London - Anglo Platinum [JSE:AMS] called on unions to act
responsibly in response to a planned overhaul of the group that will cut
production and close mines. "This is not a reprisal, for example, against the
strikes at the end of last year. This process started at the beginning of 2012
and it was to address the fundamental and structural changes to our businesses
that have made our operations unprofitable," Anglo Platinum CEO Chris Griffith said on a conference call.
"This 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.
The company has to take these drastic and significant actions to save the
company and the employment of an additional 45 000 people."
The overhaul plan is expected to cost R3.2bn, a total to be
incurred in 2013, with most of that to be spent on retrenchment costs.
The world's top platinum producer, said it will mothball two
South African mines, sell another and cut 14 000 jobs in moves to restore
profits that may provoke a repeat of last year's strikes when about 50 people
In a long-awaited review announced on Tuesday that is seen
as crucial to the flagging fortunes of Anglo American, which owns about 80% of
Amplats, the platinum producer said it
aimed to cut output by around a fifth or 400,000 ounces.
The price of platinum rose 1.6% in response, leaping past
gold for the first time in 10 months.
Labour reaction was swift, with an Amplats labour leader
threatening a strike across its South African operations if the indefinite
closures, when they would be put on "care and maintenance", go ahead.
"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, an Amplats labour leader in platinum belt the city of
Rustenburg, which will bear the brunt of the job cuts.
Activists brought many of South Africa's platinum and gold
mines to a standstill last year in a wave of violent wildcat strikes.
The unrest was rooted in a union turf war and aggravated by
income disparities within the industry and low wages for dangerous work.
If 14 000 jobs are lost, it will represent about three
percent of South Africa's mine labour force and set back government efforts to cut unemployment from
The ANC is losing support among mine workers before general
elections next year. 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 other groups.
"As the NUM we are extremely disturbed by these job
losses and we are asking workers to be united to defend their jobs," NUM
General Secretary Frans Baleni told Reuters.
Amplats said on Monday it probably fell to a full-year loss
because of the 2012 strikes, which were centred on Rustenburg.
It said two of its mines in Rustenburg, Khuseleka and
Khomanani would be put on "long-term care and maintenance" - when
mines are maintained so that they could be reopened in future but are not
operated - because of their high costs.
Amplats also said it would "divest the union mines at
the right time - to maximise value under different ownership". Reuters
reported on Monday Amplats was likely to sell union. Saving the company
Amplats CEO Chris Griffith said on a conference
call with reporters that the proposals were not a short-term response but were
vital to "save the company".
"We must evolve to align the business with our
expectations of the platinum market's long-term dynamics and address the
structural changes that have eroded profitability over time," he said.
The proposals will have to be pushed through by new Anglo
American [JSE:AGL] chief executive Mark Cutifani, who will take over from
Cynthia Carroll in April.
Cutifani hailed South Africa as an investment destination as
he turned around bullion producer AngloGold Ashanti [JSE:ANG] but is also a realist
who will want to deliver for shareholders.
Investors applauded the moves. "It's good that they've
made a good, strong first move and this will place them on a great footing to
profit when the cycle does turn," said Nic Norman-Smith, chief investment
officer at Lentus Asset Management in Johannesburg, which owns Amplats shares.
South Africa is home to about 80% of the world's known
platinum reserves, but soaring power and labour costs and depressed prices for
the metal - used in autocatalysts to lower
emissions - have conspired to make much of the industry unprofitable.
A tipping point may have been reached last year by the
illegal strikes that hit production and bottom lines.