[miningmx.com] — THE popularity of a financial publication like
Forbes, the US magazine, is that it turns on our insatiable interest in what
other people earn – especially the rich and powerful; and in South Africa, especially
Patrice Motsepe.
The hyperactive Executive Chairman of African Rainbow Minerals (ARM) is a source of
constant interest in the South African mining industry.
Motsepe is scatty, make no mistake; but you can only admire the unlikely chemistry
between him and ARM’s recently retired CEO, Andre Wilkens.
This is not a double act written in the stars, but it works terribly well – Wilkens with
his technical expertise; Motsepe with his broad network and entrepreneurial flair.
In 2004, following the merger with Avmin, ARM was worth R5bn. It’s now valued at
R40bn. Anyone owning shares in ARM back then would be doing pretty well today.
Like Motsepe, for example. Last week he “sold’ shares valued at R99m to his family
trust, which really means he exercised his share options and bought them back for a
cost of around R48m, which includes a 40% tax payment.
What’s outstanding about that fact is that he had the R48m to buy back his own
company’s shares.
Most people would take the money and run, so to speak.
Wilkens says Motsepe was insistent that his message was: ARM shares are worth
holding. There’s financial sense in Motsepe’s actions as well. Taking the tax cost now
means that when he does decide to sell his share options, most probably for a much
higher price, they’ll only attract capital gains tax of about 10%.
ARM seems to have stood the test of time better than many empowerment
companies, which have run into financial difficulty, ended up in the scrap yard or
were
refinanced.
Much of this has to do with the initial Avmin deal, which presented Wilkens and
Motsepe, then with only marginal gold shafts and a platinum project – a balanced mix
of assets that included iron ore and a foothold in Zambia’s Copperbelt.
Wilkens, who has now taken a position in charge of strategy in Motsepe’s office,
says
his proudest achievement is having organically grown the company’s projects without
issuing shares to fund them. “We haven’t diluted shareholders once,’ he says.
“The task ahead now is to get the timing right. All our projects plateau from about
2018 to 2020, so my job is to find growth after that,’ he says.
What has been absent from ARM is what Gold Fields CEO, Nick Holland, once
described as “merger and acquisition heroics’. You can’t say ARM has been much
connected with the takeover of a peer, or become another’s dinner, although Wilkens
adds the company does actually spend time sizing up rivals.
He won’t confirm it, but ARM ran the rule over Metorex before its joint venture
partner
in Zambia, Vale, stepped in. Might ARM look to make a quantum leap through
acquisitions, especially now Wilkens has the extra time to dwell on such things?
ARM’s main competence is project development.
Still, there are adjustments to the portfolio. Wilkens says the company has
purposefully moved to phase ferrochrome out of the product mix in favour of ferro-
manganese; a more stable market.
There may be some additions too. The burning question is whether ARM will be able
to buy Modikwa from joint venture partner Anglo American Platinum, which is in the
process of assessing the viability of certain options. The likelihood, analysts say, is
that Anglo will sell out of its joint ventures. Wilkens is bullish on platinum.
“The market fundamentals will change. In two years’ time we will see a market deficit
for platinum and prices will have to support that.’
In the meantime, Wilkens says he’s enjoying going a bit slower. “After 15 years of
the CEO job, it’s very stressful. But I couldn’t just sit on the stoep either. I’d die,’ he
says.
Any professional regrets in those 15 years?
After a full minute assessing the question, he does have one: “We didn’t grow quickly
enough in Africa. That would be my biggest disappointment. We were a bit slow
there.’
– This article first appeared in Finweek. If you want to subscribe to the digital
format of Finweek visit www.zinio.com.
