Section of Rustenburg
Platinum Mines’ Waterval
smelter, where PGM-
bearing ore is smelted
prior to further refining
Johannesburg/London --- 20 July 2011 - Falling profits at Anglo American's diamond and platinum subsidiaries, and a major reshuffle at its key South African units, point towards the challenges for the global miner which launches the reporting season for mining heavyweights next week.
Reuters reports that analysts welcomed the departure of the boss at Anglo American Platinum, or Amplats, after the group had warned of sharply lower earnings at the sector.
Its turnaround efforts could blaze the path for an industry battered by rising costs, militant labour and weak demand.
“Clearly, fixing Anglo Platinum is a difficult and probably lengthy job, because it has some seemingly intractable issues to resolve in its structure and its costs,” said analyst Des Kilalea at RBC Capital Markets.
He and others welcomed the appointment of Chris Griffith, currently at sister unit Kumba Iron Ore, to replace Neville Nicolau at the Amplats' helm as “encouraging”.
Kumba reported an 18% drop in interim earnings today because of low prices, but Anglo regards the asset as one of the most promising in its South African stable, and just spent US$950 million to raise its stake in the company to 69.7% from 65.2%.
Amplats is a different story as costs soar while the spot price of platinum, used to build emissions-cutting catalytic converters in automobiles, wallows near 2012 lows. The group said this week its interim earnings would fall about 80%.
“The scale of the challenge at Amplats is huge, with a larger workforce in a lower margin, structurally disadvantaged industry,” said JP Morgan Cazenove analysts.
Anglo is the only mining major with a big exposure to platinum and is undertaking a strategic review of its operations in South Africa, home to 80% of known reserves.
The mining giant has denied that Nicolau resigned in a disagreement over strategy, though analysts say he was said to have opposed cuts most see as essential to turning around the platinum sector.
South Africa's powerful and often militant labour unions, key to any effort by Anglo to cut back in platinum, welcomed the arrival of Griffith, but the National Union of Miners has already warned there was “no way” it would accept cuts.
Griffith could lead a charm offensive as unions applauded a Kumba ownership scheme for workers last year that saw thousands of lower-paid employees reap over R500,000 each.
Copper production was helped 7% higher by Chile's Los Bronces, though increases there were partly dented by lower grades and adverse weather.
Diamonds followed a drop in the first quarter with a further 11% decline in the second as De Beers, which separately reported earnings today, focuses on maintenance and waste stripping while it waits for demand to recover.
Source: Reuters Africa. For more information, click here.