MINING FINANCE / INVESTMENT
2012: A year for calling leaders to account
Tragedy, firings and calls for leadership were at the heart of the mining sector's big stories of 2012.
Posted: Wednesday , 02 Jan 2013
GRONINGEN (Mineweb) -
2012 was a big year for leadership. A host of countries, including France and China elected new leaders, others, like the US, chose more of the same. But, all around the world, leaders were being forced to work a little harder to win votes - unsurprising really, when one considers the parlous state of the global economy.
But, it was not just in the political sphere that leadership was being questioned. Mining leaders, at both a government and a company level were put on the spot. Indeed, one could argue that leadership (or a lack thereof) was at the heart of many of the sector's largest stories in 2012.
The biggest and most tragic story of the year was the unrest on South Africa's gold and platinum mines - unrest that led to the massacre at Marikana and a wave of strikes almost unprecedented in the industry.
While the full extent of the changes wrought in that crucible are yet to be seen, it is certain that the sector has undergone profound change and will have to see much more before it can begin to recover.
The judicial commission of inquiry into the massacre being Chaired by former judge Ian Farlam, has yet to reach a verdict but it has already raised a number of questions about leadership on all sides of the issue.
As Gold Fields CEO, Nick Holland said in conversation with Mineweb, "during those days, the sector looked over the precipice and didn't like at all what it saw."
The next trick will be ensuring that here is sufficient leadership within the sector to ensure the sector need not reach the edge again but, it is going to be a battle that will require not just miners but government and union cooperation as well.
Speaking to Mineweb in November, Gold Fields Chairperson Mamphela Ramphele, explained that now the initial crisis is over the sector needs to get together and deal not only with the short and medium term problems it has highlighted but, more importantly it needs to create a vision of a mining industry in South Africa which is appropriate for the 21st century..
"That's the long-term that we need to be thinking about: How do we take advantage of this enormous endowment that we've got in mineral resources, the biggest that is known and yet we've have missed out on the opportunities that other mining countries have had through the resources boom that has just now ended. And, at the heart of it is that we did not re-engineer our mining processes for the 21st century. We are still using the same old 19th century approaches and so issues of productivity, of safety and of trust within the working environment have to be addressed through a much bold and much more imaginative approaches."
While these macro issues need to be decided upon to ensure that the country gets the most out of its mining endowment, the platinum belt specifically needs a great deal of attention. As was pointed out in these pages earlier this year, there is a fine line between contrarian genius and throwing good money after bad and, at this stage the platinum mines in South Africa remain in a precarious position. The big question for 2013 is going to be how the global economy fares and, what this means for the demand side of the equation as this is likely to be the main driver of prices.
Speaking of poor performances, another of the year's big stories, was the increasing dissatisfaction on the part of both investors and management with the performance of the gold sector globally.
In the face of rising gold prices, investors have become increasingly strident in their demands for better management and higher returns.
These demands grew louder throughout the year, leading eventually to the removal of a number of gold mining CEOs including Newmont's Richard O'Brien, Barrick's Aaron Regent and Kinross's Tye Burt.
And, if recent comments by the investors like Frank Holmes, Evy Hambro and Chris Ecclestone are anything to go by, mine managers are going to have to remain on their toes and start producing better returns to shareholders soon, or the consequences for the sector could be significant.
Indeed, in a note out earlier this week, Ecclestone comments, "While we don’t doubt that the heads that have rolled deserved their fate, we do doubt that the chopping should end at the CEO’s doorstep."
Some CEOs are beginning to get the message. Holland, in an address to the Melbourne Mining Club was very critical of the current situation and, has put his money where his mouth is, with Gold Fields spinning out its large, old South African assets into a new vehicle called Sibanye Gold.
The move was hailed by a number of analysts as a very good one and as a way to improve the dividend flow for the company.
Other CEOs, like Randgold Resources's Mark Bristow and McEwen Mining's Rob McEwen have also been quick to point out a number of failings within the sector. Of course, it is important to bear in mind that these are firms that are doing rather well at the moment and have every reason to trumpet their successes.
It was not however, only in the gold sector that CEOs' got their marching orders or where management's feet were held to the fire. Anglo American CEO Cynthia Carroll decided this year to call it a day. A decision the company was quick to point out had been all hers but, there was definite and loud unhappiness from some quarters about her performance as well.
Who the group gets to replace Carroll is going to be one of the big stories of 2013, in this writers opinion as the group faces a number of challenges that a new CEO will find just as difficult to unravel.
Press reports have also been circling around BHP Billiton CEO Marius Kloppers but, as yet, nothing has been announced and, BHP remains tight lipped as ever.
Indeed, in this writers opinion, the performance and decisions taken by the large diversified this year with regard to strategic direction are likely to be very revealing.
Mick Davis too is soon to be stepping down as Xstrata's CEO, after the events of what is the final "big" story of the year - the seemingly inevitable offer by the recently listed Glencore for the stake it doesn't own in Xstrata.
While it is yet to be finalised, the deal saw some massive behind the scenes action involving Davis and Glencore CEO, Ivan Glasenberg.
Both Glenstrata's first steps and Davis's next ones are also likely to be events to watch in the coming year.
All in all, if 2012 was about calling leaders to account and seeing what happens when such leadership is absent, 2013 has to be the year where they, hopefully take up the challenge.