Wanted: Buyer for the world’s deepest mine. The purchaser, with some additional investment, could extend the asset beyond its current eight-year timeframe. But extracting gold 4km below the planet’s surface will require a steep geological and engineering learning curve. And on the surface, there’s South Africa’s potentially explosive labour, social and political environment. AngloGold Ashanti, the seller, may just close it down if it can’t find a buyer.
AngloGold made the announcement on Thursday alongside a routine quarterly operations update. It came as no surprise: The company has recently sold off other South African assets as it focuses on a range of projects in places such as Guinea, Colombia and Ghana. In Ghana it is rebooting and mechanising its historic Obuasi mine, which at one time had been overrun by thousands of illegal miners. So it has its hands full under its relatively new CEO, Canadian Kelvin Dushnisky. The company also tried in 2014 to hive off its South African operations into a separate listing — a proposal that was shot down by shareholders.
“Mponeng has a good eight years left with improving grades and so likely improving costs. To go beyond eight years we have higher return options in our portfolio and Mponeng ranks below those,” AngloGold spokesperson Stewart Bailey told Daily Maverick. This means they have other places where they can generate more money by spending money. The hope is that it might fit into someone else’s portfolio.
There may not be many takers on that front.
“You have to be careful who you sell it to. I don’t think there is anyone with the technical competency in the country who can run Mponeng,” said Peter Major, head of mining at Mergence Corporate Solutions. “If they can’t find a buyer they may just close it down.”
Indeed, there are no obvious local candidates to buy it. Major noted that Harmony Gold is busy with its Wafi-Golpu project in Papua New Guinea. Sibanye-Stillwater is bedding down its palladium asset in the US. Gold Fields got out of conventional, labour-intensive operations such as Mponeng when it spun off Sibanye. Internationally, it is also hard to see any immediate takers (except possibly the Chinese). Barrick CEO Mark Bristow, who is South African, has made it abundantly clear that his home country’s mining environment is toxic in his eyes.
Still, Mponeng does make money, even if it isn’t exactly a cash-spinner. In 2018 it produced 265,000oz of gold at a total cash cost of $977/oz, less than 10% of group production, compared to 224,000oz at a total cash cost of $1,014/oz in 2017. And astonishingly at such depths, it has not had a fatality in more than a year, part of a broader safety trend in South African mining. Getting that right requires serious technical know-how.
AngloGold is also putting for sale signs on its local surface rock dump processing business and a mine waste retreatment operation, Mine Waste Solutions. They both generate cash and don’t come with the technical challenges presented by Mponeng, which requires a trip down two shafts and two chair lifts to get to the bottom, 4km below the N12 highway west of Johannesburg.
Of course, if all the assets are disposed of, AngloGold would find it hard to justify maintaining its primary listing in Johannesburg, beyond the attraction of the climate and living standard to its executives.
“Nothing is off the table, but it’s not the focus at the moment,” AngloGold’s Bailey said when asked about the prospects of moving its listing. DM
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