Amplats overhaul not a reprisal, says CEO

Jan 15 2013 10:45

Striking Amplats mineworkers. Picture: Lucky Nxumalo/City Press

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Last traded 250
Change -1
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Cumulative volume 1338011
Market cap 0

Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA


Last traded 341
Change -6
% Change -2
Cumulative volume 256126
Market cap 0

Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA


Last traded 121
Change -3
% Change -2
Cumulative volume 1039310
Market cap 0

Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA

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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 died. 

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.

Unions react 

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 over 25%. 

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.

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anglo platinum  |  mining



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