Company Comment:

Achunk of Spar shareholders seem to be taking note of the huffing and puffing by the auditing profession about the need for continuity and the Independent Regulatory Board for Auditors’ (IRBA’s) recommendations for mandatory auditor rotation.

At Tuesday’s annual general meeting, an unprecedented 36% of shareholders voted against the reappointment of Deloitte & Touche as external auditors. An additional 9.3% abstained from voting, presumably because they haven’t quite made up their minds — or at least suspect there may be some value in the IRBA’s recommendation. As an ordinary resolution needing just 50% approval, it was passed. But at this rate, 2018’s vote could be touch and go.

The details of the voting at Spar’s meeting show again how critical it is that the JSE enforces full and prompt disclosure of the voting results. In addition to the auditors’ vote, 12.4% of shareholders voted against the reappointment of Chris Wells to the audit committee, 9% voted against Harry Mehta’s reappointment and 8.3% against the reappointment of M Mashologu to the same committee.

Apart from these significant aberrations, the pattern of voting was pretty much in line with tradition with most resolutions getting 95% plus.

It does seem investors weren’t too thrilled by the trading update released after the meeting. The share price is down almost 7% on the week and, at R178, is considerably off the R219 it reached in July 2016 and also below the R185 at which new shares were placed in April 2016.

The collapse of the pound after Brexit took some of the sparkle out of the group’s overseas operations. The R295.4m acquisition of Gilletts became effective just days after last June’s vote in the UK. But it’s hard to see how the Irish business will be affected by the pound’s weakness given that it is a committed member of the eurozone, its close trading ties with the UK notwithstanding.

Logic prevailed at Thabazimbi, a mine that Kumba Iron Ore had owned and used to supply ArcelorMittal SA with low-cost ore but closed after the side of a pit slipped and rendered the mine no longer viable.

The closure, with the loss of hundreds of jobs, came as a blow to the Thabazimbi area. It may have been a tough decision, but it was part of Anglo American’s strategy to close marginal or unprofitable mines.

Anglo owns 69.7% of Kumba, which has also undergone a large restructuring exercise at its flagship Sishen mine in the Northern Cape to bring its costs to below $40 a tonne.

On Thursday, Kumba and ArcelorMittal SA said the ironore producer had transferred ownership of Thabazimbi to the steel maker. ArcelorMittal SA will assess the cost of rehabilitation against the option of reopening the mine, which had been near the end of its life.

The obvious strategy would be to become the master of the price of part of its feedstock, reducing dependence on Kumba’s Sishen mine and giving it access to good-quality ore to blend with that from Sishen. Reopening the mine is no certainty but there is now a tiny spark of hope. New ownership and a new cost structure may well be Thabazimbi’s salvation.

For many people living in the depressed area, hope for the revival of the 80-year-old operation is all they have.