Desmond Sacco

Who Desmond Sacco is

Desmond Sacco is a geologist who has run Assore since 1992 — a manganese and iron-ore group his father founded in 1928 — and who took it off the Johannesburg Stock Exchange in 2020 after seventy years as a listed company.

Forbes put him at US$1.1 billion in 2018, while Assore was still listed. The delisting is why his entry is now harder to value than it was, and it is also the most interesting thing on this page.

A geologist, not a financier

Sacco took a Bachelor of Science in Geology at the University of the Witwatersrand, where he played cricket and hockey. He is a Fellow of the Institute of Directors and of the Geological Society of South Africa, and a serious mineral collector — his collection was written up in Rocks & Minerals in 2012.

The training shows. Most of the mining fortunes on this index were assembled by dealmakers, lawyers or accountants who bought ore bodies as assets. Sacco is one of the few who can read the rock.

His father, Guido Sacco, founded the Assore Group in 1928. Desmond joined the company in 1968, was appointed to the board in 1974, and has served as its chairman and managing director since 1992. He also chairs Assmang.

Nearly six decades at one company, three of them running it. That is the longest single-company tenure on this index.

It is worth noting what that continuity is worth in mining specifically. An ore body is a multi-decade asset: the shaft sunk today produces for thirty years, and the decision to develop it has to be taken through a commodity cycle nobody can forecast. Executives on five-year tenures are structurally biased toward projects that pay back inside their own tenure, which in mining is usually the wrong answer. A chairman who has been at the company since 1968 and expects to be there for the next decade is making a different kind of decision — and family-controlled mining groups tend to survive downturns that take out professionally managed ones for exactly that reason.

Assmang: the joint venture with a rival on this same list

The centre of the business is Assmang, which Assore owns 50/50 with African Rainbow Minerals — the company founded by Patrice Motsepe. Assmang supplies three of Assore’s four commodities: iron ore, manganese ore and manganese alloys. It is itself no longer listed.

Two people on this index therefore own half each of the same asset, and it is a substantial part of both fortunes. That is unusual enough to be worth stating plainly, and it says something about South African mining: the deposits are few, enormous and concentrated, so the realistic options are to partner or to compete for the same ground.

Manganese is the commodity to understand here. South Africa holds the overwhelming majority of the world’s known reserves, in the Kalahari manganese field, and manganese is not optional — it is required to make steel and there is no substitute at scale. That is a considerably better position than being one of many gold or platinum producers. It is also why a Japanese trading house took a large interest in the controlling structure: steelmakers want the supply secured.

Why manganese is a better business than gold

South African mining fortunes are usually imagined as gold or platinum. Sacco’s is neither, and the difference explains a great deal about why Assore has outlasted companies that were far larger a generation ago.

Gold is a pure price-taker with no pricing power at all. Every producer sells an identical, perfectly fungible product into a global market at a price set by forces — interest rates, currencies, sentiment — entirely unrelated to anything happening at the mine. A gold miner controls its costs and nothing else. South African gold made matters worse by being the deepest in the world, so those costs rose relentlessly as the shafts went down.

Bulk commodities like manganese and iron ore behave differently. The customer is an industrial buyer — a steelmaker — who needs consistent grade, reliable volume and long-term supply, not a spot cargo. That makes the relationship contractual rather than transactional, and it rewards a producer who can be depended on for decades.

Geography compounds it. Because the Kalahari field holds the overwhelming majority of world reserves, a steel industry that needs manganese has a short list of places to get it. Scarcity that sits in the ground rather than in a marketing strategy is the most durable competitive position there is.

The offsetting risk is equally structural: bulk commodities are heavy. Ore that cannot reach a port cannot be sold, so a producer’s fortunes depend on rail capacity and port throughput it does not own and cannot fix. For South African bulk miners that has been the binding constraint for years — the ore is there, the buyers are there, and the bottleneck is the line between them.

2020: buying out the public

In March 2020 Assore announced it would buy back its minority shareholders and leave the exchange. The terms were specific.

The company offered R320 per share, excluding an interim dividend of R7 per share, for the 17.4 per cent of the shares it did not already control — a 27 per cent premium, for a total consideration of R7.8 billion, funded out of the R8 billion of net cash on the balance sheet at end-December.

The ownership either side of the transaction was disclosed: Oresteel Investments moved from 52.4% to 63.4%, the BEE shareholding from 26.1% to 31.6%, and the Sacco family’s individual holdings from 4.1% to 5%.

The family’s direct 5% is the smaller part of their interest. Control runs through Oresteel, the holding company, and it is the Sacco interest in Oresteel rather than the listed stake that matters — a structure common to old family mining groups and almost invisible from the outside.

Why a company with R8 billion in cash buys back its own shares

This is worth explaining, because it is the opposite of what most people assume a listing is for.

A listing exists to raise capital. A company that generates more cash than it can usefully deploy does not need to raise any — and it is then paying for a stock exchange listing in disclosure, compliance cost and public scrutiny while receiving nothing in return. Worse, a mining group with lumpy earnings tends to trade at a discount to what its controlling owners think it is worth, because the market dislikes concentrated commodity exposure and minority positions in family-controlled companies.

If you hold the majority, believe the shares are cheap, and have the cash on hand, buying out the minority is straightforwardly a good trade: you acquire the rest of an asset you already know intimately, at a price you consider a discount, using money earning very little in the bank. The 27 per cent premium was to the market price, not to what the controlling shareholders thought the business was worth.

It is the same logic as any of the acquisitions elsewhere on this index, turned inward.

How Rateweb values him

The 2020 transaction is the best evidence available, and it gives a starting point that does not require guessing a multiple.

R7.8 billion bought 17.4 per cent of the company. That implies an equity value of roughly R45 billion for the whole of Assore at the offer price — a real number derived from a real transaction, on the agreed-transaction basis set out in our methodology.

Three things stop that becoming a clean figure for Desmond Sacco personally. The price was a minority buyout, which typically prices below what a control block is worth. The transaction is from 2020, and manganese and iron-ore prices have moved a great deal since. And the family’s principal interest sits inside Oresteel, whose own ownership split we have not read out of a document we can cite.

Our figure sits in the same region as Forbes’ 2018 estimate of US$1.1 billion, which is reassuring without being evidence. This entry is better founded than most of the private ones here and weaker than any of the listed ones. That is exactly what delisting does to a fortune’s visibility, and it is the whole point of the 2020 story: the company stopped having to tell anyone anything.

What we do not know

The Sacco family’s exact interest in Oresteel, and how it divides between family members and trusts. What Assore is worth now rather than in 2020. Assmang’s current production, reserves and earnings, which have not been public since it delisted. And what the family holds outside mining.

If you can point us at a filing that establishes the Oresteel ownership split, tell us — that single document would convert this entry from an estimate into a calculation.