Skeat is back with a gold mine and a plan
Junk status delays billion-rand funding to revive Blyvoor mine
VETERAN mining entrepreneur Peter Skeat, who intends to revive the old Blyvooruitzicht gold mine near Carletonville, says South Africa’s credit rating downgrade to junk has delayed the funding which he hoped would be in place by this month.
The new deadline for the $100million (about R1.3-billion) he is seeking from overseas investors is now June, he says.
“But we’re definitely getting the funding.”
After the downgrade, investors wanted him to come back with more due-diligence reporting, “to see where the rand is going, where the country is going and how badly they’ll be affected”, he says.
Mining will begin a year after he gets his funding.
He admits that trying to arrange it after the downgrade has been “hard work”.
“Any listed entity offshore that is associated with South Africa generates a negative perception.
“They’re running shy of any negative press overseas. They don’t want to be seen to be doing any deals with South Africa.”
Because of the downgrade, massive corruption and increasing political volatility, “South Africa is not a happy name overseas”, Skeat says.
The situation could get “more difficult” if his offshore institutional investors are forced by their mandates to withdraw funding. His company, Blyvoor Gold, which has a capitalisation of R1-billion, would be vulnerable to that when it lists, although this won’t happen for at least a year.
“We’re going to stay private to get a track record. It will take a minimum of a year to build that track record. Then we’ll list.”
Lots of questions are being asked about the listed gold sector in South Africa, with some companies like AngloGold Ashanti having such a bad year that it announced this week it would be reviewing some of its local mines.
“We do not want to list in an environment of doubt,” Skeat says.
Production at Blyvooruitzicht started in 1942, when it was owned by powerful mining house Rand Mines. In the ’50s and ’60s it was the company’s flagship mine and the most profitable gold mine in the world.
It was taken over by DRDGold in 1997 and, thanks to rotten management and costs overrunning revenue, it pretty much collapsed.
Bernard Swanepoel, who had acquired a great reputation as a turnaround artist while CEO of Harmony Gold, took it over in 2012 promising to do what Skeat is now promising to do, but threw in the towel a year later and it went into liquidation.
The same team from Aurora Empowerment Systems that had plundered the Pamodzi gold mine and left thousands of workers to starve put in a bid for Blyvoor, which was accepted by the liquidator with no deposit.
According to Skeat, they marched in and stripped the mine of its entire gold plant and all its Eskom power lines worth R100-million. Then they disappeared, again leaving about 7 000 miners high and dry.
He bought it from the liquidators for some R250-million.
Skeat, 63, has a civil engineering degree from the University of Cape Town, a mechanical engineering diploma and a mining engineering degree from the University of the Witwatersrand.
Blyvoor is his third attempt to revive a gold mine others had given up on.
The previous two ended badly after being hit by funding problems and unanticipated political events which forced him to sell to other parties, who proceeded to reap handsome rewards when the share price rocketed.
Skeat has a reputation of being good at identifying valuable assets but not so good at developing them, which he thinks is unfair and the fault of “distorted” reporting in the media. He came to public notice in 1997 when he purchased Anglo American’s Afrikander Lease (Aflease) mine near Klerksdorp, with its low-grade gold deposit.
He managed it for three years and it made a couple of million rands a month, winning the status of best-performing gold share on the JSE for two years.
Then, after some ruthless boardroom manoeuvring, it was taken over by a consortium headed by businessman Brett Kebble and financially ruined within three months.
Skeat denies this speaks to a certain boardroom naivety on his part.
“I was not able to compete with a man called Brett Kebble, who was worth many billions, at that stage of my life when I was a whole lot smaller. I outper- formed in terms of gold production and cost, but not in terms of political power and muscle power.”
There was an attempt on his life and he was arrested on trumped-up fraud charges.
“The most terrible things you can imagine happened to me and I had to fight that alone. It was impossible.”
At Blyvoor, he has armed himself with a strong board of experts and says that even if a Kebble-type somehow materialised again he would be dealt with very decisively.
He says mining will start within a year of the funding coming through, producing 50 000 ounces of gold a year, reaching 100 000 within 18 months to two years.
Why should he succeed when the South African assets of AngloGold Ashanti are in such severe trouble?
Because his break-even cost will be $600 (R8 000) per ounce, he says, whereas Anglo’s is $1 300 (R17 000) per ounce. His margin will be 40%-50%.
He says unless gold loses its safe-haven status and/or the rand suddenly takes off, both of which he discounts, the next biggest risks to success are unions and the Department of Mineral Resources.
He is on good terms with the department and his 30-year mining licence has been approved and signed.
As for the 26% BEE ownership requirement, he has made an agreement with the 1 000 carefully selected mineworkers he will be employing “that we intend empowering them so they become shareholders in the mine”.
They will thus receive monthly dividend payments of around R10 000 in addition to their normal working salaries of the same amount, he says.
They are totally pro-management and anti-union, he says. They don’t want them anywhere near the mine.
“Their choice, not my choice. They’re saying they had a union, they paid the union, which they’re saying destroyed their mine and left them without a job for three years.”
His insurance against labour unrest is that they will earn 26% of the profits.
“So what happens? Productivity goes up, loyalty goes up, efficiency goes up.
“And suddenly your cost per ton goes down and you’re all working towards one goal, not to satisfy unions on one side and shareholders and listing requirements on the other.”
As long as US President Donald Trump remains in power, keeping alive the need for a safe haven, Skeat believes that this is going to be third time lucky for him.
Any listed entity associated with SA generates a negative perception They don’t want to be seen to be doing any deals with South Africa