If radical socio-economic transformation – the term favored by South African politicians these days – had a face, it would probably look like one of the many new mining operations being established by new players in the industry.
A recurring theme over the years at the Mining Indaba has been the uncertainty in the South African mining industry. This is driven by contested regulatory and legislative issues which have looked to aggressively introduce transformative initiatives across the industry.
That narrative has not changed but this year’s gathering in Cape Town had a tinge of optimism, with miners waiting for the contentious legislation to be changed.
In 2017, the then-Minister of Mineral Resources, Mosebenzi Zwane, announced a new Mining Charter that “shifted the requirements for black ownership and employment equity at mining companies, as well as the companies from which they procure any goods and services.”
Following this, industry stakeholders say they have lost confidence in the ministry. According to the Chamber of Mines, the Mining Charter made investors wary of committing any capital to the country. A report by the Chamber of Mines claims that investment into the sector, which contributes 8% to GDP, has been stagnant since 2008.
This year, there were calls for the minister to stay away from the event. The stakeholders wanted Cyril Ramaphosa, who at the time was Deputy President, to deliver the keynote address. Zwane ignored this and defiantly asked, “In terms of the population of South Africa, what percentage of the people do these critics represent?”
“Anyone who thinks they can better the charter, our door is open for discussion,” Zwane told FORBES AFRICA on the sidelines of the event.
But, if you look past the legislative woes and the political rhetoric, you’ll see an encouraging story of a young black man who struggled to break into the sector which has previously been dominated by a privileged few.
A recent report by Statistics South Africa noted that mining production had increased by 6.5% year-on-year, up from the annual growth of 5.2% reported in October 2017. This bodes well for Black Royalty Minerals, a subsidiary of the Makole Group, which launched its first colliery in Bronkhorstspruit, a small town 50kms east of Pretoria, at the end of January.
“For us, mining is a pillar and a cornerstone of the South African economy. It’s a foundation that you cannot ignore when you talk about economic development. So, in 2014, [Bronkhorstspruit] is where Chilwavhusiku started, we did our prospecting and applied for all our authorization and after this was done we realized that we could take this project into the mining phase and that’s exactly what we did. And now, as we stand here, we are very proud of this development,” says Ndavhe Mareda, the Chairman of Black Royalty Minerals, which is 100% black-owned.
“One of our mandates is growth. We are looking at both the domestic market as well as export markets. We are working with a lot of traders in the hopes that we’ll be able to expand our horizon. And, we want to do this the right way, in a way that will not exploit the land or its dwellers and of course that works well with the society.”
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Mareda was born in Venda, a former homeland of the apartheid regime in northern South Africa. He obtained his matric and moved to Johannesburg, the City of Gold, to further his studies. He obtained his Bachelor of Commerce at the University of South Africa and practiced as an accountant before venturing into entrepreneurship.
The company, which became operational in 2014, employs 350 people – 90% of whom are Bronkhorstspruit locals. It is hoped the colliery will create opportunities for the some 20,000 people that live around the mine.
“There is a huge level of unemployment in Bronkhorstspruit and our mine eases a lot of the pressure applied by the poverty. We give tender preference to the locals. These tenders may be for transportation or any other services that the mine needs to commission,” says Mareda.
This is what the disputed Mining Charter is looking to foster – assisting black-owned businesses like Black Royalty Minerals.
Disputed government policies are not isolated to South Africa.
The Democratic Republic of Congo (DRC) is no stranger to legislation battles between government and mining conglomerates. The government recently completed a new draft of what it calls the Mining Code. It awaits the signature of the president. In the meantime, mining companies are anxious about the future of their operations in the region.
Randgold Resources started developing Kibali, in north east DRC, eight years ago. After investing $2.5 billion in the operation, the giant gold mine may have to stop productivity.
Randgold chief executive Mark Bristow says the mine is on track to produce its target of more than 700,000 ounces of gold in 2018, making it one of the largest gold mines in the world. But, with the Mining Code, this prosperity may be short-lived.
