If Sipho Nkosi, CEO of Eyesizwe Coal, is in the midst of making South African corporate history by being part of the creation of a “black Anglo American”, he chooses to leave that judgement to future generations. He is tipped to become CEO of an unnamed and diversified mining company, which will be the largest black-owned outfit of its kind, with an enterprise value of R16billion. But he is not assuming the title before the fact.
So is this the black Anglo? “I don’t know,” he says, noting that the group’s origins in 1918 and its evolution as a conglomerate in a closed economy were very different. All he knows is that the deal-makers would like to create a strong mining house and energy business.
The company has been formed from the unbundling of Anglo’s contested subsidiary, Kumba Resources, into Kumba Iron Ore and Newco. Newco will have a 55% black shareholding; a 25% stake goes to minorities, 3% to employees and 17% is held by Anglo. The company will combine Kumba and Eyesizwe’s coal assets to make it the fourth-largest coal producer, yielding 45million tonnes a year.
The company also has heavy minerals, sands and base metals, including zinc, in its portfolio. It will also be the third-largest titanium slag producer. The company will then have a 20% shareholding in Kumba Iron Ore, giving it crucial exposure to cash-generating iron ore. Its other shareholders include Fani Titi’s Tiso group and the South African Women in Mining Association. The company will be named and unveiled by the end of the year and list on the JSE by the middle of next year.
It has already been harangued at birth. Many critics note that, “as usual”, Anglo has kept the crown jewels and given the bad assets to Newco. If Nkosi is hurt by the criticism, he does not show it. “No company has all the best assets,” he says. “You have good and not so good assets; it is about how you manage them.”
The contentious aspect is that Anglo has reduced its holdings in Kumba Iron Ore, as the government wanted, over the past few years, yet it retains a significant, controlling interest of 52%. If that is what people mean by Anglo taking the crown jewels, Nkosi is happy to concede. But he notes that Iron Ore is a significant cash generator for Newco, and trying to take on more than 20% may have stretched the company. He feels the other shareholders will have sufficient influence.
The iron ore cash-generating capabilities, and money raised, form a listing that will be used to develop and add to the other assets. An arguably more interesting part of the new business will be its entry into energy. The company is looking to become a significant player in an independent power-generation market that is to open up shortly with opportunities of around R20billion.
The outlook for the commodity cycle enhances the company’s prospects. Nkosi expects both coal and iron demand to remain buoyant, thanks largely to China. Zinc is doing well at $1 200 a ton, but Nkosi says that managing costs will be key.
The new owners would do well to install him as head of operations. Trained as an economist, he has worked in international coal marketing for both Anglo and BHP Billiton. The two provided the assets that were used to create Eyesizwe. He has also worked as country manager in South Africa for Swedish power-generation company ABB.
His mantra for empowerment companies in mining is to think of what to do with the 26% ownership given by the mining charter in the long run.
He currently goes out to Eyesizwe collieries in Mpumalanga once a month. “You have to smell the coal,” he says, “otherwise you suffer withdrawal symptoms.” He is looking forward to the new challenge of a job he casually describes as stressful. He takes it in his stride, partly because his family is relatively manageable. It comprises a 16-year-old son at boarding school “and one wife”.
All he has to do now is deploy his disarming charm to conceal his aversion to publicity.