The Bafokeng blasts Glencore and Xstrata

[] — IT WAS not just Anglo Platinum (AngloPlat) that Royal Bafokeng Holdings (RBH) CEO Niall Carroll antagonised in his speech to the South African Institute of Mining and Metallurgy’s International Platinum Conference held recently at Sun City.

He took hefty swipes at former BHP Billiton CEO Brian Gilbertson as well as Xstrata and its most important shareholder, Swiss trading firm Glencore, comparing Glencore’s operations to those of the De Beers’ former diamond marketing monopoly.

Carroll also shed new light on the role of former Anglo Platinum CEO Barry Davison in structuring the deal that created the Bafokeng Rasimone Platinum Mine (BRPM).

AngloPlat’s decision to veto the proposed sale of BRPM to arch-rival Impala Platinum (Implats) was the trigger that set Carroll off, and the focus of media reaction to the speech.

But Carroll’s attack on Xstrata is notable because RBH-controlled Merafe Resources is the junior partner in Xstrata’s hugely important South African ferrochrome operations.

Carroll said: “Our relationship with Xstrata has been sound, although largely commercial with little alignment between the community’s needs and Xstrata’s CSI (corporate social investment) programmes.

“However, we have one major gripe – the evergreen, fixed margin marketing contract that Glencore enjoys over all of Xstrata’s current and future production.

“It cannot be correct that shareholders in SA provide all the risk capital to develop mines and smelters, yet pay away a fixed margin to a Zug-based organisation without any regard for whether it adds value or not.

“It reminds us of that other great mining confidence trick, the Central Selling Organisation (CSO) in which for decades De Beers persuaded major producers of diamonds, notably Botswana, that they needed the CSO more than the CSO needed them.

“Of course, in recent years Botswana has realised that this assumption was incorrect and the split of economics has subsequently tilted much more in favour of Botswana.

“Similarly, we believe that Glencore’s marketing arrangements with producers and, in particular, with Xstrata Alloys, are anti-competitive and ultimately unsustainable.

“They are not in our interests and cannot be in the national interest,’ Carroll declared.

An Xstrata spokesperson said the group had noted the comments, which they intended taking up with Merafe CEO Stuart Elliot on Monday when he returned to South Africa.

The Bafokeng fought a long and bitter feud with Brian Gilbertson, who ran Implats in the mid-1990s.

That dispute over royalty payments was eventually resolved in 1999, after the late Steve Kearney became CEO of Implats. Carroll told delegates that RBH is now “proud to be the largest shareholder in Implats’.

But his action in pointedly referring to the feud now may be more than mere coincidence. Gilbertson is currently chairperson of platinum junior Platmin, which has developed a new mine in the Pilanesberg north of BRPM.

Platmin has clearly stated its growth and consolidation ambitions, but has become involved in a commercial dispute with its partner, the Bakgatla tribe.

Carroll told the conference that Implats’ strategy under Gilbertson was to wear the Bafokeng down through the courts.

He said: “Within the context of Mandela’s emerging Rainbow Nation, it is difficult to think of a more cynical and self-interested approach by a major corporate than relying on apartheid-era, Bantustan legislation to deny a black community what was rightfully theirs.’

Platmin is controlled by Pallinghurst Resources whose CEO – Arne Frandsen – could not be immediately reached for comment.

Turning to Davison’s role in the creation of BRPM – which took place at the height of the dispute with Implats – Carroll said: “Whatever else may be said of Barry Davison, he was shrewd.’

He added: “The resource base on Anglo’s Boschkoppie farm was on the cusp of being too small to justify a stand-alone operation but, by combining with the Bafokeng’s much larger resource base at Styldrift, a significant mining complex could be developed.

“More importantly, tying up Styldrift in the Anglo stable would prevent Implats moving north into Styldrift as a logical extension of the Impala lease area.

“Develop a new mine as well as poke Implats in the eye – it was a compelling story, the timing was good and Davison sold it well. The BRPM joint venture, to be held in equal part by Anglo Platinum and the Bafokeng, was conceived.’

However, as Carroll noted, “conception was the easy and most enjoyable part. The birth was more difficult and finalising the joint venture agreements took a number of years.’

The Bafokeng subsequently got involved in a dispute with AngloPlat over the granting of new order mining rights for BRPM, which it won through the deal which gave RBH management and equity control.

Which brings us to the current situation, where AngloPlat has vetoed the proposed sale of BRPM to Implats.

Carroll said: “We are, frankly, disappointed that Anglo Platinum has seen fit, yet again, to frustrate the legitimate aspirations of the community from whose land they have extracted so much value over the decades as well as stand in the way of increased industry transformation.’