Report on the Court Meeting and Extraordinary General Meeting held to approve the takeover of Lonmin by Sibanye Stillwater, London, Tuesday 28 May 2019
by Richard Solly, Co-ordinator, London Mining Network
1. The reason that Lonmin held another shareholders’ meeting just over two months after its Annual General Meeting was that its board was recommending that shareholders accept a takeover offer by US-South African mining company Sibanye Stillwater. Under the deal, each shareholder would get one share in Sibanye Stillwater for every share they owned in Lonmin. The first legal meeting, the Court Meeting, was called to approve the takeover scheme. The second legal meeting, the Extraordinary General Meeting, which followed immediately after that meeting in the same place, was called to approve a resolution giving practical effect to the decision of the Court Meeting.
2. For an hour or so before the shareholders’ meeting began, the Marikana Solidarity Collective held a People’s Tribunal outside the Royal Society, where the meeting was to take place, looking at the appalling historical record of Lonmin and the company from which it was spun off, Lonrho, together with the complicity of leading figures in the British political establishment.
3. Because I attended the tribunal, I was late for the Court Meeting. When I arrived, a shareholder was talking about the contrast between the payout to Ben Magara under the Sibanye Stillwater takeover deal and the valuation per share under that deal.
4. Chairman Brian Beamish said that Lonmin’s share price today is just over 62p. As of 23 April when papers about the deal were sent out, the valuation was 83.1p. He said that the company operates within the bounds of its remuneration policy. In the event of a takeover, shares held in trust for executives are paid out to them. The bulk of money which the shareholder was referring to was included in bonuses earned by executives in the years gone by, half in cash and half in shares. Now that the company was going out of existence, the shares kept in trust for a three year period will all be cashed. The other element in payments to long-term executives were incentives, and these will vest pro rata. Other than that the takeover deal includes no special payments to directors. Directors have a bonus scheme on various subjects based on performance against set objectives. 35% of their bonus was to do with finding strategic solution to the company’s problems, and this is associated with this transaction happening.
5. The shareholder said that he had based his comments on coverage in the South African Business Weekly. He aid he disagreed with bonuses anyway but accepted the Chairman’s explanation.
6. Brian Beamish said that payments were totally in line with what shareholders had approved.
7. A second shareholder said that she had stayed loyal to the company for very many years. “Tiny Rowland would turn in his grave if he saw what had happened to his company,” she said. Lonrho had had “nice AGMs” in pleasant premises with fine refreshments. “Now there are protesters outside holding pictures of people who died at your operations. Bonuses are not appropriate. Have you solved the problem of the people who died? Have they received compensation?” Nobody from the board had been outside to greet shareholders, and the shareholder had felt uneasy passing the protesters. She had helped keep the company afloat through her contribution to the rights issues and was now to be left with a very small amount. How could the board look at themselves in the mirror every morning and be happy? [I wondered the same thing; not because shareholders’ meetings are not as nice as they apparently were in the days of Tiny Rowland – called by former British Conservative Prime Minister Ted Heath “the unacceptable face of capitalism” – but because of the role of the company in the Marikana massacre and its aftermath, and in creating the conditions of poverty, desperation, family strife and worker conflict which led to it.]
8. Brian Beamish said that the people outside were “commemorating the unfortunate incident which happened in 2012, when the police shot 32 [sic] people after inter-union rivalry resulted in ten deaths. It was a very unfortunate incident – we refer to it in Lonmin as the day that changed our lives.” The company had gone out of its way since then to ensure that the children of those employees had been educated. It had offered employment to a family member in each family that had lost a breadwinner in order to ensure income for families, and it had worked to ensure statutory payments to families of victims. The whole industry and the government regret the incident and want it never to happen again. At the time, he said, he had not been involved with Lonmin but with Anglo American. The violence could have happened at any mining company’s operations. Lonmin was not worse that other companies – indeed, it has high moral standards. [The term ‘cognitive dissonance’ came to my mind.]
9. Regarding the financial side and the rights issue, he went on, “that is why we are here today.” Over the last decade there had been three rights issues, to keep the company afloat and survive in very challenging market conditions. The growth in the industry that had been expected had not occurred. Prices continued drifting downwards. The company had managed to maintain a cash neutral position in line with a commitment made in 2015. This has been done by cutting costs wherever possible, but the business was not sustainable at current metal prices. The platinum price would almost certainly one day improve, and Lonmin’s assets would make money again, but in its current form the business could not get through the period of depressed metal prices. The board had looked at selling assets and other ways of surviving, including all the suggestions made by analysts and in the media, and had come to the conclusion that the deal on the table was the most suitable and most likely to get the company through to the other side of depressed prices. Shareholders would benefit from this.
10. The shareholder asked how much the company had spent on all of this. Had they ever thought of reducing the fees of the board? “You always start to save at the bottom with shareholders, but never at the top. The attitude has to change.”
11. Brian Beamish replied that the company had indeed reduced fees. Ben Magara had come in at a much lower rate of pay than his predecessor because of this, and the board all took a reduction in pay in 2014 because of the difficulties the company was facing.
12. The shareholder asked how the new company could make things any better. Why did they want to take Lonmin over? It seemed a bad idea. And she said that the Chairman had not answered her question about how much the company had paid for the fees for lawyers.