“It is our express wish that the government grasps the serious consequences this ill-considered code will have on its ability as a country to attract international investment and re-investment to the DRC, and to refer the code back to the ministry of mines for further consultation with the industry,” says Bristow.
Officials, however, are confident the code will demonopolize the industry and allow the country to enjoy a percentage of the profits made from the exploration of its resources. Albert Yuma Mulimbi, Chairman of the state-owned mining company Gecamines, says it will be renegotiating its contracts with international mining partners operating in the DRC.
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Regulation is not the only issue facing mining in Africa. The former president of Nigeria, Olusegun Obasanjo, in his official address, highlighted that creating a sustainable environment for emerging miners is no simple task. He said the industry is marred by a lack of transparency as well as a legacy of mistrust of major miners. The mining industry has been accused of pursuing profits at the expense of its workforce.
Solutions to these issues need to be found.
Apart from the emergence of junior miners, the mining industry in South Africa is looking at technological advancement to resuscitate the sector.
&#8220;Technologies like robotic process automation and artificial intelligence will enable core mining activities to be performed from locations that can support a more diverse and inclusive workforce,&#8221; reads Deloitte’s Tracking The Trends report. &#8220;These new technologies will turn the mining value chain upside down, disrupting both existing business models and the traditional roles and relationships among mining companies and their customers, suppliers, and even competitors.&#8221;
This is the kind of disruption that excites another junior miner, Olebogeng Sentsho, who’s a disruptor herself as a young woman emerging in the mining industry. She is the founder of Yeabo Mining, a company that specializes in erecting and operating waste management plants at mines.
“In order to make headway in this industry we need greater support and space from various stakeholders. The increasing cost of mining, especially when discovering alternative minerals in decommissioned mines, is immense,” she says.
Sentsho says Yeabo Mining will need R50 million ($4.1 million) for infrastructure needed to mine in the current climate.
“It’s not an easy ride but it’s one worth hanging onto and I am confident about the future and the markets we’ll be serving as Africans,” says Mareda with a smile and genuine hope.

New Kids On The Mining Block

Sure, optimism shone forth in Cape Town like the late summer sun bouncing off Table Mountain, as more than 6,000 powerful people, including more than 20 government ministers, headed for the biggest mining gathering on the planet.
<img loading="lazy" decoding="async" class="alignleft size-medium wp-image-4586" src="/wp-content/uploads/2017/04/Chris-Bishop_JC-200x300.jpg" alt="" width="200" height="300" />
There were more mining companies this year, up 50% on last year, after more than five years of decline. The keen-eyed investors were back and looking for contenders across the continent. A fruitful place to be for the brave, like the motorbike riding maverick Mark Bristow who has spent the last 20 years making money digging gold in mines from Mali to Cote D’Ivoire. Two decades ago many fellow South Africans may have laughed at Bristow for taking risks far from home, in what many see as barren land for mining, but now they’re laughing on the other side of their faces. At the Mining Indaba, Bristow’s Randgold Resources announced it had increased gold production, for the fifth year in a row, plus it was debt free with more than $500 million in cash. Many mining companies would kill to be in that position.
Among the investors looking to blaze a trail across Africa is the Lagos-based African Finance Corporation that began life, in 2007, with a fund of $1.1 billion and now has assets of $3 billion, according to one of its directors, Osam Iyahen. It is a public-private fund, 42% owned by government, that invests in: oil; gas; resources; infrastructure and power. In January, it broke ground on a $200-million bauxite mine in the Boffa region of Guinea Conakry, just 15 kilometers from the coast, with plans to ramp up to 15 million tons.
“I think there has been a rebound in the industry this year,” says Iyahen in Cape Town.
“Last year was a bit of a disaster. People were not interested in talking about transactions; all they were worried about was protecting their downside. There was a lot of sulking going on.”
You could be forgiven for thinking the host nation is still sulking. South Africa, the biggest mining country on the continent, has been like a boxer on the ropes since the power cuts and global financial collapse of 2008. More than 60,000 jobs have been lost since 2012; capital expenditure ground to a halt and the South African industry lost R38 billion (about $2.8 billion) in 2016 alone, in a year when mining output fell 4.8%.
