- Impala Platinum chief quits after workers die, profit tumbles
- Quirks of South Africa industry compound search for new leader
Wanted: Mining executive who can make money when prices and output fall, will halt skyrocketing costs, and is willing to accept a salary paid in one of the world’s weakest currencies.
That’s the potential job description for whoever replaces Terence Goodlace as chief executive officer at Johannesburg-based Impala Platinum Holdings Ltd., the second-largest producer of the precious metal. Goodlace, 57, said last month he plans to soon resign, ending a four-year tenure that saw one of South Africa’s most reliable cash cows diminished by plunging platinum prices, strikes and fatal accidents.
South Africa is home to about three-quarters of the world’s platinum reserves and is a major source of commodities from gold to diamonds. But extracting them is difficult and expensive. Some of the world’s deepest mines were built using cheap, mostly black miners working in dangerous conditions, and the industry has been slow to mechanize, which would allow developed-world pay and prevent more fatal accidents. Temperatures deep in the Earth can reach 60 degrees Celsius (140 degrees Fahrenheit), enough to fry an egg.
On top of all that is the country’s history of whites-only rule, which ended in 1994 and creates unique challenges for executives. The next chief at Impala, like the rest of the mining industry, will face growing demands from the government to erase the remnants of apartheid through expanded social benefits and increased minority ownership, efforts that can conflict with the interests of investors.
“A South African mining CEO sounds like an impossible job right now,” said Bernard Swanepoel, the former head of Harmony Gold Mining Co. who is a non-executive director at Impala. “I don’t think Jack Welch could run a South African mining company by himself,” he said, referring to the former head of General Electric Co., one of the world’s biggest conglomerates.
While safety has improved significantly in recent years, mining remains deadly work. Just this year, eight workers were killed at Impala’s mines. On May 17, a day before Goodlace announced his resignation, an underground area caved in. Two men were killed, including one who’s body wasn’t found for more than two weeks. Every fatality means lost production while government inspectors examine the site.
Impala spokesman Johan Theron declined to make Goodlace available for comment, adding that an interview now wouldn’t be appropriate given the recent worker deaths.
“Terence transformed the safety culture within Impala,” Swanepoel said. “But the reality is there will be accidents and traumatic experiences. If you’re passionate about people, you hurt when people get hurt. I’m sure it was a contributing factor to his overall decision.”
Tough working conditions and low pay make for volatile labor relations. There was a five-month strike in 2014 that disrupted operations and reduced output. Impala is due to begin new wage talks in the coming weeks.
It also doesn’t help that executives need to keep tabs on changes in government rules that make operating in South Africa different from other English-speaking countries, according to Guy Lundy, of Los Angeles-based executive-search firm Korn Ferry.
“We sit in such an uncertain environment on a policy level and an economic level that it’s very difficult to plan ahead,” Lundy said. “On top of that, the social issues, the environmental aspects and exchange rate fluctuations differentiate the challenges facing a South African mining CEO from an American or Australian CEO.”
In an industry hit hard by the global commodity slump, Impala’s decline stands out. The company was the third-best performer among precious-metals producers on the JSE All-Share Index in the decade before Goodlace took over, paying substantial dividends even as rivals faltered during the 2008 financial crisis.
That changed in the last five years, mostly because of things outside Goodlace’s control. Platinum prices plunged 47 percent from $1,903.50 an ounce in 2011. The precious metal fell 1.1 percent to $999.52 at 12:51 p.m. in London.
Impala’s output fell and costs rose as it built three expensive new shafts needed to access more than half of the company’s reserves. Goodlace fired 1,600 workers and last year raised 4 billion rand from shareholders. The company employs about 50,000.
“It’s probably been the toughest time in the company’s history to be a CEO over the last few years,” said Wayne McCurrie, who helps manage 100 billion rand at Momentum Wealth in South Africa. “The rights issue was needed to stay a viable company.”
As the company struggled, Goodlace turned down pay rises and bonuses for three years in a row. He took home 7.5 million rand ($510,000) in the year ended June 30. By comparison, Chris Griffith, who runs No. 1 producer Anglo American Platinum Ltd., earned 18.5 million rand last year, while Ben Magara, the CEO at No. 3 producer Lonmin Plc, got 580,000 pounds, then worth 12.1 million rand.
The compensation of Impala’s next CEO will be similar to those at comparable companies in South Africa and abroad, said Theron, the spokesman. Goodlace’s decision not to take bonuses or pay increases was a personal one.
Impala plans to cast a wide net for candidates. “But the reality is our challenges are so diverse and unique that you probably got a much higher chance of finding the right candidate closer to home,” Theron said.
Getting paid in the local currency may be a tough sell. The rand has declined 16 percent against the dollar over the past 12 months, the biggest slide among 16 major currencies tracked by Bloomberg.
For Swanepoel, the non-executive director, leading Impala is a team effort and should not just focus on the CEO.
“The very demanding environment that mining has become means any expectation of CEOs being around for 10 years is wrong,” he said. “The super-hero CEO model is outdated.”