Froneman speaks out on miners’ frustration
Sibanye Gold CEO says the state cannot hold industry to ransom
THE outpouring of frustration by mining executives about operating conditions in SA continued yesterday, with Sibanye Gold CEO Neal Froneman saying the government needed to understand economic realities so it would “do the right thing”.
Mr Froneman’s comments at Sibanye’s interim results presentation came a week after Anglo American CEO Mark Cutifani called for greater labour market flexibility to curb the loss of thousands of mining jobs, warning that the failure to resolve labour issues would accelerate job cuts in an industry in crisis.
Mr Froneman said the industry wanted more decisive and considered leadership from the government as he addressed the uncertain regulatory environment, an impasse over empowerment in the sector, Eskom’s erratic and increasingly expensive electricity supply and labour.
“The sooner the government understands the economic realities of running a business, the sooner it will do the right thing. We are tired of political comments instead of concrete actions,” he said.
“Government has to nurture this industry. Until it changes its mindset about nurturing these businesses, we will continue to be at loggerheads,” he said.
Asked why mining CEOs were speaking out so vigorously when in the past they had been more diplomatic or silent on these matters, Mr Froneman said they had no choice.
“The situation is so bad that the fear of being singled out or victimised is of such small consequence now that people feel they have to speak out.”
Regulatory uncertainty continued. This included changes to the Mineral and Petroleum Resources Development Act, with President Jacob Zuma sending sections of long-awaited and controversial amendments back to Parliament so that it could address concerns about constitutional compliance.
A legal battle has started around the ownership clause in the mining charter. The Chamber of Mines has lodged papers in the High Court to secure a declaratory ruling on interpretation of the “once-empowered, always-empowered” clause.
“To be blunt, there’s a total lack of leadership by the government on these issues. It’s easy to point fingers, but I think we are part of the solution as well,” Mr Froneman said.
Mr Cutifani said there had to be greater clarity on ownership because certainty was critical.
Mineral Resources Minister Ngoako Ramatlhodi, realising the scale of the jobs crisis, has convened an urgent meeting of labour, industry and the government to find ways to stem thousands of retrenchments and mine closures.
After a meeting on Wednesday, task teams have been assigned studies so as to come up with job-saving plans that should be made public next week, said Mahlodi Muofhe, the minister’s adviser.
One of these would be to look at whether rehabilitation work could be done concurrently with mining, potentially creating additional jobs.
However, there had to be an understanding that mines were not charitable institutions that could run at losses to retain jobs, Mr Froneman said.
“We understand the issue of job losses and unemployment, but you cannot hold companies to ransom. It will just precipitate a more vicious spiral,” he said.
The government could not legally stop companies laying off workers if they followed the letter of the law, he said.
Sibanye was forging ahead with a two-pronged strategy to generate its own power, cutting its reliance on Eskom-supplied
electricity that the company sees making up 24% of group costs in two years from 19% this year and 9% in 2007. Labour makes up about 53% of costs.
Sibanye lost at least 8,660oz of gold in the first half of the year, forfeiting revenue of R125m to electricity supply interruptions from Eskom.
The first and most immediate plan was to raise R3bn to build a 150MW solar power plant at its Driefontein mine, to supply 20% of the group’s needs.
The first 50MW unit will come on stream at the end of 2017. Sibanye needs 500MW.
Sibanye will make an announcement before the end of the year about the purchase of a coal mine so that it can enter into an offtake agreement with an independent power producer to ideally take its four mining complexes in Gauteng and the Free State off the national grid.
Much depends on what the costs are of the supply agreement and what Eskom will charge to “wheel” or transmit electricity across its grid to the mines.
The thinking is Sibanye would be able to control the cost of coal to the power plant, securing steady and predictable electricity prices free from the vagaries of commercial coal price fluctuations.
It would want other mines to share electricity consumption and would want between 400MW and 600MW for itself.
Sibanye should know by the end of this month whether it is a successful bidder for the Rustenburg platinum mining complex Anglo American Platinum wants to either sell or list. However, Sibanye is unlikely to bid for the Union mines the world’s largest platinum miner Amplats is selling.
Sibanye has no interest in buying Lonmin where shares have fallen 70% so far this year.
The gold sector needs consolidation, but not at asset level, Mr Froneman said.
Arguing that there would be greater benefits by consolidating companies, he said about R30,000/kg in costs could be saved by stripping out duplicate corporate costs and shared services.