Mining Weekly

JOHANNESBURG (miningweekly.com) – The role of the South African mining industry CEO is changing as they are being tasked on an ongoing basis with the high-pressure job of maintaining and creating value in an industry plagued with many challenges and demands, specifically maintaining and increasing productivity and remaining profitable despite a lack of funding, complex geology and labour unrest.

This was the message that emerged from a panel at the Joburg Indaba: Investing in Resources and Mining in Africa, held in Inanda, this week.

The panel, featuring mining industry top brass and chaired by Chamber of Mines president Mike Teke, were questioned on what they were doing to ensure value creation in today’s demanding environment.

Allan Gray portfolio manager Sandy McGregor pointed out that South African mining industry CEOs tended to face the same challenges – most recently, the need to cut costs.

“The mining industry in South Africa is so caught up in the struggle to survive, in an era of collapsing prices, that it is difficult for management to think beyond the now and focus on the long term, he said, adding that this situation has been unfairly compounded by investors, who criticised the performance of mining companies from the sidelines.

McGregor assured delegates at the indaba of the incredible opportunities that would likely be created during the down-cycle currently facing the mining industry.

“This down-cycle brings with it the trend by multinational mining corporations to dispose of their marginal assets, which, in turn, creates opportunities for those who know how to successfully execute a strategy and are strategically investing in these assets.

“What I, as an investor, am looking for in the mining industry is not how big companies are able to weather the storm, but instead how the smaller companies are able to flourish out of the ruins, as this is where I believe the future lies,” he stated.

When asked how he creates value within his company, platinum miner Lonmin CEO Ben Magara said the company’s biggest leverage in improving its performance, was taking the time to understand what made its employees “tick”.

“I believe that focusing on strengthening employee–employer relations and understanding the complexities surrounding stakeholder engagement is an important driver that CEO’s need in today’s mining industry,” he told delegates.

Meanwhile, gold miner Harmony Gold CEO Graham Briggs said, despite having a multitude of pressures placed on one’s operations and having to fulfill more roles now than in the past, his first focus as a CEO is to ensure the company is profitable.

“Therefore, we create value by running our operations better, improving productivity and reducing costs,” he commented.

When asked to highlight its challenges, Norman Mbazima, CEO of Anglo American’s Kumba Iron Ore said regulatory certainty, specifically with regard to mineral rights, was challenging.

He further highlighted the challenge of insufficient infrastructure. “While State-owned utility Transnet has fulfilled our needs sufficiently over the past two years, our production figures for the future indicate that we will have more product than they will be able to move.

“To create value in an industry as trying as ours, with price drops of about 41% since last year, Kumba will ensure that it communicates the current challenges and future outlook to its stakeholders,” Mbazima noted.

Also part of the panel discussion, Sasol Mining senior VP Peter Steenkamp said that, unlike most mining companies with a single resource focus, Sasol’s biggest challenge had been to hone and focus its substantial value chain. To do so, Sasol had embarked on a growth strategy in South Africa, designed to sustain and expand is integrated value chain in the country until 2050.