13. Brian Beamish said that the total expenditure on the takeover agreement had been US$24.38 million, of which US$16.02 million was for financial and broker advice and the rest for legal costs. Real synergies were to be had by putting the two companies together. Lonmin starts off finding and mining metals and goes through to refining and selling. Lonmin has spare capacity in its processing facilities which Sibanye Stillwater can now use, “so that is a massive benefit to them.” The other benefit is that their business and Lonmin’s are next to each other “so we can rationalise management and the treatment of ore.” There was value in synergies and Sibanye had better cash generation across their business so is able to invest in the business in a way that Lonmin currently could not.
14. The shareholder asked if the Lonmin board were to be paid redundancy money.
15. Brian Beamish replied that all non-executive directors would resign from the board and have no further remuneration from Lonmin after 7 June. The future of the two executive directors lies with the new owners and there had been no discussion so far on this matter.
16. A third shareholder said he was “not clear on the new company. Do they have other metals that they are going to be mining?”
17. Brian Beamish explained that Sibanye had started life as a gold mining company and had several gold operations in South Africa. It had started buying into the platinum industry and bought the Rustenberg operations from Anglo American and then bought Stillwater in Montana in the USA. Sibanye Stillwater now mines gold and Platinum Group Metals, which is where the synergies come from. The foundation of its diversification was the acquisition of Stillwater in Montana.
18. I referred to the Chairman’s answer to the second shareholder, in which he said that the protesters outside were commemorating those who had been killed at Marikana in August 2012. I said that the tribunal outside had looked at the whole history of the company, though the massacre at Marikana had certainly played a central role in its deliberations. I said that Bishop Johannes Seoka of the Benchmarks Foundation in South Africa had hoped to attend the shareholders’ meeting but had not managed to obtain a visa in time. I said that the bishop had made a number of comments and that I wished to summarise them. I said that the bishop had said, among other things, that Lonmin is guilty of failing the workers, depriving them of their rights and forcing them to slave-like living and working conditions, which had resulted in the massacre at Marikana. Both Lonmin and state officials are guilty. To date nothing has been done of what is required by the labour law of South Africa. The merger is bad news for the miners and their communities. It is taking place despite the challenges ranging from Lonmin’s failure to implement its Social Labour Plan to the drop in Sibanye’s stock since 2017, when the merger announcement was made. According to civil society, there must be a vote against the merger until there is clear provision for the protection of the miners who are likely to be retrenched after six months of the merger. The reality, the bishop had said, is that there has been no change at Marikana since the massacre. The conditions in which people live and work are worse than they were before 2012, when they were massacred for a living wage and better working and living conditions. I said that Lonmin had not fulfilled its Social Labour Plan and that it was essential that, if the merger went ahead, Sibanye Stillwater would be required to fulfil it.
19. Brian Beamish replied that he had met with Bishop Jo the previous week. “We have discussed all these issues repeatedly at AGMs,” he went on. “Lonmin is a good payer in the mining industry and excellent in comparison with other industries in South Africa. Regarding the Social Labour Plan, we undertook to spend 500 million rand over five years and we did. We pay out per annum 475 million rand in living out allowances where employees have opted to receive these. We have a Social Labour Plan agreed with the government and that SLP stays in place irrespective of the transaction. Sibanye Stillwater has said they are happy to honour all commitments in these plans. We are not leaving our employees or communities in the lurch: everything we have committed to, we have done. We have a clear conscience regarding what we have done. We have downsized the workforce as a business necessity. Going forward, because we cannot reinvest in our business, older shafts close down and we cannot replace them for lack of cash to invest. We are looking at 12,600 positions which will fall away as shafts are mined out. Unless we invest in new shafts we cannot mine any more. Jobs will come to an end without further investment. Sibanye Stillwater see it the same way. Without any cash injection, 12,600 positions are in jeopardy. We have slowed the rate of job loss but those positions will drop away without substantial investment. This is the result of the reality of business.”
20. Another shareholder said that he had spoken to one of directors at the last meeting and said it would be nice if all shareholders could go away with a bit of platinum rock as a memento of the good times and the bad times during their involvement with Lonmin. “Will we go away with a piece of rock?” There was some polite laughter from other shareholders. Brian Beamish also laughed. “Sorry to disappoint you,” he said. “There will be no rock. I am sorry.”
21. The resolution to accept the proposed all-share takeover was then carried by 98.98% of votes cast.
22. The Extraordinary General Meeting then commenced. There was one item of business, a special resolution, to give effect to the scheme agreed at the Court Meeting. It was passed by 98.97% to 1.03% – not quite as high a margin as the resolution at the Court Meeting, but nonetheless unassailable. Brian Beamish then thanked shareholders for their loyal support over the years; management for their unwavering commitment and hard work; and employees for their service to the company.
23. There was no admission of guilt for the massacre at Marikana or any of the other matters included in the charges in the tribunal outside. Shareholders approved the demise of the company without – apparently – ever getting to grips with their share of moral responsibility for its atrocious history.
24. The struggle now will be to ensure that Sibanye Stillwater and its investors are held to account for the injustices in which Lonmin is implicated and the promises which it has made.