Offshore financing dries up for SA's junior miners
Strikes added to on-going policy uncertainty poses serious threat to junior landscape.
Posted: Thursday , 27 Sep 2012
JOHANNESBURG (Mineweb) -
Gold junior, Pan African Resources, says it has found offshore funding hard to come by in its efforts to grow.
CEO, Jan Nelson said that recent road shows to the United Kingdom had found potential investors saying that the current labour strife was ‘just too much'. Added to this is the on-going policy debate around what form nationalisation would eventually take.
This correlates with statements made by law firm, Webber Wentzel, who have, on more than one occasion, raised the issue of declining investment in the local junior landscape with exploration virtually non-existent.
Nelson was speaking at the company's annual results presentation in Johannesburg today and said that the current strike contagion in the industry posed a serious threat to the junior mining landscape in the country.
Junior miners do not have the same balance sheet strength nor the geographical or operational diversity that has enabled the majors to withstand enduring strike action.
Pan African Resources owns the Barberton mines and is busy putting together a deal to buy Harmony's Evander mine which will see it double in size to produce over 200 000 ounces of gold per year.
Pan African Resources is in the middle of wage negotiations at its Barberton operations and the Evander mine is part of the Chamber of Mines two year wage agreement for the gold sector that is due to expire next year.
"I think that there is a balance, last year we had a 3% yield to our shareholders in terms of dividend but we gave an 11% increase to our employees and our employees had serious concerns for example their bus fares went up by 300% so you have to understand that the people do have serious issues and concerns" said Nelson.
However, the CEO would not give any guarantees that the company would not be impacted by the strikes.
"We are not experiencing any difficulties at the moment but it is a fluid situation and it can change" said Nelson.
Despite the offshore funding resistance, the company has found support locally for its growth aspirations.
"Fortunately we are able to raise money in South Africa from institutions like Coronation, Allan Gray and Investec who continue to support investment in South Africa so I think that we can be thankful for that" said Nelson.
Of the R1.5bn needed for the Evander acquisition, half of this was already underwritten by the abovementioned institution as well as black economic empowerment partner, Shanduka.
The Shanduka Group, headed up by former trade unionist and businessman, Cyril Ramaphosa, and also the black economic partner for platinum miner, Lonmin, has been sharply criticised after the tragic events that saw 46 people killed during violent strikes at Lonmin's Marikana mine.
Mineweb asked Nelson if this criticism was likely to rub off on Pan African Resources due to its association with Shanduka.
"It is very difficult to comment on that but we have a very good relationship with Shanduka. If you look at the current Evander transaction, Shanduka is putting R125m of their own money into the transaction to develop the company so we have grown and developed as a result of Shanduka" he said.
The CEO went on to say that Shanduka had assisted the company in its community relations and development.
"Through the Shanduka adopt-a-school foundation we've just built a R8.5m school and we are going to spend another R6m in the next 12 months in expanding that school for about 900 learners" said Nelson.
The miner does not have any broad based share ownership schemes in place for employees or nearby communities but Nelson said that the company would look at developing something in the coming year.
On recent comments made by Gold Fields chair, Mamphela Ramphele, that the industry was archaic Nelson said he wasn't so sure that Ramphele's argument stacked up given the attempts, albeit unsuccessful, at long hole stoping in the platinum and gold sector to try and reduce labour and improve efficiencies.
"I think that a lot of people see labour as a negative but if you can get your people to be just 1% more productive, it is 49% of our cost component, can you imagine what we can do" said Nelson.
The annual results for the company showed a 69% jump in attributable profits for the year to £29m and almost doubled headline earnings to 2p per share.
The miner said that it would forego a divided this year due to the Evander acquisition after giving shareholders a 3% dividend yield last year.
Shareholders won't be too upset. The junior has seen growth in its share price of over 60% for two years running from around R1 per share to current levels of R2.39.