Johannesburg - Chief executives of mining firms are taking strain in a difficult environment.
This was again highlighted by the resignation of Ian Rozier, the chief executive and president of JSE-listed Eastern Platinum (Eastplats), who stepped down on Monday, following 13 years at the helm.
Read: Turmoil to claim 32 000 mining jobs
He will remain as a director of the company.
David Cohen, the chairman of Eastplats, will become the chief executive and president.
Cohen said under Rozier’s stewardship Eastplats had maintained its asset base and proactively protected its balance sheet, despite “the extreme challenges currently faced by the PGM (platinum group metals) industry”.
“Ian has agreed to remain on the board to assist with ongoing South African matters.”
Write-downs of unprofitable assets have become the new norm for mining firms as the global economy slows and mining firms battle to survive.
Mistakes made by mining firms in better times, turmoil in the economy coupled with depressed commodity prices and labour woes are weighing heavily on mining chief executives.
Other mining executives are also quitting.
Peter Major, an analyst at Cadiz Corporate Solutions, said the government and the hostile labour environment were to blame for difficulties in mining.
“Most countries support their mining industries, but we are always in attack mode here. Look, we are at the bottom of mining ranking,” he said.
“Nobody cares. Political leaders don’t care. Unions have wiped out 440 000 jobs on gold mines. There were 550 000 (employed) in gold (mines) in the 1980s… There is a toxic destructive and irreversible cocktail against chief executives,” Major said.
ArcelorMittal South Africa chief executive Paul O’Flaherty announced his resignation in December and is scheduled to step down next week after his appointment in May 2014.
Graham Briggs, Harmony Gold’s chief executive, announced his retirement in July.
Rene Hochreiter, a mining analyst at Noah Capital, said yesterday: “I don’t think any chief executive wants to resign. They don’t want to show they have failed… They are paid big salaries and that is worth fighting for. Just because the market is bad does not mean chief executives resign, they refocus their strategies.”
In the case of Eastplats, Hochreiter said the collapse of the Chinese takeover deal was the final straw for Rozier.
“They were trying to make Eastern Platinum into something it was not. The company tried to make a deal with the Chinese, but it fell through, and this was the last chance to turn the fortunes (of Eastplats) around,” Hochreiter said.
The two-phase cash purchase of Eastplats by Hebei Zhongbo Platinum collapsed because Beijing Hehe Fengye Investments, a major shareholder in the Chinese company, had opposed the deal, Eastplats said in November.
Eastplats assets are poor compared with its peers, such as Lonmin and Anglo American Platinum (Amplats). It’s market capitalisation is R648.5 million.
Yesterday the shares were halted at the request of the company. In the year to date its shares have slid 12.5 percent.
Lonmin’s share price was down 0.64 percent to close at R10.93 on the JSE yesterday. In the year to date its shares have tumbled 40.98 percent, with a market capitalisation of R3.08 billion.
Amplats is faring better. Its shares slid 1.08 percent to close at R228.50. It has a market capitalisation of R61.6bn, its shares have gained 23.5 percent in the year to date.
Hochreiter did not believe the recent resignations by some chief executives was a sign of capitulation because of market conditions.
The remuneration of mining executives has been under the spotlight, particularly in 2014, when Chris Griffith, the chief executive at Amplats and 11 other executives, were paid R25.3m in performance bonuses in the middle of a five-month platinum belt strike.
Martin Hopkins, a partner in human resources services at PwC, said the job of mining chief executives was particularly hard with operational challenges, depressed commodity prices, regulatory challenges and a hostile labour environment.
“Mining remuneration has been market related, compared with other sectors over the long term, but it tends to be very volatile with high payments in the good times, but lower payments in depressed conditions. Executives need to be in for the long haul and have a longer-term view in the mining industry,” Hopkins added.
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