Business

Amplats plans to close shafts, sell mine to cut costs

Chantelle Benjamin

Anglo American Platinum says it has plans to break up its struggling Rustenburg operations into three mines and close some high-cost shafts.

Anglo American Platinum says it wants to save R3.8-billion in costs by 2015. (AFP)

The miner also wants to sell its Union mine and deliver R3.8-billion in cost savings by 2015.

It said it intends on reducing its planned capital expansion expenditure over the next year by 25% to R100-billion to focus investment on low-cost, high margin projects.

These plans are all the result of a review of its operations started in February last year by its parent Anglo American in a bid to return the platinum company to long-term profitability. About 14 000 jobs are expected to be affected, of which at least 13 000 of which will be in the Rustenburg area.

But The National Union of Mineworkers (NUM) said on Tuesday afternoon it intended on negotiating with the company to prevent it from retrenching workers. 

"The NUM will engage the company in a bid to save these jobs and appeals on workers to work together to safeguard their own jobs," said NUM general secretary Frans Baleni.

"As a result of the proposed changes to the business, a total of up to 14 000 jobs may be affected, 13 000 of which will be in the Rustenburg area," Anglo Platinum said.

The NUM said Anglo Platinum's decision to cut jobs was "shocking".

"The NUM has repeatedly called upon workers to unite in order to defeat the evil nature of capitalism, which seeks to put profits first and humanity last," said Baleni.

Anglo American Platinum employs about 45 000 people. 

Rand declined
The rand reacted immediately to the news. According to Bloomberg the rand declined for the sixth time in seven days after Anglo American Platinum's announcement, fuelled, they believe, by concerns that South Africa's trade deficit will worsen.

Anglo Platinum chief executive Chris Griffith said in a radio interview on Tuesday morning the company would not launch a Section 189 Labour Relations Act process, which would see consultation with the unions. But the unions, the Association of Mineworkers and Construction Union (Amcu) in particular, has already indicated it would oppose any retrenchment process.

A statement by the company said: "The company's review of its business is in response to its revised expectations for platinum demand growth and a number of structural changes that have eroded profitability in recent years, including capital intensity, mine depths, ore grades, higher than inflation unit cost increases, jewellery demand elasticity and increasing secondary supply of platinum.

"Anglo American Platinum has previously stated that a number of its mines have been under considerable economic pressure for some time. The continued operation of unprofitable shafts within the current configuration, and in light of the company's revised demand and cost expectations, it is not sustainable."

'Likely to be of value'
Affected by the reconfiguration will be four unsustainable high cost shafts, namely Khuseleka 1 and 2 and Khomanani 1 and 2, which will be put on long-term care and maintenance. The Rustenburg  Waterval UG2 Concentrator and number two Smelting Furnace could also be closed in the near future, the company said. Its not yet clear how many additional jobs would be lost as a result of the closure of these operations. 

Of Union mine, the company said it was "likely to be of value to another buyer".

The restructure plan also includes a job creation initiative intended to assist retrenched miners by replacing the 14 000 jobs lost. It focuses on housing, infrastructure, small business development in Rustenburg and the areas where the labour is from, should the miners opt to go home.

Griffith said on Tuesday: "The platinum business has attractive underlying fundamentals, but we are facing tough decisions to restore profitability to our operations. We must evolve to align the business with our expectations of the platinum markets long-term dynamics and address the structural changes that have eroded profitability over time.

"We have reviewed our business across the entire value chain, building upon steps taken to improve operational performance in recent years, and will be consulting exclusively with our stakeholders in relation to our proposed changes."

On Monday, Anglo American Platinum, issued a profit warning, saying that its 2012 earnings would probably show a loss of 491 to 623 cents per share, down from a profit of 1 365 cents per share in 2011.

The company is expected to publish full end of year results on about February 4.

In its statement it attributed its losses to the strike action: "Platinum sales volumes for the period were lower primarily due to the two-month illegal industrial action experienced during the second half of 2012," the company said. – Additional reporting by Sapa

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