Miners walk at the end of their shift at the Anglo
Platinum's Khuseleka shaft 1 mine in Rustenburg, northwest
of Johannesburg. REUTERS/Siphiwe Sibeko
Anglo American Platinum plans to mothball two South
African mines, sell another and cut 14,000 jobs, risking a
repeat of last year's violent strikes as the world's largest
producer of the precious metal struggles to stem losses.
Reaction to the long-awaited plan from Amplats on Tuesday was
swift, with the government accusing the company of betraying
its trust and a labour leader threatening strikes across its
South African operations if the closures go ahead.
Improvements at Amplats, 80 percent owned by mining group
Anglo American, are critical to the fortunes of its
underperforming parent. In 2006, Amplats made up a quarter of
Anglo's operating profit, but that has dwindled as the
platinum firm struggles with rising costs and weak prices.
Investors welcomed the plan to cut output by almost a fifth -
or 400,000 ounces a year - and begin a shift to profitable
production as the first step in Anglo's own recovery.
But a labour leader promised to fight any attempt to put
mines under "care and maintenance", when output is halted but
they are maintained enough to be reopened in future.
"If they put any shaft on care and maintenance, all of the
operations will go on strike. Nothing like this will be
allowed," said Evans Ramogka, labour leader in Rustenburg.
Most of the cuts will fall in Rustenburg, in South Africa's
platinum belt about 120 km (70 miles) northwest of
Johannesburg. Rustenburg was the centre of last year's
strikes when about 50 people died, including 34 shot dead by
police at rival platinum producer Lonmin's Marikana mine in
Analysts cautioned that the size of the headline reduction
could be overstated, as it was from planned production - a
level Amplats has not reached for several years. Against
market forecasts of output, it may be closer to 300,000
ounces, only a little above most analysts' expectations.
"I would expect discontent among unions, among workers, but
Amplats has drawn a line in the sand," said analyst Des
Kilalea at RBC Capital Markets, adding that other producers
would be watching to determine their own next steps.
The price of platinum rose over 2 percent to 3-month highs
after the announcement, leaping past gold for the first since
March last year, on tighter supply in South Africa, site of
80 percent of known platinum reserves.
Anglo shares fell more than 4 percent after the government
expressed its concern. Mines minister Susan Shabangu said
Amplats had "betrayed the trust" between the company and
Shabangu contradicted Amplats' claims that it had engaged
with the government: "There was never a consultation. They've
come up with their own plan, finalised their plan and told
us," she told a news conference.
Amplats said earlier this week it would sink to a full-year
loss because of last year's wildcat strikes in many of South
Africa's platinum and gold mines. The unrest was rooted in a
union turf war and aggravated by income disparities within
the industry and low wages for dangerous work.
The 14,000 affected jobs amount to almost a quarter of
Amplats' workforce including contractors, and three percent
of South Africa's mine labour force. If the jobs are cut, the
losses would set back government efforts to cut unemployment
from 25 percent.
Support for the ruling African National Congress (ANC) is
waning among miners before a general election in 2014. The
National Union of Mineworkers (NUM), a base of ANC electoral
support, is rapidly losing members to the militant
Association of Mineworkers and Construction Union (AMCU) and
Amplats - which will also reduce smelting capacity and review
marketing arrangements and joint ventures - said it would try
to replace the jobs through supporting housing and small
business initiatives in the Rustenburg area.
Shabangu dismissed the efforts - which will cost Anglo 470
million rand ($53 million) out of a total restructuring cost
of 3.8 billion - as a "public relations exercise", echoing
sceptical comments from angry mineworkers.
"Fourteen thousand jobs? In which sector? Brick-laying?" she
The ANC also attacked the restructuring as "cynical and
dangerous" and said it justified a review of mining licences
across the industry, still largely controlled by the white
minority 19 years after the end of apartheid.
SAVING THE COMPANY
Amplats said the cuts are critical for its survival: "This is
not a knee-jerk reaction to unions, this is not a short-term
response to an economy that may improve in a month or two's
time," Chief Executive Chris Griffith told reporters.
"The company has to take these drastic and significant
actions to save the company and the employment of an
additional 45,000 people," he said.
Even by the standards of the struggling platinum industry,
the company's profitability is weak. Its operating margin
over the last 12 months was 7.3 percent, compared to a 13
percent average of seven of its industry rivals, Reuters data
Platinum's labour-intensive nature has intensified the storm
for Amplats, which faces rising wages, power and input costs.
At the same time, demand has sagged for a metal used in
making diesel cars, sales of which are falling in Europe.
Amplats said on Tuesday that two of its mines in Rustenburg -
Khuseleka and Khomanani - would be put on "long-term care and
maintenance" because of their costs.
The group will also sell its Union mines "at the right time".
Griffith said the company had not yet talked to potential
buyers or had interest expressed by other companies.
The proposed overhaul, which will be subject to two months of
consultation with unions and others, will have to be pushed
through by Anglo American's new chief executive.
Mark Cutifani, who takes over in April, has defended
investing in South Africa but is a pragmatist with
operational experience who improved returns at fellow mining
company AngloGold Ashanti.
"This might not be easy to implement, given the militancy of
the workforce, but it looks sensible," said one of Anglo
American's 20 largest investors. "The platinum market is
likely to see more balanced supply/demand when this has gone