Platinum, like you’ve not seen it

Gilbertson and Dale close in on the platinum sector; Davis hovers all around, and Roux has been partially freed up.

JOHANNESBURG - 

In Alaska, it's sometimes said that men are men and women win the Iditarod, at 1,150 miles, possibly the world's last great race. That may all be true, just as any number of mining diehards believe that mining engineers are best qualified to run mining companies, as seen in the return to pinstripe suits by Tom Dale, upon this week's announcement that he is to take up the CEO position at Platmin, the newest platinum producer in southern Africa, which boasts around 80% of the world's platinum-group-metal resources.

The global PGM sector has been in a spin for more than a year, after platinum, palladium and rhodium prices collapsed after mid-2008, along with prices for a number of further byproduct metals cranked out by primary platinum producers, not least nickel. For its part, Platmin has been funded out of the abyss over the past few years by Pallinghurst Resources; its chairman, Brian Gilbertson, now takes over as chairman of Platmin, renewing a high level connection with Dale seen between the two a decade and more ago, mainly upon the formation of the modern Gold Fields.

This is a telling time for Dale, a mining engineer with an MBA, to grind into the platinum sector. With the distinct exception of diamonds, no subsector in global resources was more trashed up over the past 16 months than PGMs. By now, thankfully, the recovery in metal prices is well advanced. During the crisis, Tier II PGM producer Northam, long known - incorrectly as increasingly shown - as the industry's highest cost producer, more than survived, and paid a dividend, to boot.

There is no coincidence about this. For some years now, Northam has been under CEO Glyn Lewis, one of the continent's toughest mining engineers, who in Ghana built Gold Fields's Tarkwa mine, the biggest open cut gold mine on the continent. For the three big southern African PGM swingers, by contrast, it has been one horror after another. Tier I producer Lonmin earlier this year raised nearly US$450m, and Tier II producer Aquarius also separately raised equity and also debt. Industry leader - certainly on production - Anglo Platinum on 27 July announced that its parent company, Anglo American, had increased its committed facility to Anglo Platinum by R7.1bn to R20.6bn.

Impala Platinum, No 2 in PGMs in the region, published lackluster results for the year to 30 June 2009, while Russia's Norilsk (where PGMs are byproducts to nickel), No 3 producer of platinum, published a set of train smash results for the first half of the year, but is recovering on rising metal prices. Like Anglo Platinum, Norilsk has a debt issue.

Anglo Platinum's CEO, Neville Nicolau, holds a mining qualification, but has inherited the creation of a plethora of strange management decisions taken over a period of years. David Brown and Ian Farmer, CEOs at Impala and Lonmin, respectively, are chartered accountants by training. Aquarius CEO Stuart Murray was trained as a chemical engineer. Cynthia Carroll, CEO at Anglo American, which holds 80% of Anglo Platinum, was trained as a geologist, but also holds an MBA.

Last week, Impala announced that it had sacked it chairman, Fred Roux, with immediate effect. Roux, who has had an illustrious career in mining, holds several degrees in science, a PhD, and an MBA. Information placed in the public domain by Roux leans heavily towards indicating a conspiracy against him led by Niall Carroll, CEO of Impala's biggest shareholder, Royal Bafokeng Holdings, and an alternate director of Impala.

(Niall) Carroll previously discussed Roux's axing with three of Impala's four biggest shareholders, and various Impala non-executive directors. Carroll then e-mailed Roux with a thinly veiled rude and savage notification that he had been sacked. Roux remains a director of Impala, for now at least. Carroll, apparently no relative to the other Carroll, is a chartered accountant, by training.

Dale was CEO of Gold Fields until September 1999, when he quit after some kind of a difference, or two, with Chris Thompson, chairman of Gold Fields from May 1998 through 2005. It may be instructive that Thompson's primary degree was a Bachelor of Arts from Rhodes, a liberal university in Grahamstown, in South Africa's Eastern Cape.

Thompson was quite different to Vladimir Strzhalkovsky, who last year was voted in as chairman of Norilsk's management committee. Strzhalkovsky, a former KGB officer and longtime friend of prime minister Vladimir Putin, is also a qualified engineer, who majored in applied mathematics; he also holds a PhD.

There are big, consolidating, times ahead for the global PGM sector. Xstrata, one of the four big London-listed diversified miners, last year ended up with a 25% stake in Lonmin, after a full bid was aborted in the face of collapsed metal prices. This year Xstrata, which has its own PGM division, launched and then withdrew a bid for Anglo American. There is no question about the kind of ambitions that Xstrata CEO Mick Davis harbours.

The PGM fields are bountiful with opportunities. The record shows that during the good years PGM miners - as a sector; there are exceptions - fell with the fat into the fire, allowing sound management practices to be devoured on the banquet table. Anglo Platinum, as the industry flagship, paid a R1.6bn dividend in 2004, when the rand basket price, expressed as rand revenue per platinum ounce sold, computed at R7,649.

Anglo Platinum's dividend, including capitalisation awards, increased to R15.9bn in 2007, with a basket price of R18,167 an ounce. The average basket price for 2008 was higher, but the dividend started falling. The rand/dollar exchange rate has also played its role; this year, Anglo Platinum suspended its interim dividend and is unlikely to resume such payments for some time.

What goes around may yet come around. In 1994, Gencor took a huge step and bought Billiton from Royal Dutch Shell for US$1.2bn. In those days, Gencor housed Gilbertson, Dale, Roux, and Davis, among others. In due course Gencor would unbundle its gold interests, with the cream of that crop later to merge into Gold Fields. Impala Platinum was unbundled and in 1999 Billiton was listed in London. Two years later, BHP Billiton was whelped, and in due course Xstrata weaned itself into its own destiny. What's going to happen now, back in the future? 

Disclaimer

MINEWEB is an interactive publication, with rolling deadlines through each day, commencing in the Sydney morning,  and concluding, 24 hours later,  in the Vancouver evening.  If you believe your side of an issue deserves inclusion, but has failed to meet one of our deadlines, you are invited to notify the Editor in Chief in Johannesburg, and we will include you in our editing and expanding on our stories. Email him at alechogg@gmail.com

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responses to this article

Future Look forward to it, it will be Very exciting! by Prophet on October 27 2009, 15:11 Find this comment inappropriate? Report it

BG They're both past it. Let them make way for young blood. by Boxerdog on October 27 2009, 16:42 Find this comment inappropriate? Report it

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