[miningmx.com] – THE potential closure of the Buffelsfontein (Buffels) gold mine by owner Village Main may be the first of several broad-ranging corporate changes due to be rung in before the end of the firm’s financial year.
In an interview with Miningmx on February 21, Marius Saaiman, joint CEO of Village Main, said the sale of the firm’s stake in Consolidated Murchison, the possible “externalisation’ of exploration investment, Lesego Platinum, and investment in South Africa’s domestic coal sector also fall under the radar of Saaiman and Bernard Swanepoel, Saaiman’s counterpart in the CEO’s office.
“We want to turn Village Main into a resources investment company. We want to incubate assets but also recognise assets that need their own jockeys chasing their own dreams . [These assets] could be set free to have their own listing,’ he says. Shareholders in Village had been apprised of this strategy, says Saaiman.
The share price is showing signs of strain, a decline of 50% in 12 months suggest investors have lost faith in Village Main’s ability to operate tired operations. Swanepoel is well known for skilled resuscitation of gold assets, but eventually, they just die. Buffels is on its death bed by most accounts.
A tiny and largely unprofitable remnant of the Klerksdorp gold fields, Buffels fares badly when it has an average quarter, and terribly in a poor quarter. In the results ended December 31, announced by Village Main last week, cash of some R187.9m was generated. Buffels, however, lost R15m in the second quarter but a more damaging R48m in the quarter before that.
“We could close it in a responsible manner; certainly there won’t be many buyers,’ said Saaiman, formerly MD of resources mergers and acquisitions at Macquarie Bank.
Closing mines is a hazardous business; while operations cease, the rehabilitation liability lingers on, seemingly forever. “The government has not issued a closure certificate for any mine,’ says Saaiman.
With all the talk of a new phase of consolidation in the South African gold sector (what, again?), Saaiman doesn’t rule out the creation of a separately listed Village Gold, although competing for assets may prove difficult.
That’s where the coal prospects become particularly interesting. Domestic prices for thermal coal are currently fetching more than exports, and there’s both an economic and political need to help consolidate the energy sector in South Africa. Eskom wants to secure price, and meaningful supplies of thermal coal while the junior coal sector needs access to capital.
“It’s a myth to think that being listed provides access to capital,’ says Saaiman. This opens up potential for a number of investments Village Main can make in the domestic coal sector. While the government’s public enterprises department wants to see capital injected into the struggling enterpreneur class; those with a second-hand, front-end loader camped somewhere in Mpumalanga province, Village Main can turn to listed entities.
For an idea of Village Main’s scale and ambition, companies such as Australian-listed Continental Coal and Universal Coal, both with cash and near-cash colleries suddenly hove into view.
