ANGLO American Platinum (Amplats) has told trade unions it wants to cut 725 jobs, and its peer Lonmin has slashed its R11bn spending plans, because of unrelenting weakness in platinum demand and prices.
Mines have been shut and projects suspended, to preserve capital as companies batten down the hatches in the face of weak demand, particularly from Europe. Amplats reduced its production forecast this week, trimmed its capital expenditure and withheld its interim dividend payment due to the state of the market. The National Union of Mineworkers said Amplats, 80% owned by Anglo American, issued section 189 notices to trade unions about cutting 725 jobs.
Amplats underwent a major restructuring from late 2008, cutting 19000 jobs, which was about a quarter of its workforce, and it shut three mines.
The company is conducting an extensive review of its business and acting CEO Bongani Nqwababa said it would "not tolerate" loss-making ounces.
Amplats issued the notice on July 18 after proposing a number of options to unions, including voluntary retrenchments, reskilling and redeployment, none of which was accepted, said Mpumi Sithole, the company's spokeswoman.
Lonmin, the world's third-biggest platinum miner, has cut planned spending of $450m a year for the next two years to $250m. It trimmed $20m from this year's spend of $450m.
This means Lonmin will not reach its goal of 950000oz of platinum in 2015, its CEO Ian Farmer said. Instead, it would have production of 750000oz annually for the next few years.
"It takes the growth out of the Lonmin portfolio in the short term," Mr Farmer said. "We'll flatline production for as long as we think necessary in context with the marketplace, and we'll only reactivate the growth scenario when we believe the market can absorb the extra metal."
The growth to 950000oz was important to ensure Lonmin's mines and plants were at full capacity, bringing a much-needed reduction in unit costs.
"If we can't achieve that unit cost reduction through growth, we'll have to achieve it through cost savings and efficiencies, which is a lot more difficult," Mr Farmer said.
"We've specifically made sure we've reduced some of our capital projects to idling speed rather than close them.
"That allows us to accelerate off a moving base rather than a static one, which allows us more flexibility and a quicker response time."
Amplats and other companies reckon the market is oversupplied by 400000oz -500000oz.
"The deferral in Lonmin's ramp-up removes about 100000oz-200000oz per annum of platinum from the market over the next three years," Justin Froneman, of SBG Securities, said yesterday.
"While we do not expect the platinum price to react immediately, we contend that the production cutbacks by the likes of Aquarius and Lonmin, should ultimately support a higher platinum price."
Aquarius has suspended the Marikana mine it shares with Amplats, as well as its wholly owned Everest South mine.
Of the 1800 employees at the Marikana mine, all but 42 had been placed at other operations, said Mr Nqwababa. One of the problems the company faces is that, if more mines are suspended, it will be far more difficult to place its workers.
"We believe Lonmin's cautious approach is prudent in the current market environment and suggest that the revised capex profile reduces the risk of the company breaching its debt covenants," Mr Froneman said.
Platinum suppliers needed to be disciplined and think very carefully about production volumes. "We are a fairly niche commodity and very sensitive to oversupply and under supply situations. The onus is on us as producers to keep things sensibly in balance as we can," he said.