Anglo American Platinum CEO Chris Griffith. Picture: FINANCIAL MAIL
Anglo American Platinum CEO Chris Griffith. Picture: FINANCIAL MAIL

ANGLO American Platinum (Amplats), the world’s biggest platinum miner, is putting four shafts at its Rustenburg complex onto care and maintenance and has earmarked its Union mine for sale in a move to restructure the business, affecting about 14,000 jobs.

Amplats is restructuring its Rustenburg operations into three mines with an annual output of between 320,000oz and 350,000oz, and it is putting four high-cost shafts into long-term care and maintenance. These are Khuseleka 1 and 2 and Khomanani 1 and 2. The move will cut production by about 400,000oz a year, leaving the company with annual production of between 2.1-million and 2.3-million ounces.

Amplats may also close the Waterval UG2 concentrator and its Number 2 smelter because of the reduced production from Rustenburg.

“The platinum business has attractive underlying fundamentals but we are facing tough decisions to restore profitability to our operations,” Amplats CEO Chris Griffith said.

The Union mine, which is also undergoing restructuring, is no longer core to Amplats.

Amplats “believes that the Union mines are likely to be of greater value under different ownership, particularly in comparison to the other attractive growth options in the company’s portfolio, and it therefore proposes to divest Union at the right time”, Mr Griffith said.

Amplats has cut is capital expenditure over the next decade by 25% to R100bn.

“In line with the proposed changes to Anglo American Platinum’s mining and processing operations footprint, the company proposes to deliver R3.8bn of annual benefits by 2015 through cost reduction and efficiency improvements, including savings of R390m to be achieved through a redesign of the company’s overhead structure,” Mr Griffith said.

SBG Securities analyst Justin Froneman said: “Although we believe the strategic review is broadly as anticipated, we maintain our sell recommendation and an unchanged price target.”

SBG has a target price of R435 on the share, which was 0.8% higher at R495 in midmorning trade on the JSE on Tuesday.

Amplats chief financial officer Bongani Nqwababa said the cost of the restructuring, including the retrenchment packages, care and maintenance costs as well as the social investment plan to offset the job losses, would be R3.2bn. Of that amount, R1.2bn is for retrenchments.

He declined to say whether Amplats would pay a dividend when it announces full-year results on February 4.

Amplats has warned it will report losses in its results, compared with profits a year earlier. This is largely because of a two-month strike at its Rustenburg and Union operations last year that cost the company 306,000oz in production.

The National Union of Mineworkers (NUM), which has lost support on mines around Rustenburg, said it would talk to Amplats about the proposed job cuts, which are the subject of a 60-day regulatory process entailed in the issuance of a Section 189 notice by the company.

“The NUM will engage the company in a bid to save these jobs and appeals to workers to work together to safeguard their own jobs,” NUM general secretary Frans Baleni said.

The NUM also called on its partners within the Congress of South African Trade Unions to oppose tariff hikes proposed by Eskom. The steep escalation in electricity prices in recent years has eroded profits across industry. “The tariff increase, if granted, will have disastrous effects on jobs and the economy at large,” Mr Baleni said.

Amplats said it would try to create 14,000 new jobs to offset those lost in the restructuring of its business after a year-long review. It will give “a comprehensive package of support to any affected employees and communities”.

In its job-creation initiatives, Amplats will focus on infrastructure, housing and small business development in and around Rustenburg and in areas from whence in draws its workforce.

The extensive review of the business was started in February last year to address growing concern within Anglo American about the poor financial returns it was seeing at its 80% held subsidiary. Moribund platinum prices, weak demand for the metal — particularly from Europe, the leading user of platinum in autocatalyst manufacturing — and rising costs in South Africa were eroding profits.

“The continued operation of unprofitable shafts within the current configuration, and in light of the company’s revised demand and cost expectations, is not sustainable,” Mr Griffith said.

The restructuring began long before the labour unrest. “This is not a reprisal for the strikes at the end of last year,” Mr Griffith said.

Amplats had informed the Department of Mineral Resources about the restructuring and it was understandably upset at the scale of the job losses, he said.

With Reuters