“We have to get our house in order in South Africa, capital is a coward and it goes to the place where there is least risk. We have to remember mining is a global game now and it is easier than ever for foreign investors to move capital around. Our grandchildren will live with the legacy of what we do now,” says Kieran Whyte, a lawyer and partner at Baker McKenzie, who specializes in energy and infrastructure.
The last few months of 2016 were better as commodity prices lifted, according to the Chamber of Mines, especially the risk haven of gold in the wake of the unpredictable, to put it kindly, presidency of Donald Trump.
“I think we are seeing the green shoots here, we just have to watch out for frostbite,” says Roger Baxter, the CEO of the Chamber of Mines, with a smile on the first day.
Baxter was alluding to two cold fronts: the first, the fact that South Africa – that mined more than a third of the world’s gold – is no longer the king of mining. In fact, in these troubled economic times, more and more nations, from West Africa to South America, are ready to accept foreign investors with open arms. A sign of the times is that, on the eve of the Mining Indaba, analysts in Cape Town were extolling the virtues of the copper, gold and coal mining nation of Chile.
The second frosty front is regulatory uncertainty. The South African government, which has met six times with the Chamber of Mines, has been working on amendments to its mining law since December 27, 2012. It promises to gazette the amended Mineral and Petroleum Resources Development Act (MPRDA) by the end of March; the Chamber of Mines feels it could be April.
<div id="attachment_4588" style="width: 310px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-4588" class="size-medium wp-image-4588" src="/wp-content/uploads/2017/04/Mark-Bristow_JC-300x200.jpg" alt="" width="300" height="200" />Mark Bristow</div>
What is likely to be in the bill could cause conflict. It is expected there will be greater ministerial discretion and set in stone that all mining companies have to have 26% black ownership at all times. One of the problems is black shareholders, once they have passed their lock-in date, often cash in their stakes by selling to white shareholders, thus diluting the empowerment stake.
The Chamber of Mines, which represents almost all South African mining houses, disagrees strongly with this. It feels that once mining companies have borne the cost of financing black shareholdings it has done its job regardless of dilution. If this so-called “once empowered, always empowered” principle is accepted, many of the country’s biggest mining houses will be compliant overnight.
“I have never seen the Chamber of Mines so aggressive. Normally they get along to go along, but it seems the worm has turned,” says one mining insider in Cape Town.
It is all likely to end up in court where mining lawyer Peter Leon reckons they have a strong case.
“All they have to do is challenge section 100 of the MPRDA. This gives the minister the power to promulgate the act, but doesn&#8217;t give the minister the right to rewrite or amend the act. That would blow it out of the water,” says Leon.
There appears to be little sign of a U-turn by the government over an issue that could further confuse and deter investors.
“We don&#8217;t want to encourage a place where courts take the place of government. We don&#8217;t agree with the norm that if you don&#8217;t agree with us you take it to court,” says South African mining minister Mosebenzi Zwane.
It’s a cold front that could mean a Chile future.

Beware, It’s Chile Out There

The chief executive of Randgold Resources, Mark Bristow, is no corporate cypher in a pinstriped suit, making decisions from afar. “I don’t believe in big offices and bureaucracies,” says the man whose company has no head office—just an operating center in the Malian capital of Bamako. With the spirit of a true entrepreneur, he likes to be on the ground and appears to relish difficult conditions.
<div id="attachment_154" style="width: 484px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-154" class="size-large wp-image-154" src="/wp-content/uploads/2011/11/279-42-683x1024.jpg" alt="" width="474" height="711" />Mark Bristow, CEO of Randgold Resources. Johannesburg, 18 August 2011 &#8211; Photo by Brett Eloff.</div>
And from the start, following the incorporation of Randgold Resources in 1995, the acquisition of BHP Mali in 1996 and the London Stock Exchange listing in 1997, Bristow set a cracking pace. Three operations were built in just 10 years: Morila in Mali; Loulo, a four-mine complex (also in Mali); and Tongon in Côte d’Ivoire. This period also saw the confirmation of a new discovery at Massawa in Senegal and the acquisition of a 45% interest in the Kibali project in the DRC.
