BUSINESS REFLECTION
After the Bell: AngloGold’s sad farewell to South Africa
I think it’s easy to explain away the decline of the SA gold industry as a consequence of geology. Of course, that’s part of it, but there are other aspects too.
What does corporate nationalism mean? I’ve been reflecting on this rather odd and contradictory idea whenever I read about AngloGold Ashanti.
The JSE announced on Tuesday that AngloGold will remain on the JSE with a secondary listing after the company announced a few months ago it had decided to shift its primary listing to the New York Stock Exchange while keeping an office in SA.
From a logistical and financial point of view, the decision is depressing – but more or less unimpeachable.
Although gold is having a moment at the moment, gold mining in SA has been on the decline for decades for the very simple reason that the gold reef has got deeper and deeper, which obviously increases costs.
AngloGold sold its last South African gold assets years ago, after expanding all over the world. Two-thirds of its stock is now traded in New York.
Furthermore, the three largest gold mining companies by market capitalisation – Newmont, Barrick and Franco-Nevada – are valued at between $26-billion and $31-billion. AngloGold’s market cap is $7.7-billion, but it trades a price-earnings multiple somewhere between 20% and 40% lower than the big three.
The comparison with Franco Nevada is most eye-popping: the Canadian company’s turnover is a quarter of AngloGold’s, though the SA company, sorry, the US company, trades at a third of the value.
So, you know, good for them. May they go forward and prosper. And yet. And yet.
I was recently reading parts of Anthony Hocking’s book, Oppenheimer and Son, published years ago, and it struck me just how wild and exciting the early days of gold mining were in South Africa. Gold, as everybody knows, was the seminal formative event of the City of Johannesburg.
And yet, it wasn’t just the gold below Johannesburg that made SA a great mining power. Hocking points out it was the extraordinary German geologist Hans Merensky who had a theory that SA’s gold deposits were the consequence of a huge inland lake, and that millennia of alluvial weathering from surrounding mountains gradually formed the gold seams.
Merensky is better known for his discovery of the Bushveld igneous complex, the platinum reef which now bears his name. But for AngloGold, it was his “inland lake” idea that was to have more influence. If the lake idea was correct, there was gold to be found, crucially in minable concentrations, way outside Johannesburg.
Eventually, some digging was done miles from Johannesburg on a farm in the Free State. In 1946, it fell to Ernest Oppenheimer to announce that a borehole drilled by Anglo and another consortium on the border of the farm Geduld in the Free State had “intersected a Basal Reef at 3,922 feet with a true width of 18.4 inches, assaying 1,252 dwt per ton, which is equivalent to 23,037 inch/dwt”. (Dwt is a description of the unit pennyweight used to measure precious metals.)
It will take a real miner to understand the enormous consequence and power of that seemingly mundane announcement. It was a bombshell that nobody believed at the time.
The notional “payable limit” then for mines on the rand reef was 150 inch-dwt. Most of the reef mines were yielding 450 dwt. And this was more than 23,000! Hocking records that some in Anglo thought the results had been salted.
In any event, once the war was over, South Africa saw a brand new set of gold mines and a whole string of new towns, of which Welkom eventually became the centre. And it further cemented what would eventually become AngloGold as one of the great gold mining companies of its age.
One doesn’t like to overplay this because there are also politics to consider, but the fact is that the Free State goldfields provided a lift for the people of the Free State, some of the poorest in the nation at the time.
Personally, I think it’s easy to explain away the decline of the SA gold industry as a consequence of geology. Of course, that’s part of it, but there are other aspects too. There are still minerals to be found in SA and mines to be mined.
SA has a geology like very few other countries in the world.
The Department of Mineral Resources and Energy announced last year that it has reduced the number of outstanding mining applications from around 5,000 to about 2,500.
But that still means there are, at the very least, hundreds of potential mines that are being held up because of bureaucratic inefficiency, just like in so many other aspects of SA’s administration.
You don’t get promoted in the government for making mines happen; you get promoted for making miners bend their knees. And then there is Eskom, and the unions, and the endless Mining Charter debate. And. And. And.
