Ideological fury will not change reality at mines
No amount of angry rhetoric from unions or politicians can alter the fundamental fact underlying AngloGold Ashanti’s decision to stop two mines and cut up to 8,500 jobs in SA.
The outcry from the National Union of Mineworkers (NUM) in response to the announcement by AngloGold that it is to shut its Kopanang and Savuka mines is entirely understandable and predictable.
AngloGold says it has kept the two mines on life support while it investigated options to bring down costs, but there comes a time when the ore body is depleted and there is no more reason to keep going.
It’s a tough decision for management to make. It is fully cognisant that 8,500 employees and their families are going to endure a difficult time. Shutting a mine is a big decision that is not taken lightly.
While AngloGold may consider an experienced and financially sound buyer for Kopanang, which has 500,000oz of gold reserves left, Savuka is too entwined in the embattled TauTona mining operation and will not be considered for sale.
The reality is that South African gold mines are old and not being replaced.
It speaks volumes about the operating environment in SA, where political ideology and increasing costs from parastatals have made fresh investments here almost impossible.
The NUM should perhaps fire off strongly worded messages to the governing party.
It has been barely a fortnight since deal maker Charles Pettit – formerly the prime mover at Torre Industries and CEO of Stellar Capital Partners – joined the executive team of investment company Sabvest.
But already the cogs are spinning. This week Sabvest announced a restructuring of its significant minority shareholding in Torre. This entails selling the 63-million Torre shares held by Sabvest to a special purpose vehicle (SPV) controlled by Pettit in exchange for scrip in the SPV. At the same time, empowerment investment company MIC Investment Holdings will swap 66.5-million Torre shares for scrip in Pettit’s SPV. What this means is that Sabvest will control 48.67% of the SPV, which in turn will own 25.18% of Torre.
Torre’s biggest shareholder remains Stellar, with a commanding 55.62% stake.
But the SPV’s shareholding could be seen as a blocking stake, perhaps to preclude from Stellar breaking up and selling off parts of Torre for a song.
Consequently, the formation of the SPV might seem to suggest that at least here significant minority shareholders believe a struggling Torre can find growth traction again.
An interesting argument raised by ear-to-the-ground analyst Anthony Clark is that Sabvest might covet another of Stellar’s main investments. The suggestion is that Sabvest might be interested in buying security technology company Amalgamated Electronic Corporation (Amecor) from Stellar. The deal could suit both parties.
As Clark points out, selling Amecor would be an elegant way for Stellar to raise fresh capital to build its financial services hub spearheaded by Prescient. Amecor, which is consistently profitable, has growing annuity income and is a reassuring cash-flow generator, seems to fit Sabvest’s investment criteria perfectly.