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MINING WEEKLY COVER STORY
 
BHP Billiton's SA operations scoring on two BEE fronts
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25th May 2007
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The black economic empowerment (BEE) strategy of diversified mining company BHP Billiton’s South African operations is to obtain BEE credits on two fronts.

On the first front, the Department of Trade and Industry (DTI) front, the South African operations of the world’s largest mining company are now independently audited as having a significant 36% BEE status in accordance with the latest DTI Codes of Good Practice.

On the second front, the Department of Minerals and Energy (DME) front, BHP Billiton’s South African coal operations have a strategy to obtain BEE credits from the outright sale of coal assets and apply these credits across the operational Khutala colliery, BHP Billiton’s share of the Douglas-Middelburg complex and the proposed Klipspruit project.

Still to come are empowerment transactions at Hotazel, the centre of its manganese-mining operations, and transactions at Richards Bay Minerals, where BHP Billiton is a 50% shareholder. Its empowerment strategy in manganese will be to empower Hotazel’s mines to 26%.

The company sees DTI codes as ultimately forming the overarching measure of South African empowerment. Interestingly, approximately 75% of the value of BHP Billiton’s South African assets are not mining assets, but industrial assets – that is, beneficiation smelters – and the company thus has code obligations for these businesses and Mining Charter obligations for its coal and manganese mining businesses (see details on page 34 of the May 25, 2007, edition of Mining Weekly).

At the helm of this advance is impressive BHP Billiton Southern Africa chairperson Dr Vincent Maphai, who this month celebrates his third year as regional BHP Billiton head. On Mining Charter progress, Maphai tells Mining Weekly in an exclusive interview that new open dialogue has helped BHP Billiton under- stand the DME’s methodology of calculating BEE credits.

He reports that BHP Billiton attended a day’s workshop with the DME on new-order rights for new upcoming multibillion-rand energy-coal projects and Maphai hopes that this form of comprehensive communication will become the pattern for the future.

“We are now singing from the same hymn sheet,” says Maphai. He is not at all concerned that fewer credits will be awarded in some instances.

“That is not an issue for us. We now have a much clearer picture and we now know exactly what to do to get projects through,” Maphai says.

Manganese BEE

Maphai reiterates that the company’s concluding of a manganese BEE deal remains imminent.

The delay in its conclusion, he says, is evidence of the detail and meticulous care that are going into it.

On manganese mining, in general, he foresees probable consolidation of smaller participants, forced by commercial and logistical constraints and the need to compete.

He sees State-owned rail enterprise Spoornet showing greater eagerness to improve logistics and believes that South Africa’s mining challenges are going to move increasingly away from the DME towards the domain of infrastructure providers like Spoornet.

“We are talking continuously with Spoornet. While there is still a backlog in infrastructure, the eagerness to arrive at solutions is there.

But we are concerned about the extent to which the cost of a solution will be borne by business and raise the cost structure still further.

“We are hoping that a modern solution can take the industry down the cost curve. The Kalahari hosts the largest and best manganese resource in the world and what you don’t want is to mismanage those resources,” he says.

BEE procurement
An area being relentlessly pursued is BEE procurement and BEE enterprise development. “Both are my passions,” says Maphai. BHP Billiton South Africa’s transformation committee ensures that declarations of intent are realised and senior managers have been appointed to drive BEE procurement, enterprise development and employment equity.

The transformation committee of the high- powered chief operating officers’ (COOs’) council is headed by Ken Greve, while Mike Fraser continues to advance the human resources trans-formation agenda.

Maphai himself has taken the lead on the company’s Master of Science (MSc) development programme.

A picture on Maphai’s desk bears testimony to its initial success.

In the picture are the first 16 MSc development programme graduates, the majority of them women.

Originally, it was intended to put 40 graduates through the MSc programme, but a decision was taken to concentrate on quality and now the next batch of MSc cadets will be sought.

“It’s a programme that we want to scale up,” says Maphai. At the time of this interview, all 16 MSc graduates were at the operations, gaining mining and operational experience.

The BHP Billiton Development Trust, financed from 1% of pretax profit, is aligning its priorities with those of the Mining Charter, without lessening its efforts to satisfy the immediate needs of near-mine communities.

Developmental and transformational thrusts have been combined under Lulu Khumalo, who reports directly to Greve in order to align the two and support growth of BEE procurement-linked enterprise development.

While Maphai’s first three years have been taken up by an outward focus on the global company’s external environment, he is now increasingly concentrating on internal transformation issues, without excluding the externals. “Right now, I have a very deliberate inward focus,” he tells Mining Weekly.

This inward focus will deal with maintaining morale and developing personnel.

The BHP Billiton customer sector group (CSG) structure dictates that many managers based in Johannesburg report to functional heads or CSG presidents in London or Melbourne. Maphai would like to take increasing responsibility for the well-being of Johannesburg-based CSG staff.

This would ensure that the company’s people feel a cross-CSG sense of belonging with a local South African flavour – a move that can help strengthen the BHP Billiton transformation goals in South Africa, as well as the company’s brand in South Africa.

“We want to tidy that relationship and open up dialogue on how this should be done,” he says. T

he second priority of his new inward focus is to foster greater group awareness of the growing activities of the Southern African region on the continent of Africa and to foster the idea of Africa being an integral part of the career path of group personnel.

