SA LOSING ITS ATTRACTION
THE RELOCATION OF BHP Billiton’s Johannesburg-based energy coal division to Australia – plus speculation that British firm Rio Tinto is considering selling its 57% stake in Palabora Copper – reprises the old chestnut that the world’s largest miners are losing patience with South Africa’s changeable mining laws.
Even stalwart SA investor Anglo American may soon lower its exposure to SA. That’s if it sells its 41% stake in AngloGold Ashanti, which derives about half its earnings from this country.
Legislative changes have been widely blamed for a turn in sentiment away from SA mining – and there’s evidence of truth in that.
“Empowerment is still a tricky process,” says Simon Toyne, an analyst at Numis Securities in London. “It’s not so much as a certainty – there’ll always be value leakage in an empowerment deal.”
But there’s a different view that SA is simply not “elephant country” any more to the major mining companies that traditionally pick tier one assets. Says Nick Cobban, media relations adviser to Rio Tinto: “We regard SA as a very important country, but our attitude to different geographies is always the same. We’re only looking for large projects with a long life.” Cobban declines to comment on whether Rio Tinto is stepping back from Palabora. An empowerment deal is being negotiated for the mine.
Several years ago BHP Billiton said its energy coal division would be run from Johannesburg. That has now been cancelled in an effort to consolidate it with its metallurgical coal division in Melbourne. Both divisions have considerable synergies, says Bronwyn Wilkinson, head of communications at BHP Billiton Southern Africa.
“It’s not,” she says of speculation that the world’s largest mining firm is disinvesting from SA. “It’s more about the leadership.”
However, it’s resulted in the surprise resignation of Mahomed Seedat, once considered a bright light in BHP Billiton’s ranks. Wilkinson wouldn’t be drawn on why Seedat resigned but it’s thought to be a mutual decision, a company insider says.
De Beers is also selling down its SA assets and slimming its head office at Crown Mines.
There are only select areas where SA offers significant upside for the heavy hitters: manganese is one, platinum the other.