ANGLO American Platinum (Amplats) on Tuesday faced a backlash to its plans to cut as many as 14,000 jobs by mothballing shafts, suspending processing plants and flagging the sale of a mine, with the African National Congress (ANC) calling for the surrender of its mining licence.
The world’s largest platinum producer, which is due to report a heavy financial loss for 2012, is investing R890m over five years in job creation schemes to offset the retrenchments it has proposed to trade unions.
The cost of the retrenchments, care and maintenance of four shafts and the job creation plan is R3.2bn. Amplats committed to R100bn in capital expenditure over the next decade, a 25% drop from its earlier intentions.
It estimates it will save R3.8bn a year if it implements its cost-cutting plans.
The company said on Tuesday that it was responding to a decline in demand growth, the rising cost of deep mining, higher than inflation cost inputs and increasing amounts of recycled platinum on the market.
"We understand the social implications of the potential restructuring. We have no choice but to make this company profitable," Amplats CEO Chris Griffith said.
"This isn’t a popular message, but it is important for the country to have profitable businesses.
"We’ve got the government and the South African Revenue Service worrying about us not paying the kind of taxes we used to — and royalties. Elements of the government are asking us what we’re doing and when we’ll be profitable again," he said.
Amplats warned in February last year that it was conducting a thorough review of its business and would not shy away from making tough decisions to restore it to financial health.
Mr Griffith said the company had "engaged" with the Department of Mineral Resources about its plans.
But Mineral Resources Minister Susan Shabangu accused Amplats of failing to consult her department about its cost cutting, which would have enormous social ramifications.
"We regard this as unilateral, but also a company that disrespected the regulator in the way that they have made their own decision," she said at a press briefing on Tuesday.
"They have come up with their own plan, finalised the plan and told us of their decision. Their current decision has major implications for our country."
Ms Shabangu said Amplats’ mining rights would come under "close scrutiny" to ensure that the company’s operations complied with regulations.
The ANC condemned Amplats’ plan to cut thousands of jobs in Rustenburg, an area where unemployment is already high.
"This decision is cynical and dangerous in the extreme," ANC spokesman Jackson Mthembu said. "This decision is part of a strategy to divest its business from South Africa and relegate the mines in South Africa to ‘dogs’. We call on the minister of minerals and energy to call an urgent meeting of the industry with a view to considering the idea that companies who want to mothball shafts surrender their licences in respect of those shafts so that they can be put on a public auction for new owners who are still hungry to mine to put them to good use."
Amplats had no choice but to restructure its business, Rezco Asset Management director Rob Spanjaard said.
"Amplats is completely marginal at the moment. You can’t run a business on that basis. This wasn’t a kneejerk reaction of theirs," he said.
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. They will reopen when market conditions become favourable again.
It will also restructure its Union operation while it seeks a buyer for the mine.
The restructuring will cut output by 400,000oz a year, leaving Amplats with annual production of between 2.1-million and 2.3-million ounces, compared to its target of 3-million ounces.
The restructuring was not a "reprisal" for the illegal strike last year that stripped 306,000oz from platinum production and pushed Amplats into an estimated R1.5bn headline loss compared to a profit the previous year, Mr Griffith said.
The strike was in October and November, by which time the review had been conducted and most of the decisions flowing from it had been reached.
Amplats said it would consult unions on retrenchment plans.
Analysts said there could be a backlash of strikes to protest against the retrenchments and shaft closures, fuelling an already unsettled labour environment.
The National Union of Mineworkers said it was "seriously concerned and shocked" by the decision, but would talk to Amplats in an effort to save jobs. Uasa, a trade union representing 5,000 affected workers, said it would "fight tooth and nail to defend its members’ rights".
The Association of Mineworkers and Construction Union, which has thousands of members at Rustenburg mines, was not available for comment.
Nomura emerging markets economist Peter Attard Montalto said Amplats’ restructuring plans were part of a larger reassessment of the competitiveness of the platinum sector by domestic and foreign mining interests in South Africa.
"While clearly companies won’t simply leave, the sort of scaling back talked about by Amplats and being considered by others like Harmony Gold, is just as damaging, in our view," he said.
Amplats releases annual results on February 4. Its shares closed 0.8% down at R487 on Tuesday while the platinum index was up 1.3%. Aquarius Platinum rose 8.7%.
With Amanda Visser