His third inward focus is to reposition the Johannesburg office as a major resource for the company’s expansion into Africa.

He points out that BHP Billiton operates “like a relay race – somebody has to begin the race and then at some point the baton is passed on”, he says.

In order for that to happen methodically in Southern Africa and Africa, facilitating structures are being established.

Country presidents have been appointed in Angola, the Democratic Republic of Congo (DRC) and Guinea, Maphai himself chairing the DRC executive committee and continuing to remain particularly close to Guinea.

While country presidents manage in-country work, once exploration gets under way, the “baton” is passed on to the head of the particular CSG concerned, with structures in place to ensure that key elements remain intact.

However, this is achieved against the background of the tone and relationships put in place under the leadership of Maphai and his team.

“My favourite phrase is that we should always make sure that we hunt as a pack,” he says. Maphai, who has occupied BHP Billiton’s highest position in Southern Africa since May 1, 2004, reports to BHP Billiton’s Marius Kloppers, a South African based in Melbourne.

“It is proving mutually reinforcing,” says Maphai, who chairs BHP Billiton’s Southern African council of COOs, which coordinates regional activities.

There are COOs for energy coal, aluminium, manganese and for business strategy. Maphai is continuously looking at new opportunities, and of diamonds he says that the group’s largest diamond exploration activities are now on the continent, in the DRC and Angola.

As a consequence, steps have been taken to establish facilities within Africa to assist the diamond business, one example being its decision to invest $3-million in a modern diamond laboratory in Johannesburg to serve growing exploration intensity.

“Everyone will tell you that the future of diamonds is on this continent and it makes sense to invest in diamond sampling infrastructure on the continent, which we have done,” says Maphai.

On the unexpected outbreaks of insecurity in Africa, as have been experienced in the DRC and in Guinea, Maphai says that the lead time of exploration to mining can be anything up to ten and 12 years, during which stability can return. The company takes a long-term view.

In the meantime, the safety of personnel is not compromised.

“Wherever there is not a democratic culture, you need to accept that a new constitution does not bring that new culture into being immediately and only begins to facilitate it.

Our view is to continue to monitor countries that suffer setbacks.

“At one point, we relocated our staff from Guinea in terms of our safety policy, but they are back there and we will continue to operate in that way. I

n the DRC, there was no need to evacuate, although we monitored the situation very closely and maintained close contact with our people.

“The violence in South Africa in the 1990s is very different to the good investment climate of this country today. When we invested in Mozal, in Mozambique, it did not look like a particularly wise decision at the time.

We do our homework and avoid pushing the panic button each time there are setbacks,” he says, adding that he continues to engage intensively with the ambassadors and governments of African countries.

His view of Angola is that it is likely to go the way of Mozambique and that its stability will be consolidated over time. In the meantime, there are physical safety concerns relating to the days when there was a war in the country, like having to know exactly where landmines are located.

BHP Billiton has greater ambition for Mozam-bique, beyond the highly successful Mozal aluminium smelter operation near Maputo, and has initiated a thorough study of the Corridor Sands titanium project in Mozambique, which it hopes to progress to prefeasibility stage.

Energy-coal presidency

The presidency of energy coal formerly resided in Johannesburg, but that is no longer the case following the merger of the energy coal and metallurgical coal businesses into a new coal CSG and the subsequent departure from the com- pany of former energy coal president Mahomed Seedat.

Dave Murray, a South African who runs the metallurgical coal presidency out of Melbourne, is now also president of energy coal. BHP Billiton is made up of CSGs, many of which could be large standalone corporations in their own right, and energy coal forms one of these CSGs, which change geographical base from time to time.

“There is a history of CSG movement from one country to another. What guides us is locating these in areas where they can perform best,” says Maphai.

“Coal remains a major asset base, regardless of where the CSG president is based and regardless whether the combination of metallurgical and energy coal under one president remains permanent.

The situation continues to be fluid and the bottom line is that BHP Billiton has very large energy-coal reserves in South Africa,” he adds.

A company of BHP Billiton’s size will always assess whether certain small assets meet their large company profile and BHP Billiton Energy Coal has, in the past two years, found that several do not, resulting in the disposal of Zululand Anthracite Coal, Koornfontein and Optimum collieries to BEE entities.

This has earned BHP Billiton BEE credits and the DME has awarded 17 coal prospecting licences to the company in recent months. In addition, the company has two multi- billion-rand energy-coal replacement projects on the horizon in the R2,4-billion Douglas Middelburg Optimisation (DMO) project and the R2-billion Klipspruit project, DMO being a joint venture with Xstrata, and Klipspruit a joint venture with Anglo American.

“These are two major projects which will strengthen our position in energy coal in South Africa,” says Maphai. His first priority now, however, is to eliminate fatalities: “In our quest for zero harm, one fatality is one too [many], and we will be investing signifi- cantly in safety,” he says.

New leadership

By year-end, when incumbent CEO Chip Goodyear steps down, a new BHP Billiton CEO will be appointed. Whoever the board selects will be introduced to the South African government and key role players. BHP Billiton chairperson Don Argus assures Maphai and local staff that Southern Africa remains critical to the group – both in terms of the existing assets and in relation to the enormous minerals exploration activity on the continent.

Edited by: Creamer Media Reporter

 

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