September 20, 2019

Cradle Gold’s Vision…

South Africa’s Witwatersrand Gold Basin has produced over 1.8 billion ounces of gold

South Africa’s Witwatersrand Gold Basin has produced over 1.8 billion ounces of gold - close to 40% of all the gold ever mined. Yet, South Africa still has more gold reserves than any other country, according to the World Gold Council.

Can gold mining once again become a sunrise industry in South Africa given this huge potential? Cradle Gold thinks it is possible - and we are out to prove it.

Cradle Gold believes that the revitalisation of the Wits lies in two key areas: a radical shift in operational strategy to mine the Wits and a complete rebuild of the staff engagement and shared value model. 

Our mission at Cradle Gold is to redesign the business of gold mining in the world’s most prolific gold field through a new model of staff engagement and cooperation. At Cradle Gold, our key difference is our people – empowered and motivated - to make gold mining more productive, profitable and sustainable; gold mining just happens to be our business, but we believe our approach is valid across all industries. 

The current model of human motivation revolves around punishment and external rewards – the carrot-and-stick approach. This model no longer works, is outdated and no longer serves its purpose of running a productive enterprise. It is, unfortunately, also at the core of the current South African gold mining operating model.

As Dan H. Pink summarised in his 2010 bestselling book, Drive: The Surprising Truth About What Motivates Us, the key to unlocking high performance and effectiveness – at work, school and home – lies in satisfying our human need to direct our own lives, to learn and create new things, and to do better by ourselves and the world around us. In other words, human beings are primarily motivated by Autonomy, Mastery and Purpose. Global studies across a broad range of socio-economic and geographic boundaries have shown that what science knows and what business does are no longer compatible. 

The carrot-and-stick management model was originally designed by Henry Ford in 1903.  This model is no longer fit for purpose as business has moved a long way in the intervening century.

There have been prominent success stories of companies rewriting the “software” of organisational management. SEMCO, Google, Atlassian and Kimberley Clarke are worth mentioning.  Unfortunately however, despite these isolated case studies, a complete global overhaul of the business operating system has yet to occur.

There will be many naysayers who see no alternative to the highly combative approach employed by both employers and unions in the gold sector. We disagree. 

A highly progressive South African CEO, Albert Koopman of Cashbuild from 1979 to 1991, took a completely new approach to engaging with staff long before corporate governance and employee engagement were notable buzzwords. In a 1986 article he describes how Cashbuild replaced a system of reward and punishment with one based on peer recognition and rejection.  For instance, despite repeated warning letters and disciplinary procedures under Cashbuild’s old reward and punishment system, absenteeism and lost hours never fell below 15 percent. 

Then, when they used the peer group concept by simply placing red marks next to late or absent employees’ names on a publicly displayed chart (with no management reprimand), lost hours immediately dropped to one percent. 

The evidence is there; carrots and sticks no longer work. What science knows and what business does are no longer in sync.

There is a global revolution underway in the structure and operations of business and Cradle Gold wants to be at the forefront of bringing this approach to one of the last places imaginable, people intensive extractive mining. Our team have already had notable success in gold mining in the Wits implementing new, people centric company policies and processes and the results were impressive. Cradle Gold is therefore building on a solid base of proven implementation in Wits gold mining.

Over four decades of research shows that a new model of human motivation is not only possible but also desirable leading to a motivated and engaged workforce, improved productivity, improved safety and benefit for all stakeholders, including staff.

Unleashing the power of people

Cradle Gold is implementing a new model of people engagement to unleash the capability of our people and our business. 

We believe in the inherent desire of people to be productive, to grow and to be a part of something bigger than themselves. It is our mission to create the platform to facilitate this.

How does one create such a platform? By placing people front and center in all areas of the business. Some of our business principles are summarised below:

Equality – if a rule applies to one, it applies to everyone. There is no special treatment for managers, executives or anyone else in the business.

Communication – All managers, including the CEO and other executives, are available to all staff at any time.  Cell phone numbers and email addresses of all executive managers are published publicly, and staff are encouraged to contact them whenever they feel it would be important to do so. Cradle Gold holds “sharing” sessions among employees, aimed at deepening understanding of diverse histories, cultures and values in the workplace. We aim to remove the power imbalance in management-staff relations through the empowerment of staff and their chosen representative councils. An annual three-day communal gathering - The Great Indaba – will give employees the opportunity to present their views on Cradle Gold and its leadership. We aim to reach consensus on key decisions more quickly through open, honest and on-going dialogue.

