Knives out for AngloGold’s Mponeng, but who will buy it?
Prospects for world’s deepest mine, at 4km below the surface, do not look rosy under new Canadian CEO
AngloGold Ashanti’s strategy is unequivocal – if a mine or prospect doesn’t fit it goes. New CEO Kelvin Dushnisky has outlined that strategy, and in a clear sign that he’s not fooling around, two mines have been put up for sale in the past four months – the most recent the profitable Cerro Vanguardia mine in Argentina.
He started his tenure six months ago saying the portfolio of 14 mines was “a bit heavy”. The strategy of the strongest possible balance sheet with stricter debt metrics, investment hurdle rates, capital allocation priorities and cost controls was clearly stated during Dushnisky’s maiden outing at AngloGold’s 2018 financial year-end results.
Where does that leave SA’s Mponeng, the world’s deepest mine at 4km below the surface? It’s not a rosy picture.
The mine has an eight-year life after a $350m investment, but a decision to spend billions of rand more on giving the mine a 20-year life has to be made within two years.
There is a host of prospects in AngloGold that do not entail ultra-deep mining along with the attendant costs, safety issues, the rampant price increases for electricity – a key risk to all mines in SA – and a long payback period.
That’s a given. What is less certain is who would buy Mponeng and its large unmined resources. Sibanye-Stillwater has its hands full with its three gold mines, securing Lonmin to add to its large platinum portfolio, and hefty debt to repay.
Harmony is under intense scrutiny for its ability to pay for its half of the Wafi-Golpu copper and gold mining project in Papua New Guinea. No foreign miner will buy an ultra-deep gold mine in SA. As much as AngloGold might want to exit Mponeng, it might struggle to find a credible buyer.