the issue as to whether the mining sector had to keep empowering itself, usually involving shareholder dilution, in order to meet the mining charter strictures.
“I support the chamber in being the application for the declaratory order, but in my view it’s not the place to get the answer,” said Cutifani.
“You have to bring it back and discuss it in a way that renders the declaratory redundant. I’m in the process [as a member of the chamber] but I have the strongly held view there has to be a conversation of people around the table.
“Ultimately the courts can test the application about policies in place. I just think it’s the second best mechanism not the first best,” he said.
