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Tom Dale, Gencor CEO (top) and Alan Wright, deputy chairman (above)
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Merger gives gold producers the chance to start at new rock faceJULIE WALKER looks at Goldco's plans to extract value from the tie-upMATURE industries need a mature approach from all the participants if they are to have a future: so for SA's gold-mining industry. As Gencor chief executive Tom Dale puts it, they must adapt or die. A week ago, the merger of two of SA's most important gold divisions was announced, and Dale will be in charge of actual operations. Goldco will hold all of Gold Fields of South Africa's and Gencor's gold-mining interests, both domestic and offshore, including all mineral rights. The sum of the parts approaches R17-billion, annual production 4-million ounces of gold and total reserves perhaps 120-million ounces. This is a company of substance. Statistics are one thing, but the cold facts remain: the gold has to be mined at a margin which satisfies all stakeholders - shareholders, government and unions. "If there is a common denominator between GFSA and Gencor, it is that the old model doesn't work in either case. Goldco gives us the opportunity to start from scratch. We cannot go on as we have in the past, and we don't have to take along any old baggage." Dale says the North American gold-mining structure is being embraced, where a listed holding company wholly owns all its subsidiaries. Goldco will make use of the existing Driefontein listing, with Beatrix as a standby in case Driefontein shareholders veto the deal. Anglo American has a big enough holding in Drief adjacent to Driefontein and hope of a merger must have crossed Anglo's mind. Anglo's official stance is that it is still considering the Goldco deal; Dale hopes it will come aboard. "Anglo has to make business decisions that are in the interests of its shareholders in just the way Gencor and GFSA have." Dale's view is that by the millennium, there will be only three main players in the SA goldmining industry. "The past two years have seen accelerated, irreversible rationalisation and it is only warming up. Everyone in the industry is talking to everybody else: this pot is boiling." The GFSA-Gencor gold deal was agreed on so quickly because it makes sense, says Dale.
His view is that by 2000, Anglogold will still be around, the Harmony-type mines will be, too, and there will be a third big player. Goldco's formation takes out one of the two current heavyweights and Randgold is dismantling into its component parts, a gold recovery company and an offshore arm. Anglovaal consolidated its three mines and mineral rights into Avgold, whereas JCI is splitting its gold assets into what chief executive Brett Kebble calls quality and quantity operations broadly reflecting their risk profiles and gearing to the gold price. The challenges facing Dale and the Goldco management team - Gencor chairman Brian Gilbertson, Nick Holland, GFSA's chief executive Alan Wright, Richard Robinson and Clive Woolf-Coote - are manifold. "We need to improve productivity, because labour accounts for 50% of our costs. We need to become more attractive to shareholders who provide capital. We need to do something about the unacceptable accident record, and we need to carve careers and growth opportunities for those people who were denied access during apartheid." Gencor has its vision on how these challenges will be met, as does GFSA through its Vulindlela initiative. "Ours has been to build up to 1 000 miners and we have so far trained and qualified 700, 95% of whom are black. I want to show GFSA how we are doing things and I want to see what they are doing." Dale says training and safety go hand in hand. Conventionally, black miners are despatched underground early in the morning and the skilled miner - the one with the blasting ticket and the legal responsibility to oversee the shift - follows a couple of hours later and takes charge of perhaps 100 men working on a dozen panels at the workface. Gencor's vision is to have six times the number of trained and qualified miners who lead their own team of 10 or 12 men underground and operate one or two panels only. Dale notes that, on average, there is a blast only every third day at each face in a stope. "If we can get our teams to blast every day, every team member will be able to double his basic rate of pay and every miner's will treble as he is the one with the responsibility." Gencor is taking its miners a step further along the education ladder: only a Std 6 certificate is required to strive for a blasting certificate but Gencor's miners are going one higher to enable them to progress through the national qualification framework. "It is still early days, but we are seeing some of the fruits of success," says Dale. "Safety and productivity levels have both improved. This is our blueprint and we want to compare it with Gold Fields's Vulindlela and take the best aspects of each in determining Goldco's strategy." Not all the component parts of Goldco will last the course. "If you want to be a part of Goldco, you have to produce gold at $250/oz or less," says Dale. This rather excludes Evander and two of the three components of the Kloof mining company. Dale concedes that management failed to deliver the goods at Evander, which was formed a year ago through the merging of neighbouring mines Winkelhaak, Kinross and Leslie. "We failed to get the co-operation of labour," he says, noting that the gold price did no favours. But St Helena was turned around from near closure to a substantial profit generator in under a year and Dale has similar hopes for Evander now that an agreement has been reached and the workforce regrettably cut by 6 000. It is entirely possible that anyone with a sensible proposal for the more costly mines will be heard by Goldco. Organised labour also came to the productivity party in this year's wage negotiations and agreed to a link between pay and gold production. Dale is encouraged by the responsibility shown by the mining unions. "There is no such thing as the typical SA gold mine. What works at one mine cannot be done at every mine. The deal struck at St Helena suited that mine's own conditions and has had very beneficial consequences for all. But Beatrix, for instance, could not work fullcalendar operations because it hasn't the hoisting capacity. The fact is, a degree of decentralised bargaining shows great responsibility by labour." What of the Chamber of Mines, which has historically negotiated on behalf of members? "I see a very clear role for a very small organisation. It should be concerned with strategic issues. It need not concern itself with centralised bargaining."
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