Amplats outlines radical SA overhaul

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Anglo American Platinum, the world’s biggest producer of the precious metal, is facing a backlash over plans to close two mines and look to sell another mine complex as part of a radical overhaul of its South African operations.

Following a year-long review of its business, the company said the moves could affect up to 14,000 jobs, which it hoped to recreate through other initiatives. In total Amplats employs about 60,000 people.

Chris Griffith, Amplats chief executive, acknowledged that there was a risk of additional strikes in the wake of the company’s move but said the miner would be urging employees to go through a consultation process and for union leaders to act responsibly.

He said it was important for workers to understand the restructuring was not a “reprisal” for last year’s wildcat strikes.

Lesiba Seshoka, a spokesman for the National Union of Mineworkers, said the union was “shocked and very disappointed” by Amplats’ plans. “We are appealing to all workers to unite and work together to safeguard jobs,” he said. “We will be engaging with the company to try to convince them the operations are still viable.”

South Africa’s governing African National Congress described Amplats’ plans as “cynical and dangerous in the extreme,” adding that it was “part of a strategy to divest its business from South Africa and relegate the mines in South Africa to dogs”.

“This action by Amplats convinces us that a move to have all the mining licenses reviewed is not misguided,” it said.

Dealing with the restructuring and any fallout will be one of the key challenges facing Mark Cutifani, who is due to replace Cynthia Carroll in April as chief executive of Anglo American, Amplats’ parent.

The two mine closures will affect four shafts at Rustenburg, where Amplats said it would reconfigure its operations into three working mines, with the closure of “four unsustainable, high-cost shafts”. It also plans to divest from its Union mines in South Africa’s Limpopo province “at the right time” and those shafts would be restructured in the interim – which would lead to a further shaft closure.

“The platinum business has attractive underlying fundamentals, but we are facing tough decisions to restore profitability to our operations,” said Mr Griffith.

“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.”

The company said the restructuring would deliver R3.8bn ($435m) of annual benefits by 2015, through efficiency and cost-reduction initiatives, while its production would decrease by around 400,000 platinum ounces a year, with a baseline production target of 2.1m-2.3m ounces per year.

Anglo announced the review of its platinum business last year, as the sector struggled with spiralling costs and a subdued pricing environment as platinum prices were hit by the eurozone crisis.

The company was then sucked into a wave of violent wildcat strikes that erupted in South Africa’s platinum and gold sectors in August.

The industrial unrest cost Amplats about 306,000 ounces in lost production and on Monday it said it expected to announce a full-year loss for the financial year to the end of December 2012.

South Africa is home to about 80 per cent of the world’s proved platinum reserves.

Like other mining houses, it agreed to wage package increases to end the strikes, which it said would put more pressure on marginal mines.

But pushing through large-scale job cuts is likely to prove a sensitive and difficult challenge as South Africa struggles in its battle against high unemployment and poverty. Mine workers have also displayed greater militancy in demanding better pay and conditions.

The strikes in the mining industry drew in more than 100,000 workers at their peak and exposed the fragility of labour relations in the sector. South Africa’s ruling African National Congress party has also been criticising the mining industry for not doing enough to support development in the country.

“Anglo American recognises the potential impact of these proposals on our people and their communities,” said Ms Carroll. “We have designed a comprehensive social plan to ensure we make a positive difference in the Rustenburg and labour sending areas, creating at least the same number of new jobs as may be affected as part of the restructuring.”

Susan Shabangu, South Africa’s mining minister, is expected to give her views on the restructuring later on Tuesday.