Motsepe's mining assets outshine Sexwale's
September 2, 2008
By Justin Brown
Johannesburg - On the face of it, two of the biggest names in black economic empowerment, Patrice Motsepe and Tokyo Sexwale, have built similar mining businesses, but with dramatically different results.
The key difference is the benefit of managing the assets that the company owns rather than investing in other businesses.
The market value growth in Motsepe's African Rainbow Minerals (ARM) over the past four years has been more than double that of Sexwale's Mvelaphanda Resources.
Analysts yesterday attributed that difference in market value growth to the commodities that ARM had invested in as well as the fact that it operated its assets, whereas Mvelaphanda was an investment holding company.
Since September 2004, ARM's market capitalisation has risen more than sevenfold to R52.7 billion, while Mvelaphanda's market value has increased more than three-fold to R9.8 billion.
ARM yesterday reported a 268 percent increase in profit after tax and minorities to R4.5 billion during the year to June, further widening the gap with Mvelaphanda.
Motsepe started in mining as a contractor in 1994. In 1997, he formed ARMGold, which was listed in 2002.
In 2002 ARMGold was part of a consortium that bought Free State gold mines from AngloGold Ashanti. In 2003 ARMGold and Harmony Gold merged. In 2004 Harmony did a three-way deal with Anglovaal Mining and ARMGold that ultimately resulted in the formation of today's African Rainbow Minerals.
Motsepe's consortium has a 43 percent stake in ARM.
Sexwale is a former freedom fighter who was imprisoned on Robben Island and became Gauteng premier in 1994.
After leaving politics in 1998, Sexwale formed Mvelaphanda Resources, which bought stakes or has agreements to buy stakes in Northam Platinum, Trans Hex and Gold Fields.
Sholto Dolamo, Stanlib's resources analyst, said it was difficult to compare ARM and Mvelaphanda as they were structured differently.
Mvelaphanda was a holding company, while ARM was an operating company, he added.
Dolamo said ARM was producing significant growth in volumes while the companies in which Mvelaphanda held major interests - Gold Fields, Northam and Trans Hex - had not shown volume growth over the past four years.
The commodities that ARM produced, such as iron ore and manganese, had seen significant price increases.
Anwaar Wagner, an Old Mutual Investment Group South Africa analyst, said ARM had grown more than Mvelaphanda because it had more operational control over its assets.
Until recently, Mvelaphanda had only been an investment holding company.
Daniel Sacks, Investec Asset Management's head of resources, said the difference in performance of their market values could be attributed to the different commodities that ARM and Mvelaphanda mined.
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