Information sharing – most companies have a terrible track record of sharing information with staff. Despite having undergone stringent hiring and vetting procedures during their recruitment, employees are not trusted with information and viewed with suspicion if they “know too much”; cognitive dissonance comes to mind. Without information people turn to the only other thing available to them, self-interest. Cradle Gold will share key information monthly with all staff. All other company information is shared upon request. We hire adults; and we treat them as such.

Training and continuous improvement – we believe in the continuous development of people assisting them as they strive to better themselves. To support this Cradle Gold employs a number of initiatives:

  • Cradle Gold training college
  • Real time access to experienced technical and life skill mentors
  • Financial training to learn how to read and understand “the numbers”

Safety – ensuring that our people are able to work safely is of paramount importance to Cradle Gold. To this end we put our people in charge of their own safety. Our mantra is if you would not take your children into a mining area, you don't go in. Every person on the mine is empowered to put a halt to any activity they deem to be unsafe, or in fact for any other reason they deem necessary. We then use the Five Whys method devised and implemented with huge success by Toyota to improve operational safety and productivity. For example, once an employee brings an operation to a halt, we ask why.  The answer to that question will then lead to a further question and so on until – after five whys Toyota proved that you get to the root cause of the problem. By fixing the root cause, the problem is resolved permanently and no longer recurs in on-going operations. Too many companies only focus on the symptom and miss the underlying cause. 

These concepts have been taken to some radical extremes and the results have been nothing short of spectacular; even in intensive manufacturing industries not hugely dissimilar to gold mining. SEMCO in Brazil is probably the most notable example of this. In SEMCO every employee sets their own salary and work schedule. According to the CEO, Ricardo Semler, the company distributes a half-yearly salary market survey and says: “Figure out where you stand on this thing. You know what you do; you know what everyone else in the company makes; you know what you need; you know what’s fair. Come back on Monday and tell us what to pay you.” Time clocks have been eliminated, and people come and go according to their own schedules – even on the factory floor. The result is greater spontaneous coordination between workers, and more people who can now do several jobs. Interestingly, although they set their own schedules and targets (or perhaps because they do), they tend to work longer hours to meet them. 

Again, what science knows and what business does are no longer compatible; a new approach is sorely needed. It is now irrefutable that harnessing core human drivers makes businesses more successful. 

A new approach to the Wits

In partnership with a new people-centric operating model, Cradle Gold’s revised strategy to unlock the Wits revolves around a very simple premise. The great mineral endowment of the Wits is now its undoing. We have become so used to mining multi-million-ounce, high-grade gold deposits that we developed an entire industry around it. South Africa is without a doubt the world leader in deep level gold mining. 

This is now a problem; we have been unable to view the Wits through any other lens. When all you have is a deep level hammer, every problem looks like a deep level nail…

If you find a one-million-ounce gold deposit in the Wits at 4 g/t in situ it is considered too small, low grade and sub-economic. If you find the same deposit anywhere else in the world you are cracking the champagne and you have a listed mining company. This is illogical, gold does not care where it is mined.

Cradle Gold’s strategy is therefore very simple. We will mine shallow (less than1,200 m below surface) ore bodies of a targeted one-million-ounces or greater at an in situ indicated grade of 4 g/t or more. We will only mine virgin, unmined Wits reefs and will not be involved in any pillar or remnant extract mining. These new ore bodies will be mined through proven and well-established decline trackless access utilising traditional stoping methods. There is no need to move away from proven Wits mining techniques; we only need to change the depth of operations, staff engagement and ore body selection.

The benefits are manifold, including improved productivity with shorter travel times, reduced cooling and pumping resulting in lower power consumption and lower geo-technical risks resulting in massively improved safety.

In addition, Cradle Gold will be leveraging the massive surplus of gold mining infrastructure in the Wits, specifically gold processing and tailings deposition facilities. These are two of the largest capital expenditure items for a gold mine and Cradle Gold conservatively estimates a capital saving of US$150 million for the first two mines planned to go into production.

The leveraging of existing infrastructure significantly reduces the timeframes to production, reduces long-term environmental liabilities and removes any further negative environmental impact in relation to plant and deposition operations.

Our internal planning, confirmed by external professional studies, shows that mining a one-million-ounce, 4 g/t ore body can produce gold with an All In Sustaining Cost (AISC) of less than US$800 / ounce; well below South African industry benchmarks.

So how many of these types of ore bodies are present in the Wits?

The answer, unsurprisingly for the world’s largest gold field, is many. 

Cradle Gold currently owns assets with three planned new decline access mines in various stages of development, for total production of 170,000 ounces of gold per annum at an AISC of less than US$800. We are currently in discussions to acquire a number of additional assets in South Africa that meet our investment criteria. 

Cradle Gold has set itself on a path to rebuild the industry upon which South Africa was built on. If successful we aim to create a new wave of prosperity and development for all South Africans.

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