ANGLO American does not see a long-term future for the strike-battered Rustenburg platinum mines in its subsidiary as the focus shifts to more profitable, less labour-intensive assets in its platinum portfolio.
A protected strike in the platinum sector called by the Association of Mineworkers and Construction Union (Amcu) is in its fourth week and has cost Anglo’s 80% held subsidiary, Anglo American Platinum (Amplats), Impala Platinum and Lonmin R2bn in lost revenue. Workers have forfeited R900m in wages.
The three companies are poised to pull out of the process run by the Commission for Conciliation, Mediation and Arbitration (CCMA), frustrated with the lack of progress in dealing with Amcu. The union had not budged on its demands, two well-placed sources said on Friday.
A platinum industry source said Mineral Resources Minister Susan Shabangu has told the CEOs of the three companies they needed to take a much tougher line on Amcu and explore legal options against the union to end the strike. It is possible that through legal processes the protected strike can be declared unprotected and companies can start laying off striking workers.
In a sign that patience with Amcu has run out, Amplats said on Friday it was pursuing the union for damages of at least R591m related to violence and intimidation. Industry figures estimate Amcu is boosting its coffers by R10m a month from membership fees and its demand to more than double wages would boost its income.
Under the leadership of Mark Cutifani, who took over as CEO last April, Anglo is undergoing a business improvement programme and there are a number of assets it has to fix or sell.
Anglo’s platinum assets are under intense scrutiny.
Mr Cutifani said Anglo’s nickel assets, for example, had to "justify their place in the portfolio ".
In South Africa, its platinum assets have undergone restructuring that provoked howls of outrage from government and labour. More than 5,000 jobs have been cut, and two of five Rustenburg mines were closed last year.
In talking about the platinum assets, which contributed 7% towards Anglo’s 2013 operating profit of $6.6bn, Mr Cutifani gave one of the bluntest public assessments of the Amcu strike by a mining CEO.
In an interview on Friday, he said it was unlikely the Rustenburg mines, which contributed 390,000oz of equivalent refined platinum to Amplats’ output of 1.436-million ounces from its own mines last year, would remain a core asset.
Rustenburg is at the heart of the stoppage called by Amcu to back wage demands. It has also been the battleground as Amcu wrested members away from the National Union of Mineworkers to become the most powerful union on the platinum belt.
Mr Cutifani said Amplats had to cut costs so that its mines made money in the long term at a platinum price of $1,500/oz. "The assets that have the best chance of being successful at that level are the mechanised, automated assets. From our point of view, they are the ones likely to get more capital support in the future.
"Those assets that are highly labour intensive, where we are very exposed to the sort of things happening at the moment, are the assets that we are going to have to be very careful with. We have to make sure we take (them) forward in a constructive way, but ultimately are probably not going to play a big part in our future ."
The 171,000oz Union mines near Northam are already up for sale.
The Rustenburg mines could be separately listed or folded into a black economic empowerment mining entity or sold outright.
Mr Cutifani cited the cost structures at the deep-level, labour-intensive Rustenburg mine as one of the reasons for looking other assets in the group for growth, particularly the open pit Mogalakwena mine, with its vast resources, near Polokwane.
Mogalakwena can take production to 420,000oz by 2017 from 330,000oz without major processing or mining changes. Output could then almost double to 600,000oz in the future, Amplats CEO Chris Griffith said recently.
Mr Cutifani expressed doubts about the future of the Rustenburg mines. "Until we get back to work and get the things up and running probably, I’m not sure they’ve got any future," he said.
"That’s the problem. I’ve got people who aren’t hearing.
"They’ve got their elbows in their ears. There is no future at Rustenburg if we don’t get back to work and try to set out a successful business model.
"People are ignoring the facts and that’s what’s worrying me. I’m worried about the people who are being led down the wrong road ….
"It can only end badly for employees and that’s the thing that keeps me awake at night. The leadership being provided, the information these guys are being fed on why they should make these operations uneconomic, I just can’t understand ."
The strike shows no signs of ending, with companies saying Amcu’s demands, including a more than doubling of underground, entry level basic wages to R12,500 a month, would result in widespread shaft closures and job losses in the industry where half the mines are already running at losses or breaking even.
"At this stage there is not a lot to get interested in the stock (Anglo American) on an asset basis, and given the financial headwinds in terms of negative cash flow and political headwinds with the ongoing platinum strikes and South African elections, we are become increasingly bearish," said Liberum’s Ben Davis.
In the first overt show of a company standing up to Amcu, Amplats has launched a R591m claim against the union for damages. The lawsuit arises from the failure of the union to control its members during the strike and for violating picketing rules the CCMA had set down and in an interdict the company secured at the start of the strike on 23 January.
"We have a court process to hold some of the Amcu leaders in contempt of court around the picketing and we also have a damages claim against Amcu," Mr Griffith said. "So the pressure against Amcu is rising for all different scenarios."
He said that Amplats was losing 4,000oz a day out of a total of 9,000oz. It had lost 60,000oz so far, costing the company R1.5bn in forfeited revenue.
Amcu general secretary Jeff Mphahlele said he was unaware of the Amplats claim.