And so the company that was listed on the JSE in August 1944 – that made so much happen in the second half of the 20th century – has set its sights elsewhere. It’s sad. DM
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And it will not be the last before this is all over.
Minister Mantashe will go down in our post-apartheid history as one of the worst ministers we’ve ever had. There have been many more that we can point to as openly corrupt, there are many more we can point to completely inept, there are plenty who have married corruption and ineptitude in a union of frightening destruction. But Mantashe, with his absolute refusal to join the modern world of energy transition and transparent mining cadastres and regulations, has been the lynchpin in the destruction of both our energy and mining industries. The DR-Congo is getting more greenfields mining investment than we are; that’s how far gone confidence is in our system. Travelling to other countries in Africa is becoming a pleasure, not having to check constantly for loadshedding schedules. Mantashe’s strangling of renewable energy projects, in concert with his cabinet colleagues who can’t ensure a functional rail and port system, or even safe passage for trucks carrying ore to our ports is beyond simply criminal: it’s bordering on treason, the way they have recklessly allowed the pillars of our economy to be destroyed, and with it, hundreds of thousands of direct jobs, millions of multiplier jobs. All for ideological and party reasons. Disgusting doesn’t begin to describe them.
Oooooh , I don’t know, I think Gweezy has stiff competition from most of his fellow ministers
The dysfunction is driven by a psychological syndrome called Dunning Kruger. A sad state where you believe you are skilled way beyond your intellect. As one can see the entire ANC cabinet and its municipal sychophants are all infected. This sadly wont change as they double down on cadre deployment with Dunning Kruger. Other business leaders/ investors must grapple with SA being the only country on the planet that has affirmative action for the majority. That says a lot.
A romantic and genteel approach to the mining industry, indeed. And fair enough, it is another South African asset lost. Another reason for Gauteng and Johannesburg and the Free State going to pieces.
But, never under estimate the dark underbelly of this industry. How it thrived on oppression, how it made the rich richer and abused the poor and how the cheap labour of men whose back breaking, sole destroying work supported the lifestyles of British colonialists as the ANC corruption now supports the lifestyles of the cadres by abusing the very same people they promised to protect.
And let us not forget how these reefs were the reason for the British to drag this country into war, putting women and children in concentration camps while plundering farms and creating abject poverty and destitution as far as they went for all inhabitants in the then Orange Free state and Transvaal.
Mining in South Africa has been and always will be the bastard child of colonial oppression. It has never taken any responsibility for the environ-mental or human abuse and destruc-tion. It has always and still rapes and pillages, creates wars and poverty and has never shown any loyalty to this continent.
It is a pity that the ANC did not have the ability or vision to prevent this inevitable outcome. It is a pity, but no surprise, that Anglo is jumping ship.
Anglo has not jumped ship as you infer, they have seen the writing on the wall and decided it was not worth staying around. Also the utterances of Kunene regarding getting rid of all colonial names of streets and towns etc. does not instil investment in this country that the ANC has destroyed.
Patrice Motsepe did quite well out of Anglovaal and Harmony and the the miners kept their jobs.
Proud to be a son of those Welkom mines. Anglo, it should be remembered, all but abandoned the Free State Gold Fields back in the 90s, selling them to Harmony (which is now the largest gold producer in South Africa).
Like it or not Mining propelled South Africa into the modern world . The infrastructure built to exploit the mineral riches of the land has also been used for the benefit of all. Mining has always exploited the poor, ask in the U.K. about the early days when women and children worked a 70+ hours a week. Forget exceptionalism, SA mining benefited from mining tragedies of Europe in legislation and mining methods. The current demise of Gold Mining is the failure of the industry to effectively mechanise hard rock mining. That and the legislation on BEE. Is it the fault of Europeans that they found South Africa a technological desert? “Historically disadvantaged” means backward and not a justification to award 30% of a business to folks whose sole qualifications are darker pigmentation and a certain political bent. The track record of our Comrades shows they know zilch about business in the real world. But the Dunning Kruger comrades still persist. Until the government and broader society change from a victim mindset, we will wander down the path of decline.
No mention of the damage to investor confidence caused by years of wrangling over BEE and the Mining Charter? Investors want to make money not give theirs away.