Tuesday, January 08, 2013

South African Mining Update: Harmony Gold's Future Threatened; New CEO Appointed at Anglo American

Death threats, shootings threaten Harmony Gold mine's future

Harmony Gold's Kusasalethu mine could be shut permanently, ending about 6 000 jobs, after managers received death threats and police were shot at.

07 Jan 2013 12:21 - Sherilee Lakmidas, Ed Stoddard

South Africa's third-largest gold producer said last week it would delay the post-holiday restart of the mine 65km west of Johannesburg as it was undertaking a review of its financial and operational status.

Kusasalethu's woes mark a rocky start to 2013 for South Africa's mining industry, after a year in which it was rattled by violent wildcat strikes that lead to the death of over 50 miners and severely damaged the country's investment image.

Harmony's problems may prove a harbinger for the platinum sector as Anglo American finalises a review expected this month of its unit Anglo American Platinum, the world's top producer of the precious metal, which may lead to shaft closures.

"There is an extremely high risk something could go wrong at Kusasalethu in its current state. We are drawing a line in the sand," Harmony chief executive Graham Briggs told a briefing on Monday. He said managers had received death threats and shots had been fired at police at the mine.

The company said it had launched a legal process that could result in the mine being placed on "care and maintenance", meaning production would cease but its infrastructure would be kept in working order by a small number of staff.

This would lead to lay-offs that could further stoke social tensions and have a huge impact on the bottom line of Harmony at a time when it needs cash to fund its huge Wafi-Golpu project in Papua New Guinea, analysts say.

"This would be a blow to Harmony: Kusasalethu produced around 18% of Harmony's production profit in the September quarter. If they do put it on care and maintenance it will certainly disrupt their cash flow regarding Wafi-Golpu," said David Davis, mining investment analyst at SBG Securities.

Shares down

Harmony shares fell almost 3% in morning trade, underperforming the Johannesburg bourse's All-share index, which was down 0.1%.

Briggs said placing the mine under care and maintenance would be a short-term option but shareholders would not want to fund an operation for long that was not producing.

"In the longer term shareholders are likely to ask about why we keep spending money on care and maintenance," he said.

Briggs said about 6 000 workers could be affected and the costs of mothballing the mine and laying workers off could be 400 million rand.

Kusasalethu is one of a handful of South African gold mines where production was actually seen rising. The country's bullion industry has been in steep decline as the ore gets deeper and more costly to get at and grades become poorer.

Briggs said 62% of Kusasalethu's workforce now belonged to the Association of Mineworkers and Construction Union (AMCU), a militant union whose turf war for members with the National Union of Mineworkers has been at the root of much of the violence in the mining sector.

A brief underground sit-in was staged at Kusasalethu just before Christmas, when 1 700 workers refused to surface in protest against the suspension of colleagues who had taken part in an illegal strike.

The suspensions also sparked violence on December 20 when several miners were injured by police who fired rubber bullets to disperse a demonstration. In November, two miners were killed in clashes between the rival unions.

Union-linked violence last year led to the closure of the Everest mine run by Aquarius Platinum.

– Reuters

Cutifani appointed as new head of Anglo American

Mark Cutifani, head of AngloGold Ashanti will replace outgoing chief executive Cynthia Carroll at the helm of mining giant AngloAmerican

08 Jan 2013 09:12 - Lynley Donnelly

After weeks of extensive speculation the announcement was made on the London and Johannesburg stock exchanges early on Tuesday morning.

Cutifani, who will take over on April 3, had been widely punted as a preferred choice, in the lead up to the announcement.

Large Anglo American shareholders such as the Public Investment Corporation, as well as Mineral Resources Minister Susan Shabangu, publicly stated their hope that a South African would get the top job. Roughly 37% of group assets are based in South Africa, and generate 55% of group operating profit according to the PIC.

Cutifani originally hails from Australia.

However, he is nevertheless widely respected in the local industry, having successfully improved AngloGold Ashanti's performance after stepping into the position of chief executive at the company in 2007. He is the current president of the South African Chamber of Mines.

Carroll announced her resignation in October last year, following lack lustre performance by AngloAmerican, and in the wake of extensive labour unrest particularly in the South Africa's platinum mining sector.

In a press release, AngloAmerican chairperson, Sir John Parker said Cutifani was an experienced listed company chief executive "with a focus on creating value".

"He is a seasoned miner, with broad experience of mining operations and projects across a wide range of commodities and geographies, including South Africa and the Americas," said Parker.

Carroll: Mine violence caused by legacy of apartheid

Violence witnessed in the mining sector this year stems from "underlying social problems that remain", says Anglo American's CEO Cynthia Carroll

05 Dec 2012 06:35 - Sapa

"The violence we have seen in the mining sector this year has its seeds in the legacy of apartheid and the underlying social problems that remain," the mining company's outgoing chief executive said during a discussion at the Gordon Institute of Business Science in Johannesburg on Tuesday.

"The curse of unemployment means that mine workers often have many other people who are economically dependent on them."

Carroll said the history of the migrant labour system loosened the bonds of family life and dislocated communities.

"The brutalisation of human relationships that occurred under apartheid ... all of these factors can be seen in the turmoil and tragedy we have experienced this year."

Carroll said whatever the challenges the country faced, there were "truths" which had to be faced.

The first was that there was no future for any society without law and order.

Maintaining law and order

"Public order is the bedrock without which civilisation collapses. This year we have seen violence and unrest across the mining industry and in several other sectors."

Another truth the nation had to face was that anarchy in the workplace benefited no one.

Businesses that could not generate adequate returns ultimately collapsed and died.

"It is the responsibility of management, not just to shareholders, but also to employees, to ensure that companies remain economically competitive."

The maintenance of law and order and the restoration of stable labour relations were critical to perceptions of South Africa as a place to do business.

"They [international investors] will make their judgements on the basis of the reality they can see."

'Mining is at the heart of SA economy'

She said the mining sector was at the heart of the South African economy, generating 18.7% of the country's GDP and directly employing 13.5-million people.

"It [mining] has a critical role to play in supporting the aspirations of the new growth path and the objectives of the national development plan."

Carroll said discussions on the regulation of the mining sector had been going on for a long time.

"The spectre of nationalisation has been laid to rest. But the need to guard against damaging regulatory changes remains." – Sapa

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