End of a well trod road for Impala’s Brown


JOHANNESBURG — In my mind’s eye, I have this picture of David Brown, with a glass of New Year’s champagne in one hand, and the last bars of Auld Lang Syne ringing in his ears, wondering what 2012 would bring him. A brutal self-assessment of his leadership of Impala Platinum (Implats) might have provided the daunting answer: “Different year. Same problems”.

Take a quick look at Implats’ prospects for 2012 and one has a sense of déjà vu. Zimbabwe, although its fortunes are not priced into the share, continues to be the basket case it always has been. Worse, there’s no sign business conditions are going to be clarified there any day soon.

In fact, they could get more complicated as Zanu-PF, Zimbabwe’s ruling party, considers shifting elections a year earlier to 2012, which would mean a resolution on indigenisation — black economic empowerment legislation — might have to wait until completion of the election race.

Secondly, platinum mining cost controls are going to be predictably difficult to rein in. According to some estimates, ‘Section 54’ related work stoppages following underground fatalities on South Africa’s platinum mines will continue to hammer production, raising costs. We all want safety to improve, but the Zero Fatality goal is still a dream.

No-one wants to admit it, but there’s no end in sight to underground fatalities on South African deep level mines. In the first week of January, while most of us were blowing the dust off our laptops, two miners had been killed on two listed South African (gold) mines.

Add to that, labour expectations and union dominance will be a fixture in South African mining for years to come. Combined with the likelihood that industrial demand globally will be stunted, at best, in 2012, placing downward pressure on the platinum price, and you can see why Brown would come to the conclusion that he’d done what he hoped to do at Implats; and could do no more. As he commented to Miningmx earlier this week, he’s due some “quiet time”.

Knowing when to call it a day is not easy, particularly as Brown has played a relatively solid innings while in charge of Implats.

Take the last five years, for instance. Impala’s share price performance is flat but, relative to Anglo Platinum, it has outperformed the company it used to call “Number One”. Even now, Impala is the preferred platinum stock for some of the mining analysts Miningmx consulted.

Brown certainly dealt with empowerment in South Africa much better than Anglo Platinum which, as we speak, is trying to re-piece its empowerment deal with Anooraq Resources, while its Mvelaphanda Resources platinum experiment is now part of corporate history.

It’s hardly the most scientific gauge of Brown’s worth to shareholders, but on the announcement of his imminent departure, scheduled for end-June, the market sold down Implats 2.75% – about R2.8bn.

The expectation is that Brown will be succeeded at Implats by Terence Goodlace, currently CEO of Metorex. Goodlace, a former Gold Fields executive, has the deep level, hard rock mining experience and did a good job of dealing with Metorex’s operations.

The fact Goodlace sits on Impala’s board also stands him in good stead. It seems natural he’s the anointed, although one analyst remarked that running Metorex is not like running Implats, the world’s second largest platinum producer.

There’s also another factor Brown’s resignation raises. Management fatigue.

According to one analyst, more resignations among South Africa’s mining executive class are possible this year which is shaping up to be a gruelling year.

We haven’t even dwelled much on government proposals for state intervention in the sector and what perils or challenges that might bring. As Brown commented himself, South African mining is unrelenting.