Great Western Minerals Group Ltd. (“GWMG”; TSXV: GWG | OTCQX: GWMGF) announced that a former Project Director, Vincent Mora, was arrested as part of a criminal investigation into allegations of fraud and money laundering. GWMG cannot disclose more details due to the legal implications of the case; however, it should be stressed that the police investigation did not take the Company by surprise, given that the initial complaint against Mr. Mora, a South African citizen, came from GWMG itself. Months before the police were ever involved; Mr. Mora (first hired in April 2011) had been dismissed from GWMG over suspicions “about invoicing, purchasing and contracting activities”. Investors should be relieved that the investigation has in no way affected the activities at the Company’s Steenkampskraal project in South Africa or that the Company itself is under review. The criminal charges, it should be stressed, affect Mr. Mora alone and they were initiated in response to a formal complaint filed by GWMG itself. GWMG has been making some changes in its leadership ranks.
Last month, a new CEO and an independent Board member were appointed. On January 9, Marc LeVier was appointed to the position of President and Chief Executive Officer. Mr. LeVier, who has accumulated forty years of mining experience, joined the Board of GWMG in late 2012 was closely involved in completing the Preliminary Economic Assessment (“PEA”) of the Company’s Steenkampskraal project in South Africa. Mr. LeVier’s appointment comes as Great Western shifts from exploration toward manufacturing stage of rare earth permanent magnet alloys of all types and chemistries and rare earth metals and his experience will be critical as GWMG re-tools operations from exploration to production. Mr. LeVier, a metallurgical engineer, has years of experience in developing technologies for hydrometallurgical, chemical and engineering design processes. Great Western also appointed Lenard Boggio and Ron Hochstein (CEO of Denison Mines) to its board of directors as part of its shift to a new phase.
The Steenkampskraal project fits within Great Western’s reputation as one of the most vertically integrated companies in the rare earths sector. The Company has ventures in politically stable environments covering exploration (six projects in North America and one in South Africa), mining and processing. Great Western has also cultivated important relationships in China such that in 2010, the Company established a joint venture agreement with Ganzhou Qiandong Rare Earth Group. The exploration side is complemented by two specialty alloy manufacturers supplying the aerospace, battery and magnet sectors. The Steenkampskraal resource will also provide raw material to the development of the Company’s processing units. Great Western is one of the few truly integrated companies in the REE field outside of China and its new South African project enhances this aspect.
The Mora case, (‘Moragate’?) has come during a delicate phase for the South African mining industry. The episode, however, serves as a reminder that while some sectors of the South African extractive sector (in no way affecting GWMG directly) have been experiencing increased risks of labor action; the government and the ruling ANC party remain highly committed to mining. Some analysts have even suggested that labor tensions and clashes in the mining industry have an ethnic basis. Such suggestions can be dismissed by the fact that the police officers trying to maintain control share their ethnicity with the striking miners. Many of the workers, moreover, are immigrants from neighboring countries including Zimbabwe, Malawi or Mozambique; this feature would preclude ethnic or tribal rivalry as the root of the violence. In fact the problem should be sought within the enmity between various unions representing the workers.
The new and very aggressive Association of Mineworkers and Construction (AMCU) has developed a fundamental disagreement with the old guard and ANC tied a National Union of Mineworkers (NUM). NUM is rooted in the ANC and, much as the ANC itself, it has adopted a rather ‘establishment’ outlook, willing to accept moderate salary increases and even participating in the management of some mines while the uncompromising AMCU has refused cooperation and resorted to violence – using rocks against members at a NUM rally last years. The demands of the AMCU would be considered excessive even in the heydays of union activity in the 1930’s with demands trumping those of workers in the OECD countries. In the longer term it is unlikely that the AMCU will manage to earn support.
The mining strikes were manipulated by the former President of the ANC Youth League, Julius Malema, who has been accused of fanning sectarian tensions and proposing mining and agricultural nationalization policies that many have feared would lead South Africa along the same disastrous course as Zimbabwe, where youth unemployment stands at 90%. It happens that Malema’s political influence has been all but wiped out and while, new leaders are rising to take his place, some more radical, they lack Malema’s organization, influence and popular appeal. Certainly, Malema will not have a chance to run for the leadership of the ANC. The elections in 2014, in fact, will feature a battle between the less radical members of the ANC and the more business friendly Democratic Alliance (DA) party, which can rely on a growing number of supporters among Whites and Blacks.
Malema’s exit means there is little credible risk that South Africa will soon resort to nationalizing mines or farms. The ANC leadership has no appetite for nationalization, having rejected its viability outright, expelling its biggest proponent, the aforementioned Malema. Despite some of the headlines, interest and investment in South Africa’s mining is strong and judging by the success of the Investing in African Mining Indaba Conference (Feb 2-Feb 7, 2013), mining will play an ever bigger role in South Africa’s economy. The organizers noted that participation – from China, India, North America and Europe – had grown from 3,500 delegates in 2009 to 7,800 this year, reflecting the growing rather than diminishing number of mining projects in the RSA.