Platinum’s hopes ‘rest on Amplats’ jobs plan’

Date: May 6, 2013 | Posted in Business News | News

ALL eyes in the global platinum industry are on Anglo American Platinum’s (Amplats’) proposed restructuring that would cut up to 300,000oz of metal off the market and provide a much-needed boost for the troubled industry.

The scale of the South African platinum sector’s uphill battle for profitability was underlined in a new report released on Thursday. It said at an all-in-cost of $1,781/oz, about 70% of mines operated at a loss last year when the platinum price averaged $1,551.

The platinum market is delicately balanced, having slipped into its first deficit in eight years last year after widespread strikes across mines in South Africa, the world’s leading source of the metal.

London-based metals consultancy Thomson Reuters GFMS said on Thursday demand outpaced supply by 83,000oz last year but it could ease back into surplus this year, with much riding on South Africa.

Platinum supply from South Africa’s mining sector fell 10% or 620,000oz because of the lengthy strikes last year, which affected nearly all platinum producers.

There is a risk of further disruption to South Africa’s platinum mines because of wage talks as two-year pay deals end next month.

There has been a steady stream of bad news from platinum producers for more than a year, as companies highlight the ravages on their businesses of weak metal prices, soaring costs and a fractious workforce.

Impala Platinum said on Thursday a recent drop in prices for platinum group metals was affecting profitability and it had a “growing number of shafts either marginal or loss making”.

Aquarius Platinum and Eastern Platinum have idled mines, with the latter about to start cutting most of its 1,300 workforce.

Amplats will reveal details of its restructuring next week, amid fierce government and trade union anxiety over its intent.

The reason the global market is watching Amplats so closely is to establish whether platinum producers in South Africa can react to market forces, GFMS mining research director William Tankard said.

“Should restructuring take place, the outlook is one of positive sentiment, but if restructuring is vetoed then you’d see a very meaningful reversal of sentiment.”

A union source said the expectation was that after two months of consultation with the government and organised labour, Amplats would trim its job cuts back to between 6,000 and 8,000, from the 14,000 it proposed in June.

Amplats has also proposed mothballing four loss-making shafts and selling its Union mine, taking up to 300,000oz of platinum off the market. The company has argued it needs to restructure its business to save 45,000 jobs and restore profit.

“If the industry can’t restructure then it puts a huge amount of pressure on their ability to justify ongoing capital commitments,” Mr Tankard said.

Amplats has held two months of talks with the government and organised labour after a furious response to its proposals in January. It faces the added complexity of having a new majority union at its mines and the inevitable friction between two rival unions.

“Inevitably, the final resolution with government will see a much smaller number of workers fired, and it remains to be seen whether or not the agreed production cuts will lead to a more rational supply/ pricing environment for the whole industry,” Jake Greenberg of Jefferies International said.

He said a possible strike led by the Association of Mineworkers and Construction Union meant “a lot of platinum could come out of the market” in coming months.

Source: Business Day

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