"I had grief over the news of the sale of Mponeng," says Bobby Godsell, referring to AngloGold Ashanti’s intention to sell its last SA mine. Godsell joined Anglo American in 1974 and became CEO of AngloGold when it was spun out of the parent company in 1998. When he started with AngloGold, it had 260,000 employees and all its gold mines — 11 of them — were in SA.
At the time, he found it hard to convince investors that gold had a future.
The price had slumped below $300 an ounce, while the Anglo gold mines’ all-in production costs were about $250.
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"Anglo was producing 7.5-million ounces of gold, but roughly half of it was produced at a marginal loss and half at a marginal profit," he says. "The single biggest entity, which was free gold, produced probably 3-million ounces and would, on a quarterly basis, have a profit of R20m or a loss of R20m. It was an absurd business from an investor’s point of view. That was what we had to change." It required a mindset shift from traditional volume-driven mining to value-driven mining: profits over production.
Godsell says the move to state custodianship of mineral resources in 2004 was necessary. "White companies owned 80% of the mineral wealth of the country, it was untenable."
The problem, though, became administrative incapacity and incompetence. "In terms of labour relations, we had this magic moment after 1987 where there was a sense of shared ownership of the industry."
However, the labour movement lost a lot of its leaders (including Cyril Ramaphosa and Kgalema Motlanthe) to the ANC when it came into power. Godsell says labour relations have been a source of stability for SA’s political transition since 1994.
At first, collective bargaining did raise productivity, linked to higher pay. But, Godsell says, productivity is not determined by labour effort but by smart work and good systems. "Labour relations have gone backwards. But I largely blame management for this: co-opting leadership, corrupting leadership and poor leadership," he says.
Depleted ore is a major reason for the demise of the industry. But Godsell believes the industry, in changing tack in the 1990s, extended the life of SA gold mines by up to 10 years.
Fund-manager capitalism is another factor. "If you sink a new gold mining shaft … it’s $1bn of revenue and you don’t produce your first gold for 10 or 12 years if you are mining below 3,000m. So it’s a long game and we have fund-manager capitalism where returns are measured in 90-day periods, mainly determined by the share price," he says.
And, he points out, gold mining has been in decline all over the world, disappointing investors with poor volume growth while destroying value through mergers & acquisitions.
For SA’s sake, hope should not be lost over Mponeng, though this requires extensive capital investment and a belief in a technology breakthrough. "If Mponeng can show the capacity to mine profitably below 4,000m, this is not the only ore body in the world at that depth."
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