Bristow may have raised the eyebrows and increased the pulse rate of investors along the way, but the story of the rapid rise of Randgold Resources cannot be gainsaid, and those who have kept the faith have been rewarded amply. In the 10 years to 2009, the company was the best performing stock in the STOXX600 Europe Index, recording a stellar rise of 4,776%. In the five years to 2010, basic earnings per share increased by 63%, from $0.70 to $1.14, and dividend payments went up by 100%. In the past three years, net profits have increased by 157%, from $47 million in 2008 to $120.6 million in 2010.
Conventional wisdom would have had the odds stacked against Randgold Resources from the start. The intention was that the company would confine itself to gold, so there was no possibility of spreading risk by mining other minerals. It was driven by explorers whose only experience
Was of deep-level mining in South Africa. At the time that it needed to fund the development of its mine, Randgold Resources had no revenue-producing operations and the gold price was at an all-time low. Finally, the assets of Randgold Resources were all in Africa—not everyone’s idea of a safe investment haven. Yet this Pan-African pure gold player is on the blue chip FTSE 100 and its stock trades at a premium to the market. Bristow recalls the early days of the company. “We were attracted to Africa beyond South Africa after the postcolonial era of nationalism, socialism and nepotism. These ‘isms’ had preserved Africa’s natural resources, gold in particular. We had no money but a lot of ambition,” he says.
Randgold Resources added to its already substantial holdings in the prospective region of West Africa in 1996 with the buy-out of BHP in Mali, gaining a collection of exploration tenements and the less-than-desirable (as it turned out) Syama mine. The turning point came the next year when the world-class Morila deposit was discovered. He views the establishment of this mine as his company’s greatest achievement to date.
“We had a stressed balance sheet and we had to persuade the bank to lend us 100% of the money to develop the deposit. This was at a time when the gold price had gone from $400/oz to $260/oz. We could so easily have lost the company,” he explains. People questioned whether Randgold Resources had the expertise to build a mine. These critics were silenced when Morila (including the construction of a 30 power station) was completed on time and on budget. The first gold was poured and a profit was made in the first quarter of operation, and since October 2000, the operation has produced 5.8 million ounces of gold and distributed more than $1.6 billion to stakeholders. “It’s been the most lucrative gold mine in the world in the last two decades,” he notes.
The development of a major mine in Mali, the third-poorest country in Africa, takes some nerve but Bristow, unsurprisingly, does not hold the conventional view that the continent is a difficult place in which to operate. “It’s a fine place to work and it’s not bound by hoity-toity corporate governance janitors. It’s a place for passionate, ambitious people who want to make a difference to other people’s lives,” he says.
His first core belief about doing business in Africa is the importance of establishing relationships. “If you want to invest in Africa, you can’t do it by remote control. You have to build partnerships and to do that, you have to travel. You have to get to know your team. You have to know the political, social and commercial environment of each country.” The holder of a pilot’s license, he usually flies himself to the company’s operations—the trip from Abidjan to Tongon in a Cessna 206 being a particular favorite.
The importance of relationships notwithstanding, Bristow makes no apologies for being uncompromising when necessary. “You can’t be nice all the time. That’s a mistake that many foreign companies make. Africa is not for sissies. We don’t bribe. We stick to our values and we don’t shy away from robust encounters with stakeholders and governments.” The story of Randgold Resources in Côte d’Ivoire illustrates his approach. Before the building of Tongon started, the company had talks with the government. In a nutshell, the message was: “We’ll come and invest, but you need to keep us safe.” That said, many would question the decision to do business in a country that was split between government and rebel forces after the 2002-04 civil war and was later divided between supporters of Alassane Ouattara, the winner of the presidential elections held at the end of 2010, and Laurent Gbagbo, the former president who refused to step down.
