Johannesburg - Ben Magara, the chief executive of Lonmin, the world’s third largest platinum producer, yesterday called on the government to improve emissions legislations to help create an appetite for platinum-based special economic zones which were envisaged for the North West and Limpopo.
Speaking on the sidelines of the Investing in African Mining Indaba held in Cape Town, Magara said the government could create demand for catalytic converters to be produced in the country if emission legislation were improved.
South Africa accounts for about 80 percent of global platinum production and the government wants to roll out the platinum-based special economic zones this year to boost its plans to beneficiate the metal prior exports.
“Beneficiation is about boosting the economy, but demand should be created. If there is demand for catalytic converters in Europe you don’t make it in South Africa,” said Magara.
Trade and Industry Minister Rob Davies has previously said that the government planned to proclaim a platinum beneficiation special economic zone this year.
Survival plan
Magara said Lonmin was focused on implementing its survival plan to buffer the volatile commodity price environment having being bailed out by shareholders in November.
The government-owned Public Investment Corporation (PIC), one of the largest investment managers in Africa managing assets of more than R1.8 trillion, paid R5.7 billion to help keep the miner afloat last year. At the time, the PIC said it helped to recapitalise Lonmin because it believed that by not doing so, the company would be at risk and potentially harm the industry and communities where it operated.
“I am grateful to the PIC for their support. The PIC and our international investors through our listing in London saw an uptick in Lonmin. They were fully supportive of Lonmin when others walked out.
“At the moment the mining sector is worth peanuts, there is no better time for people to buy stocks,” said Magara.
The Lonmin share price was 97 percent cheaper since the massive discounted rights issue. It was also battered by strikes, particularly the five-month platinum belt strike in 2014, and high debt levels. Among its rightsizing plans Lonmin cut loss making production and planned to cut 6 000 jobs and taking sensible decisions on pay freezes and waiving bonuses. It had since cut 5 100 jobs.
“We have to focus on being cashflow positive. There was disbelief around whether we can deliver on our plan to restructure, but we are an example of how to make tough decisions. Two years ago it was unthinkable to part with 5 100 jobs without resistance from mineworkers. We have done so,” said Magara.
The platinum basket price was down 24 percent since last year and according to the Chamber of Mines around 80 percent of mining houses were loss making.
“Everybody has seen this cycle before. It is debatably the worst cycle I have experienced. Everybody is aware we are making tough decisions. South Africa’s credit ratings come to play. It is heartening that we have a treasury and the South African Reserve Bank which we should guard jealously,” said Magara. Investors with whom he had interacted had acknowledged the challenges.
“They asked how we can manage production disruptions through either labour and Section 54. Safety is our aim and it is how we achieve zero harm. We need to ask: is there a way to achieve zero harm without these because they weigh in on salaries, bonuses, exports and South Africa’s credit ratings,” he said.
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