Alan Wright, chief executive of Gold Fields, talked to Bronwen Jones about the future of the mining house
ALAN Wright is an optimistic man. While one mugging is enough to set most people packing for Perth, Wright’s reaction to serious injury was to protect his home and get on with his life. His reaction to analysts predicting the break-up of Gold Fields is similarly confident.
Wright feels good about the future of the mining house as well as that of South Africa. And yet, the one-time accountant is weary of rumour and idle speculation among the financially ill-informed. He says simply: “We are not unbundling. There is nothing to unbundle.”
While Johannesburg Consolidated Investments (JCI) and Gencor had non-mining assets to hive off, Gold Fields is deep in to mining and almost nothing else.
“We have stakes in Standard Bank, Liberty, Sasol and to a small extent, Commercial Union. Standard are our bankers. Liberty and Sasol are our cash pool. Should we find a nice mining investment, we’ll use them.”
The likelihood of new mineral finds is improving, with increasing sums being spent on exploration. Gold Fields has doubled the percentage of its market capitalisation used for exploration over the past five years. Last year it stood at R52-million; this year the figures, due in mid-August, are expected to be far higher.
Wright says: “The amount we spend will increase. Our future has to be exploration. And while more than 50% of our exploration budget was spent in South Africa last year, the big switch will be a larger and larger percentage being spent offshore.”
But whether mining in South Africa, Ghana or elsewhere, many high-cost variables affect the bottom line. Wright says it is too early to predict the outcome of this year’s wage negotiations, but industrial relations have improved.
Gold Fields only lost 68 000 man-days to strike action in the year to end-June. While the figure at first seems high, with a workforce of some 89 000 people it doesn’t even average out at one day per employee — a good record in South Africa. All this year’s strike action was illegal, but Wright says: “One has to grin and bear it.”
The wry smile fades at talk of underground fires. There have been “too many” in the past 12 months. Yet the picture remains a significant improvement on figures two years ago when some even suggested the active hand of an arsonist at play.
The fire in June 1995 at Libanon spilled over into the next financial year; there have been two fires at East Driefontein and one at West Driefontein. Wright says: “No one really knows the cause. By the time one gets back in, the source has been totally consumed.”
At Libanon, insurance paid out a R2,5-million claim; at East Driefontein a claim for R9,8-million has been settled; workers are not yet back into the area of the second fire at East Driefontein and the claim at West Driefontein has not yet been settled.
Wright says: “Normally it is one to two months after a fire is out before you can safely go back in. The rocks are so hot, they can be 3000C.”
Wage increases are only one facet of talks with the unions. Wright says the company is “fairly down the road” in discussions over broadbanding, but is reluctant to pay skilled wages for an employee who spends most of his day as a manual labourer. “But, of course, we have to be prepared to spend more for more skilled men.”
The choice for employers is stark. If the National Union of Mineworkers (NUM) call for a R1 350 minimum was met, “we would no longer employ people without skills”.
Wright says a vast number of people have no education at all. “We take them on at a low rate of pay, train them and move them through the workforce. They need the pay incentive to better themselves.” Gold Fields spends R50-million a year on formal training and a further R50-million on additional training.
Last year, the industry battle over working on Sundays, holidays and the option of shifts around the clock, resulted in an agreement in principle for a two-pronged attack. The Chamber of Mines would work on the macro full calendar decisions and as an interim measure there would be interim “fullco” agreements at individual mines.
There has been little implementation. Wright says: “At none of our mines can I say that we’re on track for fullco working within say the next three to four months.” He thinks the idea will eventually take hold. “If anything, people will work less hours, but they will have different length breaks. After working for 10 days they will have a meaningful break.”
While very few people work the night shift at the moment, Wright sees the bigger change being towards more than one effective shift a day.
With greater recognition of trade unions, the company now has full-time health and safety representatives as well as full-time hostel representatives. But, while the NUM wants full-time shop stewards too, Wright points out: “None of the other unions has them.”
In its effort to curb the high cost of theft, Gold Fields has joined a high-tech fingerprinting scheme. Run through Anglo American’s Research Laboratories, the method accurately “fingerprints” gold, sourcing it not just to a mine, but to a particular shaft.
Wright says the scale of gold theft from the company’s mines is “larger than it should be”, but while an increasing quantity of stolen material has been retrieved in the past five years, reassuringly it is at ever lower grades. With more than R150 000 worth of gold known to have been stolen from Gold Fields from 1995 to 1996, security is improving.
Technologists may have mastered the identification of gold, but they continue to research the option of opening the Gamsberg Zinc Mine. On current progress it is not feasible. The zinc resource is massive, but because of its combination with manganese the affordable method of extraction would generate a giant lake of sulphuric acid … Quite environmentally unacceptable, and by location, unsaleable.
For now, Gold Fields can rest on its environmental laurels. Wright says: “While there are not many people there, the area has a very delicate ecology.” It was around Gamsberg that the company saved the Burgher’s onion and the red finch.
The company intends to apply the same “environmentally aware, yet affordable” standards to its gold project in Tarkwa, Ghana. Negotiations to move two villages with a total population of 20 000 people to make way for Tarkwa have already taken 12 months.
And in Namibia, restoring the landscape is one reason behind the decision to reprocess tailings for copper from the mined-out De Wet shaft. Gold Fields will reprocess these through the Osmelt process so that there is no future hazard. The new mine at Khusib Springs will make tailings as well as treat this new material.
Back in South Africa, doubting Thomas analysts still question the future of Northam. The platinum mine will not turn a profit for the year to end-June but, more importantly, it will show a profit for the second consecutive quarter. This will be as good as, if not better than, the close to R6-million profit of the previous quarter.
There is an air of permanence at 75 Fox Street. The high polish of the floor slabs, the even higher sheen on the furniture, do not speak of unbundling. And nestling behind safety glass lies a kilogram of gold. Small change in the pocket of a man and a mining house in a long-term game.