The timing of the re-entry of JSE-listed Village Main could “not have been better” as mining assets were becoming “very, very cheap”, South African mining luminary Bernard Swanepoel said, following Tuesday’s annual general meeting at which all company resolutions were passed in full.

The new Village Main and To The Point head added, however, that the notion of a super commodity cycle had “unravelled”, and opportunities in the resources business were currently “very commodity-specific”.

Swanepoel said that there was “low-hanging fruit” owing to many new junior companies – through no fault of their own – being unable to raise funds.

“Suddenly, if you can bring in that critical R5-million, you can probably decide on the stake you want,” he told Mining Weekly Online.

“It’s really a situation now of having more opportunities than the time to take them all,” he said.

Village Main was at a decision-making stage on the route to take towards becoming a strong resources company, while To The Point had already obtained exposure to platinum, coal and iron-ore.

“It may still be the logical thing, at some stage, to put those assets into Village Main," Swanepoel said.

Obviously, the independent, non-To The Point directors on the board of Village Main – which included Swanepoel’s former codirector at Harmony Gold, Ferdi Dipppenaar – would have to be convinced that it made sense for Village shareholders.

Swanepoel said that the South African coal industry was in good shape and there had been a negative market overreaction when it came to platinum.

Gold would certainly continue to be one of the opportunities for To The Point, but not necessarily Village Main.

Gold tended to be an exclusive strategy.

“There aren’t many examples of gold companies that are diversified. Recently they combined with copper, but that may not be a sustainable strategy,” the former Harmony Gold CEO said.

“We’re still approaching that critical decision point of whether Village Main will be in gold or are we everything other than gold.

“We have been able to put Village Main board in a good position to take the decision early in the New Year on whether Village Main will be a gold company or a diversified mining company excluding gold,” he told shareholders.

To The Point was already Village Main’s controlling shareholder and would probably become the majority shareholder after the “clawback” offer, already in the public domain, put R20-million seed capital into Village Main.

“The timing for us could not have been better: mining assets are becoming very, very cheap,” he said.

The opportunities that created long-term value for shareholders would be brought into Village Main.

“I am not urging people to rush out and today overpay for a Village Main share, but if they watch what we do for a year or so, and they do decide to put money back into resources, because we are a small company, we have the opportunity to really grow exponentially and therefore they could see stunning returns over a period of time.

“If we do the optimum level of diversification for them and give them exposure perhaps coal, platinum and others, we can be that small diversified mining company of choice,” Swanepoel said.

“We believe that if Eskom is to build the plants that it needs to build at the rate that it needs to build them, then all the potential coal mines in this country better start up.

“The coal prices are high, perhaps even unsustainably high, but we are trying to pick those sorts of projects that would still be good coal-mines if prices had to normalise.

“It’s going to be difficult for me, given my background, to stay out of gold and that may be where we have to create a separate vehicle. If the right strategy is for Village Main to be a diversified resources company, then that has to be the decision,” he said.

Most of South Africa’s old mining houses were founded on gold. Then later, as they built up the rest of their portfolios, in all cases, gold was spun out of them into separate entities.

Underlying that was the basic assumption that gold mines were valued differently and that gold traded at a multiple to its underlying net present value.

“But that is not true in the market today. If you look at gold stocks, they are trading at discounts. So arguably today, a gold company could sit as a division within a diversified company, but I don’t think anybody is prepared yet to try that, because this may be an aberration in the market and as the market normalises, then gold stocks will again trade at a multiple to their net present value and they will then be spun out on their own again in order to crystallise that multiple. Nobody is yet prepared to blend gold with other commodities in any big way,” he added.

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