On-The-Air (01/05/2015)

4th May 2015

By: Martin Creamer

Creamer Media Editor

  

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Every Friday morning, SAfm’s AMLive’s radio anchor Sakina Kamwendo speaks to Martin Creamer, publishing editor of Engineering News and Mining Weekly.  Reported here is this Friday’s At the Coalface transcript:

Kamwendo: Global shareholders will decide on Wednesday whether or not to strip out all the South African assets from the world’s biggest mining company.

Creamer: This is BHP Billiton and they have decided that their assets in South Africa and some other assets in Australia and South America need to be stripped out, because they are a lazy assets. They are not given enough management attention and they need to be put into a new vehicle, which is going to be South32 if the shareholders give the thumbs-up.

That will be listed in Australia, London and South Africa. The fear is that it is coming at a time that is a bit bearish. Late last year when this was mooted the aluminium price and nickel price where in a better state. A lot of these assets that they are going to strip out now are related to South Africa’s aluminium. Hillside Aluminium smelter, for instance, is part of the assets that will go into South 32 along with our manganese assets. Metalloys, the alloy business here in Meyerton, plus all the mines in the Northern Cape and the coal mines like Kutala and Klipspruit in Mpumalanga will all go into this. At a time when commodities are not doing to well and people are fearing that perhaps that those who receive these shares particularly in London may start selling off, which will do the new South23 no good and perhaps open it up to other acquisitors.

So, there is a lot of uncertainty with this big BHP Billiton, which is a hallowed company, coming under a fiery attack in Australia, particularly from the tax authorities. At the Senate committee, they were belittled, saying that they are paying less tax in Singapore then a pensioner with a part time job. So, a lot of tension coming in at this time, but we will know on Wednesday whether this will go ahead. It looks like it will go ahead and these South African assets will be reparcelled into South32 and then listed on May 18.

Kamwendo: The 300 000-strong Bafokeng community this week dealt a blow to beneficiation by selling out of South Africa’s once-mighty ferrochrome business.

Creamer: This was quite a surprise from the Bafokeng community. They have got the Royal Bafokeng Holdings, which has got a lot of investments in platinum, of course, which is closely associated with the Bafokeng, but the next mineral is chrome.

One expected them to stick in that, but the Roayl Bofokeng pulling out of chrome now indicates that the community has got a new strategy of not being as close as they were in the past to metals and minerals. At the same time, it deals a bit of a blow to ferrochrome, which was once a mighty industry, employing about 200 000 people and contributing about R42-billion to the gross domestic product. It has come under certain blows, not the least of them being the fact that the government couldn't stop people from exporting raw chrome.

When you export the raw chrome, you do damage to the ferrochrome business, because where is that raw chrome going? Most of it is going to China, so China has been building up its ferrochrome business at our expense. We know that beneficiation is a big word in South Africa and we can see why with ferrochrome, because with ferrochrome you add six times the value to your chrome and also three times the jobs. On both counts, South Africa has let slip. I suppose it is difficult to control the traders and also difficult to control the people who wants to export that chrome, including the platinum mines, which have a chrome by-products and they are struggling at the moment, so to tell them to stop will get a reaction of what are they supposed to do.

It shows you how difficult adding value is at home. Not only do we have the Eskom problem with not enough energy for the smelting of the chrome into ferrochrome, but you also have the issue of being whittled away by your own actions in your country giving growth to China and reducing your own economic growth at home.

Kamwendo: A High Court ruling is due any day now on whether empowered companies remain empowered after their BEE partners cash in their shares and leave.

Creamer: This is a big issue and it has been put into the courts by our Mineral Resources Minister, Ngoako Ramatlhodi, who has decided against using his own discretionary powers and said let’s all get together rather then fight and let the courts come up with a declaratory order on what we should decide.

If a company is empowered, and this goes back to 2002, with a change in legislation in 2010, if they were empowered pre-2010 and their BEE shareholders already sold out – as we see with the Bafokeng now just selling out of ferrochrome, they are leaving Glencore in a bit of a BEE turmoil, because they have cashed in – a lot of BEE companies have seen fit to cash in, particularly the early deals, from 2004.

Those companies are saying we were empowered we believe once empowered, is always empowered and we would like now the courts to decide whether this should be the case or whether we have got to go through the whole exercise again and look for new BEE partners.

Kamwendo: Thanks very much. Martin Creamer is publishing editor of Engineering News and Mining Weekly, he’ll be back with us at the same time next week.

 

 

 

Edited by Creamer Media Reporter

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