Wesizwe, not lost in translation

[miningmx.com] — THE public face of Jinchuan Group in southern Africa,
Jianke Gao is disarmingly amiable.

Dressed simply in a short-sleeved shirt and slacks, he frequently grins at questions
translated for him – almost as if being interviewed about Wesizwe Platinum, the
company he now leads, is a novel experience.

Quaint even. Of course, behind him stands a monolith: Jinchuan Group, a diversified
state-owned Chinese company whose Jinchuan Group International Resources, quoted
on the Hong Kong Stock Exchange, breezed in to trump Brazilian firm Vale for control
of Metorex for $1.4bn last year.

Before that, it assumed control of Wesizwe Platinum, laying out $877m in total for
the acquisition and future capital commitments.

The perception is that Chinese companies like Jinchuan are effortlessly picking off the
African continent’s best resources. It’s also said that Chinese companies don’t
care about value since buying Africa’s resources is actually a question of national

Gao disputes this. “Have you ever seen a Chinese person not working for profit?’ he
asks. Now that you mention it.

According to Alan Smith, a director at Incubex, which sold the gold assets of Taung
Gold – a company with one asset that hasn’t produced gold since the Fifties – to
Wing Hing for the inflated price of R3.9bn in equity, valuations on the Hong Kong
Stock Exchange are always far higher than elsewhere.

“They apply much higher multiples because the outlook is far, far longer. They take a
very long view,’ says Smith. “Very long.’

Gao’s view, however, is that Jinchuan is quite pedestrian about what it pays. But
he also unseats the view that Jinchuan is glacial about decision-making. “The owners
of Jinchuan are quite quick in making decisions. But then decisions have to go through
the state, which is where the bureaucracy comes in,’ he adds.

Another misconception is that Jinchuan has money burning a hole in its corporate
pocket. In fact, he doesn’t even believe Jinchuan has got the best assets in Africa.

“Most of the best projects are gone. We transact with companies that are often in
distress,’ he says.

There’s some truth in that: Jinchuan bought Zambia’s Albidon in 2007, a company
riven by dissent among Zambian and Australian partners, into which the Chinese
added themselves. Gao led the company and says the experience established a
foundation for the task at Wesizwe Platinum, a company at war with itself while
Jinchuan was kicking the tyres in 2010.

Minority shareholders in Albidon have since made a fuss claiming a recent review
of its nickel production by management was “a sham’, according to a Dow Jones
report, and that in a Bloomberg News report they wanted greater control over
Munali, the asset.

Clearly, not all is well at Albidon and it’s too early to say whether Jinchuan’s tenure at
Metorex or Wesizwe will result in similar problems.

For now, however, Gao’s strategy is to improve communication with Wesizwe’s
shareholders and find a means of derisking the company. In an earlier interview
with Finweek, Gao commented:

“Currently, Wesizwe is a “one-project company’, which is very dangerous – with cash
flow only likely to be produced in eight to 10 years’ time. Wesizwe is looking for a
collaboration, synergies or consolidation in the PGM space.’

The restructuring of Anglo Platinum by majority shareholder, Anglo American, is one
obvious opportunity but Gao gives one of his grins again. “I can’t comment. There’s
an opportunity for everyone,’ he says.

He’s just not saying, and speaking in Chinese takes away subtleties from the
conversation. Is he going to learn English?

“The cultural differences at Wesizwe were easier than imagined to manage, and I’m
taking English lessons every morning. which is quite difficult,’ he says.

– This article first appeared in Finweek. If you want to subscribe to the digital
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