Muller must now walk his talk
Talking tough as a CE about whipping underperforming operations into shape is one thing and easy to do. The difficulty is carrying the promises through in such a way that shareholders are left in no doubt that their CE has a backbone.
Talking tough as a CEO about whipping poorly performing operations into shape is easy to do. The difficulty is carrying through the promises in such a way that shareholders have no doubt that their CEO has a backbone.
Nico Muller had his first public outing last week as CEO of Impala Platinum (Implats) after five months at the helm. After a nervous start, he gave a characteristically blunt assessment of the troubles besetting the world’s secondlargest platinum miner and the word from his executive team is that he has grabbed them by the figurative scruff of the neck and given them a shake.
Muller was apologetic about confidentiality agreements that constrained his answers about group strategy and how he saw Implats shaping its future, closing and disposing of assets as well as adding shallow resources that could be mined mechanically.
While wanting to close lossmaking shafts is no surprise, the interesting strategy unveiled for the first time is the search for fresh, low-cost ounces to reduce the group’s reliance on deep, expensive mines around Rustenburg. Anglo American Platinum (Amplats) has sold its labour-intensive Rustenburg mines to focus on shallow mechanised mines. Northam Platinum has sprinted ahead in a quest for similar deposits.
The northern limb of the Bushveld Complex, where Amplats has its open pit Mogalakwena mine, is a clear option, with the undeveloped Waterberg prospect of Canada’s Platinum Group Metals mentioned by some analysts as a potential fit for Implats. There are still some shallow prospects on the eastern limb.
Muller’s right-hand man at Implats is Gerhard Potgieter, with whom he worked well at African Rainbow Minerals.
Potgieter described closing shafts that have evolved into an organic mass, with shared infrastructure such as rail links, electricity, cooling and water lines, as like “unscrambling eggs” and said this was why it had not been done sooner.
“If we can’t make money from the old shafts, we should not continue with them. There’s no reason to hang on to those, but we can be more aggressive about how we try to make money from them,” he said.
Muller has to grasp this nettle. As important as seeing through these tough decisions is the critical process of soothing tensions that will inevitably arise with organised labour and the Department of Mineral Resources, which, under the leadership of Mineral Resources Minister Mosebenzi Zwane, has a less than cordial relationship with the sector, certainly at a national level.
Muller wants the mines around Rustenburg, which are the company’s largest source of platinum, to be profitable and the workforce to be productive. He plans to reorganise how group costs are allocated to mines. He also wants a radically overhauled relationship between head office and mine management teams, moving away from being overly critical and laying blame to being more constructive and helpful.
The takeaway from Muller’s first results presentation is that unprofitable production will not be tolerated. If it cannot be fixed, it will be closed. He has put the underperforming Marula mine on notice that if there is not an immediate improvement it will be stopped.
Equally unequivocal is the warning that the Mimosa mine shared with Sibanye Stillwater in Zimbabwe cannot afford to build a smelter to beneficiate concentrate that it sends to SA nor can it afford the 15% levy to be imposed on the exported concentrate from early in 2018. If either of those options was forced on the mine, it would be closed, Muller said.