JOHANNESBURG (miningweekly.com) – All South Africans need to work together to ensure that the South African mining industry is a globally competitive investment destination, said African Rainbow Minerals (ARM) executive chairperson Patrice Motsepe on Thursday, when he declared the black-controlled company’s highest-ever dividend.
“We have a lot to be proud of and together we’ll make this industry the globally competitive industry that we want it to be,” Motsepe said at the company’s presentation of 204%-higher headline earnings to R3 196-million in the 12 months to June 30.
"As an industry, mining does not always get the respect and recognition that it deserves. A huge amount of truly world-class work is being done at huge sacrifice,” he said after declaring ARM’s 189%-higher dividend of 650c a share.
“We’re very proud that this is the highest dividend that we’ve paid because, part of being globally competitive is that you have to be a regular dividend payer.
“Of course, our share price has to consistently be competitive and increase, but we are employees of the shareholders. We have a multi-stakeholder obligation, but at the centre of this multi-stakeholder obligation are our shareholders and shareholders say you have to consistently pay dividends. It’s a crucial component of how we have to run our companies,” said Motsepe, who presented ARM's results shortly after listing of his new African Rainbow Capital Investments on the Johannesburg Stock Exchange (JSE).
He noted that the importance of mining to the South Africa economy was exemplified by most of the questions put to him by the media at the launch of this new black-owned bank, being mining related.
“We must create jobs and help the poor,” said the founder of JSE-listed ARM, which benefited from the realisation of higher dollar prices for the commodities in its group, which are iron-ore, manganese ore, manganese alloy, nickel, copper, coal and platinum group metals.
During question time, in response to Creamer Media’s Mining Weekly Online on the industry’s need for collective engagement with the South African government to make sure that mining is not destroyed by the implementation of the highly negative Mining Charter Three, Soweto-born Motsepe, 55, said economies of the world that have succeeded in taking people out of poverty, creating a middle class and generating jobs that have increased the standards of living of everybody, are those economies in which the private sector has felt welcome, confident and able to compete over the long term.
He conceded that people in his position had a “huge obligation beyond the mining industry”, and were often obliged to tell politicians “the things that they don’t like to hear”.
Ultimately, besides providing education, safety and security, the function of government was to uplift the standards of living of the people through the creation of an economic future for everybody “black and white”, said Motsepe, whose first job was as a R2 000-a-month attorney for the then Bowman Gilfillan Hayman Godfrey Inc.
On Mining Charter Three, which has been universally condemned as having the potential to deal a devastating blow to the competitiveness of South African mining, he said: “As South Africans, we sometimes think we’ve got a choice. We don’t have a choice.We have to do what has proven to be right.
“I’m very confident that in terms of the global competitiveness of the mining industry, we will work out an arrangement that is good for investment. It has to be that way, and the people who determine whether we’ve succeeded in that regard are the investors, which is crucial."
Having made a point of attending the policy conferences of the African National Congress and the South African Communist Party, and having sat with the communities at the company’s Modikwa platinum mine and listened to what the mineworkers say, he noted the “huge amount of unhappiness" in the black community over the lack of jobs and the lack of access to the economy.
“Many children who have gone to university have either received the wrong education or skills for which there are no jobs,” he said, noting that “the ham in the sandwich is us”.
“Either they say that mining is on an investment strike – which is the biggest nonsense in the world, we’ll always invest when it makes sense – or that mining is not as committed as it should be,” he said, recalling that at the memorial service for the five mineworkers who died at Harmony Gold's Kusasalethu mine following a seismic event, the Mineral Resources Minister suggested that he should pay mineworkers what he pays his Sundowns soccer players as the owner of Mamelodi Sundowns premier league soccer team.
“What he recognised, and I think correctly so, is that we’ve got to conduct our mining industry in a way that has greater inclusivity, with more blacks in senior management positions, not because they're black, but because they have the skills and expertise, and must become part of this economy.
“That’s why I always say that South Africa has no blacks or whites, but rather poor who must be brought into the economy, to avoid political strife and instability.
“Having said that, I’m absolutely confident, that the mining industry will eventually become globally competitive and attract investment. Really, I say this with the greatest amount of respect, because there’s not one CEO in the mining industry who we can say reflects a lack of commitment to the country, to the workers and to all stakeholders.
“Every single CEO and every single chairmen that I have had the honour of meeting is open-minded on making mining work, and I’ll tell you, that positive attitude extends beyond the mining industry.
"That’s what gives me hope and confidence. I can’t sit in some corner and mumble and grumble. In my position I cannot. I’ve got to be there at the centre and we’ll get the flak, but that’s the challenge we’re going through as a county. But it’ll be okay, I’ve got no doubt about that,” he said in response to Mining Weekly Online.
In the audience was his wife, Dr Precious Moloi, to whom he has been married since 1989.
Motsepe emphasised the need for South Africa to build a large middle class, and made the point that the route to do so was though education, which would facilitate merit-based economic ascendency for all.
As a major shareholder in Harmony Gold, Motsepe explained how painful it is to look five families in the eye and to have to tell them that “at our mines, where we take responsibility”, their loved ones had lost their lives.
"We have a duty to create the safest possible working environments,” he said, praising the “black and white South Africans” who put their lives at risk to recover the bodies of the victims.
At operational level, ARM reported the holding down of costs to levels below inflation for all commodities bar platinum, which saw production cost increases at the Modikwa and Two Rivers platinum mines remain in line with inflation.
The company lowered net debt to R1 271-million from R4 235-million as at June 30, 2016, with ARM and Vale announcing the disposal of their 80% interest in Lubambe Mine for $97-million.
ARM's interest in Two Rivers will increase to 54% on execution of Two Rivers' amended mining right, which is said to be imminent, and ARM and Glencore Operations South Africa are in discussions to improve ARM's debt obligations on its partner loans.
Headline earnings soared 204% to R3 196-million and headline earnings a share rose to 1 684c a share compared with 494c a share in the 12 months to June 30, 2016.
Basic earnings of R1 372-million, compared with the last financial year’s basic loss of R565-million took in the R711-million after-tax impairment of the Nkomati nickel mine assets, R734-million after-tax of the Modikwa assets and the R144-million partial impairment reversal of the Lubambe mine.
ARM Ferrous headline earnings jumped 157% to R3 709-million as iron-ore, manganese ore and manganese alloy prices recovered. Iron-ore export prices were 45% better and manganese ore export prices 93% higher than in the previous financial year.
ARM Platinum headline earnings improved by R360-million as each operation in the division improved its contribution to earnings.
There was a turnaround at Nkomati from a headline loss of R244-million in the previous year to headline earnings of R91-million in the 12 months to June 30.
Two Rivers mine’s headline earnings were up 2% to R325-million and Modikwa reported a reduced headline loss of R66-million compared with R84-million in the 2016 financial year.
ARM Coal headline earnings of R82-million compared with a headline loss of R297-million on improvement at the company’s so-called participating coal business operations, which contributed R181-million headline earnings.
However, the Goedgevonden coal mine continued to be lossmaking as operational challenges negatively impacted on sales volumes and unit costs.
The ARM Copper headline loss was R203-million, with the sold Lubambe mine now classified as a discontinuing operation.
The corporate headline loss of R778-million includes a provision of R330-million for a possible settlement of silicosis and tuberculosis class action claims and related costs.