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Anglo American’s (LSE:AAL) platinum business – the world’s largest producer of PGM – is set to close four of its shafts in the Rustenberg mining district, leading to a potential loss of jobs and a reduced production in the coming years.
The move, however, is not so much as the result of the recent unrest in the said district but rather the conclusion following a review of the company’s operations initiated in February 2012.
Long before the unforgettable events that happened in Rustenburg during the second half of 2012, Anglo American had already authorised a review of its business following falling profits, according to Cynthia Carroll, Anglo American’s Chief Executive and Chairman of Anglo American Platinum, the 80% owned subsidiary of the London-listed mining giant.
In a statement, the outgoing CEO said the Amplats has found the “the optimal mining configuration and the appropriate processing footprint, overhead structure and commercial strategy to improve profitability and drive greater performance” and ensure that the company continues to be a sustainable business.
Social Responsibility
Approximately 14,000 jobs may be lost – 13,000 of which in the Rustenburg area alone, according to Amplats, as a result of the “reconfiguration” of the business but the company pledged it will strive to create the same number of jobs to honour the firm’s “social responsibility”.
Amplats plans to close down four shafts and reduce its five 100% owned Rustenburg mines into three, targeting a 320,000 to 350,000 ounces of platinum produced a year across the said mines.
It said it will divest its Union mines “at the right time” and will move to halt mining activities within the area to protect its near-term value. Amplats hold 85% in the said mines, with the other 15% held by South African investors in line with the black economic empowerment programme of the South African government.
Increased production and lower head grades resulted in higher costs above inflation rates in recent years, according to the company’s report, in addition to lower demand of platinum and increase in supply through the recycling of secondary platinum group metals.
As a whole, the firm expects a reduction by about 400,000 ounces annually as a result of the shutdown of operations. Amplats produced over 2.5 million troy ounces of platinum in 2011.
Amplats hopes to deliver SAR3.8 billion (£270 million) annual profit by 2015, including SAR390 million (£27.6 million) in savings after restructuring.
“The objective has been clear from the outset – to create a sustainable business by facing the tough and necessary decisions for the benefit of all its many and varied stakeholders,” Carroll ended.
Chris Griffith, Amplats’ Chief Executive, nonetheless, assured that in securing the company’s profitability, the company will not abandon its role in helping the community surrounding its African mining units.
“By creating a sustainable, competitive and profitable business, we will be in a stronger position to continue substantial investment, provide more secure and stable employment, and to benefit our customers, suppliers, shareholders,” he said.
Back in the City, shares of Anglo American moved 0.7% to £20.52 by 11:00 AM GMT, following the news. Meanwhile, platinum overtook gold and regained its premium over the yellow metal at US$1,699 per ounce.
