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BUSH TELEGRAPH

Tete takes on
Eskom challenge

Back in 1999, Anglo American plc and kets which have dramatically changed before the highest court in the land, the
the former Gold Fields of South Africa Kumba’s profitability and outlook. Constitutional Court, depending on what

took the first steps that led to the creation This brings me to the key difference is contained in the latest redraft of the

of one of South Africa’s most success- between the 1999 deal and the 2012 Mining Charter due to be gazetted im-

ful black economic empowerment (BEE) deal. In 1999 Anglo American’s strategy minently.

groups through the sale of some unwant- was a positive one, designed to create a The industry is being hamstrung by

ed coal mines. black-controlled coal group which could use of the deliberately vague new min-

The company which bought those coal emulate the success of the country’s ing legislation which came into force in

mines was Eyesizwe Coal which subse- then existing coal majors and so con- 2005 to meet political and social ideolog-

quently merged with Kumba Resources tribute to the success of the “new South ical targets at the cost of the businesses

in 2006 – a commodity group unbundled Africa”. themselves.

from the former state-controlled steel That was then. This is now and the As if that’s not bad enough, major

group Iscor – to become Exxaro Re- current driving strategy for Anglo Ameri- state-controlled entities like Eskom have

sources. can is negative. It is getting out of vari- imposed their own ideological require-

Anglo American is now doing it again, ous South African businesses because ments that it wants suppliers to adhere

selling unwanted coal mines to a BEE of pressure from its overseas sharehold- to which go beyond the legislated regula-

buyer who has huge ambitions to use ers as well as management’s desire to tions.

them as a base to develop a “black- limit its exposure to a country where the The future looks bleak.

owned mining champion”. But the cir- ruling politicians seem hell-bent on de- This brings me back to New Largo.

cumstances behind the deal announced stroying what’s left of South Africa’s min- The colliery is supposed to supply some

on April 10 are hugely different – and, ing industry. 14 mtpa coal to Eskom’s Kusile power

frankly, seriously depressing – to the fac- In 1999, South Africa was enjoying a station which is currently under con-

tors that drove the 1999 deal. honeymoon period under late president struction. But there’s no coal supply

Anglo American has just agreed to Nelson Mandela following his election agreement between Anglo American

sell its Eskom-dedicated New Vaal, New in 1994. Now, South Africa’s sovereign and Eskom which started construction of

Denmark and Kriel collieries, along with debt has just been downgraded to junk the power station without having that es-

four other closed coal mines, to Seriti status by two of the top three global rat- sential building block in place.

Resources Ltd – a 79% black-controlled ings agencies following a string of self- The two have been arguing over the

company which is led by Mike Teke who serving decisions by President Jacob terms for the past five years. New Largo

is currently both the president of the Zuma who inexplicably remains in office was left out of the latest deal because

“country’s Chamber of Mines and chair- despite widespread allegations of cor- they are still arguing and there’s a huge
man of the Richards Bay Coal Terminal, ruption. amount at stake because it will cost some

South Africa’s dominant coal R20 billion to build that mine.

exporting facility. In 1999 Anglo American’s No ordinary BEE company is
Teke – who has vast expe- strategy was a positive going to be able to raise that
kind of money.
rience in the coal business one, designed to create a black-
including controlling the Opti- It gets all the more inter-
mum colliery which he acquired controlled coal group which esting because Kusile was
could emulate the success of
from BHP Billiton Ltd through a designed to use New Largo
previous empowerment deal coal. Using alternative coal is
but then sold to Glencore – has not good for the high-tech fur-

made no secret of his ambi- the country’s then existing coal naces yet the first generating
tious plans for Seriti. majors…the current driving strategy set at Kusile has been started
up using a mix of coal supplied
He’s after other assets that

Anglo American could sell off for Anglo American is negative. from junior coal miners operat-
with first up likely to be the New ing in the area.

Largo colliery which was ex- That should give you some

plicitly excluded from this deal; idea of the mindset of the

more of which later. In 1999, negotiations had yet to start management at Eskom that Teke is go-

Teke has also got his eye on Anglo on the new mining legislation which ing to have to deal with should he even-

American’s export coal mines as well as would transform the industry but industry tually take over New Largo. He’s a highly

its controlling stake in iron ore producer executives believed a workable system competent executive and can probably

Kumba Iron Ore. Two years ago, Anglo would be reached through reasonable find the necessary financial backing but,

American management earmarked Kum- compromise between state and busi- frankly, good luck mate because you are

ba for disposal as a “non-core” asset but ness. The future looked promising. going to need it.

this year changed its mind following the Now, the Chamber of Mines is poised Brendan Ryan is a Johannesburg-based

unexpected recovery in the iron ore mar- to haul the South African Government mining writer

AUSTRALIA’S PAYDIRT MAY 2017 PAGE 7