Mponeng sale has less harmony with Sibanye
As an objective observer, it is hard to make a case for Sibanye-Stillwater making a play for AngloGold Ashanti’s Mponeng gold mine.
AngloGold has drawn a line under its continued operational presence in SA, putting its last underground mine and tailings retreatment business up for sale. The only two realistic buyers of the assets are Harmony Gold and Sibanye, which have neighbouring mines.
Mponeng could be a standalone mine in another company’s portfolio, but that company is not in SA, and foreigners are leery of exposing themselves to ultra-deep-level gold mining.
Mponeng is the world’s deepest mine at 4km below surface. It has an eight-year life and needs a multibillion-rand investment to extend the life to 20 years.
Sibanye CEO Neal Froneman said recently the company was “not panting” to get its hands on Mponeng, but because it was so close to its Driefontein mine, it had to take a look.
Given the R21bn of net debt in Sibanye and its stated intention of repaying debt as quickly as possible and resuming dividend payments, the chances of it investing heavily in SA, where Eskom is a threat to the economy, are arguably small.
If it can buy Mponeng cheaply, with the price reflecting the economic and rising social risk, as well as the large capital bill to extend the life of the mine beyond eight years, then maybe Sibanye will be a player.
Harmony is a logical buyer. One analyst has spoken of tax benefits that could be realised for Harmony, and the company needs to replace a number of old mines that will be depleted in the next few years. It doesn’t have the balance sheet strains that Sibanye has, freeing it up to make an offer to AngloGold.
A tale of two smelters
As electricity prices continue to climb in SA, power-hungry smelters are feeling the pinch.
Take, for example, South32’s loss-making Metalloys manganese smelter in Meyerton, which is under review.
Though a decision is yet to be made, the options range from divestment to closure. It’s simply too hard for SA to compete with power prices in other parts of the world, especially in Malaysia, where there is an abundant and cheap supply of hydropower.
It is not just SA that cannot compete. South32’s manganese smelter in Australia is also in a tough spot despite receiving subsidised hydropower from the Tasmanian government.
But South32 is more hopeful of the prospects for its Hillside aluminium smelter in Richards Bay. The smelter made a loss of almost $75m in the previous financial year. That’s despite delivering record production even after load-shedding as well as a painful restructuring, which saw 500 staff members take voluntary separation packages.
Hillside is also thrashing out a new power deal with Eskom following its long-run power contract. That was controversial because it was linked to the aluminium price, which was seen as favourable to the company but detrimental to the utility.
Even so, South32 sees a future for a competitive aluminium industry in SA. That’s because of opportunities to increase beneficiation of aluminium, particularly linked to the department of trade and industry’s motor industry programme. It just goes to show that where economics might fail, industrial policy can still step in.