[miningmx.com] — ONE of the most difficult jobs in gold mining at the moment must be the investor relations function at Harmony Gold.
Harmony’s present troubles are well documented: in essence, the company has not made money even as the rand gold price notches up record highs. Bernard Swanepoel, Harmony CEO, makes the point that the company is 90% exposed to South Africa whereas his company’s peer group, which includes Gold Fields and AngloGold Ashanti, have the benefit of offshore exposure. But recent Chamber of Mines figures show South African gold mining is becoming profitable again. Yet Harmony struggles.
Analysts say they expect more from Harmony in the third (September quarter) and the anecdotal evidence is that the company will start to show its long-awaited turnaround. But it hasn’t come soon enough for Phillip Kotze, Harmony’s investor relations manager, who is to quit the company.
Swanepoel confirms Kotze’s departure, likely at the year-end, which will make him about 18 months in the job. His predecessor, Brenton Saunders, left within a year.
“Phillip has left to follow his own interests. I truly don’t know what these are at the moment,’ Swanepoel said. Kotze was on a roadshow in the US and could not be reached for comment. His successor, Amelia Soares, started at Harmony this week.
“We talked him into the investor relations job,’ says Swanepoel of Kotze’s move from operations. The implication is that Kotze was a departure waiting to happen.
But the speculation is that Kotze moved into head office management prior to taking an executive post, preferably as part of Harmony’s plans to split the company into two, separately-listed, halves. Swanepoel reversed that strategy at the last quarterly briefing saying that the company wouldn’t get proper value for the restructuring. According to reports, this left Kotze disgruntled.
Swanepoel remains under pressure, but he’s as defiant as ever. “We’re in good shape. There’s talk about me being tired and so on. But that’s absolute crap. I am being patient and my shareholders are prepared to be patient. It’s normal growing pains,’ says Swanepoel of the last two years in which Harmony Gold has reported total headline losses of about R2.2bn.
If there’s any discontent among one of Harmony’s largest shareholders, African Rainbow Minerals (ARM), there’s no public evidence. Pieter Rorich, investor relations manager for ARM, is staunch in support for Harmony. ARM owns about 16% of Harmony – a stake currently worth R2.4bn – and needs to finance R3.4bn worth of capital projects over the next two years.
The comment has been made that ARM could sell part or all of its Harmony investment. Rorich says there are no such plans. “There’s no particular trigger that makes Harmony a sell. There’s awareness of the quality in the business and we want to see that unlocking,’ he says. In any event, with 17% gearing, ARM can take on more debt while its ferrous projects, which will soak up R1.8bn in capital to end-2007, can be shouldered by its unlisted business Assmang which has no debt.
Returning to Harmony, there’s a case to be made for its own capital projects and Swanepoel’s persistent investment in them. According to estimates, the company will return to peak output of 3.5 million oz/year in about 2009 to 2010 when its fleet of new projects such as Phakisa, Hidden Valley, Doornkop and Tshepong Sub 66 come on stream.
It would be interesting at that point to compare the cost of developing those projects – equal to about 800,000 oz/year of new production – against the $8.7bn Goldcorp is to spend buying the 600,000 oz/year Glamis Gold is expected to produce this year. “I though instant gratification was a male thing. But it goes for shareholders as well,’ says Swanepoel of Goldcorp’s acquisition of new ounces.
“If you can bring it immediately, people clap their hands. If you spread investment over several quarters, people crucify you for it,’ he says.