Bristow’s response is interesting. He says that Côte d’Ivoire has a “deeper institution” or regulatory framework than most African countries. “At all times, that institution has reinforced our deal and respected our contracts.” He admits that things became very difficult at the end of 2010. “We had to deal with social unrest and people wanted to steal,” he says. However, the mine did not arm its security forces even though there was one ton of gold piled up in the safe. “We made it clear [to both factions] that we would not be used as a political football. The response of both governments was to ensure security for the operation and the community. They kept their word.”
This gave him the confidence to continue. “Other companies withdrew their expatriates. At no stage did we feel that we needed to pull people out. Our view was that ifit became too dangerous, we’d close the mine altogether,” he says. They never had to make that decision.
He concedes that the circumstances were highly complex. “We were in the middle of a conflict area under UN watch. We’ve had to manage in a social and political environment that has been turned on its head: the good guys became the bad guys and vice versa. We’ve built relationships and we talk to everyone.” These partnerships are the key to the company’s ability to operate in this type of situation and they are the nub of what separates his company from many others on the continent. It starts with a commitment to using local businesses. Apart from the difference that this makes to the economy, it makes good sense because these businessmen can open doors to government contacts and it means that the company is viewed as “local” rather than “foreign”. Since the commercial ventures in the surroundings are benefiting from the operation, it is less likely that people will interfere in its running and more likely that locals will defend it from attacks.
Bristow is scathing about the “comfort blankets” that so many foreign mining companies “drag with them” when they come to Africa. “They bring service providers, logistical support, security personnel and contractors from around the world and they build a perimeter wall around their business.” By adopting this approach, they make no real difference to the economy of the country.
That brings us to his second core belief: that if a companymines gold assets in Africa, it is beholden to create value for all stakeholders. “You don’t own the mine; you rent it. The country only begins to benefit when you start construction,” he notes, adding that the real benefits only start when profits are made and taxes are paid.
He says any one of the Randgold Resources’ mines consumes goods to the value of $10 million to $15 million a month. “If you can cycle such costs in the local economy, can you imagine what you do to that economy?” he asks. In preparation for the start of mining at Kibali, 400 kilometers of roads in the north-east DRC have been opened up. “For the first time since 1955, a bus was driven from Uganda to Doko in the DRC in August last year,” he says.
Locals are already feeling the benefits of these developments with the cost of living having fallen by 50%. He is confident that the new operation, with estimated reserves of 10 million ounces, will be a “big engine” for growth in that part of the country. Expected to be one of the largest mines on the continent, it is anticipated that first gold will be poured by the end of 2013.
The biggest sing single risk for Africa, in his view, is thepressure of poverty. His message to the anti-mining lobby and the “greenies” is that this is more destructive to the planet than everything else put together. “Poor people don’t care about rules and regulations; they just want to survive for the day. That’s why they’ll chop down the last tree. Lift them out of poverty then they’ll start looking after the environment.” And he has no doubt whatsoever that the way to liberate Africa is to create jobs. Since 1995, Randgold Resources has directly created 9,000 jobs and, at full operation, he expects Kibali to employ about 3,000 to 4,000 people.
The Randgold Resources philosophy is that local people are employed wherever possible and not only at junior levels. There is only one expatriate on the management team at Morila and local people make up well over half of the team at Loulo. He is impatient with people who hold the view that Africans cannot deliver and perform at the highest executive levels. “There are plenty of highly skilled Africans.
If you are prepared to invest in people, they are here. We’ve just been on an employment drive to the southern DRC and we had people queuing up,” he says. He makes the point that in countries like Mali and the DRC, the intellectual elite is to be found in mining.
Bristow, who holds a PhD in geology—his thesis was on the “esoteric” topic of chrome seams in the Bushveld Complex—from the University of Natal in South Africa, says he did not set out to be successful. The circumstances in which he found himself helped. So did the fact that he likes winning, loves making a difference and enjoys working in a team. Above all, he really believes in Africa and its people. “It’s got to be the place to be in the next 10 years,” he says.

Tag: Randgold Resources

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