London, England — 17 May 2012 – Global mining giant Anglo American has made a priority of its struggling platinum business, admitting earlier this year that the world’s largest primary producer “’ Anglo American Platinum (Amplats) “’ is underperforming in the face of soaring costs, imposed safety stoppages and weak demand.
But Reuters reports that South Africa’s politics, restive unions and a lacklustre market mean the keenly awaited operational review of the Anglo American Platinum unit, due later this year, is more likely to mark an evolution than a revolution “’ and constitute a case study in the woes holding back a battered industry.
Analysts and industry sources, some of whom see the review as a recognition that the market will not turn any time soon, say they expect Anglo to outline the planned closure of some higher cost deep shafts, signal some potential sales or exits from some joint ventures with rivals, and to focus its spending.
They say the review is unlikely to contain the radical production cuts that would transform the platinum industry after four years of narrowing returns “’ Amplats accounts for some 40% of global supply “’ or the transformational sales that would boost Anglo’s own lagging margins.
The price of platinum, a precious metal used mostly in catalytic converters and jewellery, is almost 40% below its 2008 peak, while costs have far outpaced inflation.
“For the sake of the industry we hope it will be a meaningful change from the status quo,” said analyst Alison Turner at Panmure Gordon. “But I am not expecting a massive shift.”
South Africa is the world’s biggest source of platinum, accounting for three-quarters of global output. It is also home to militant unions “’ the dominant National Union of Mineworkers (NUM) and the more radical Association of Mineworkers and Construction Union (AMCU). Both would take a dim view of drastic mine and shaft closures, and they would likely be backed by the governing ANC in a country where one in four adults is unemployed. This could be the single biggest factor holding back change.
Analysts say Anglo is likely to close down a handful of its most problematic shafts in Rustenburg. It is also likely to sell out of some of its joint ventures, including its stake in Modikwa “’ a 50:50 venture with African Rainbow Minerals, which has already signalled an interest in the asset, and Pandora “’ a venture with Lonmin, which has also expressed interest.
“Amplats has some of the world’s best resources, but equally they have a lot of shafts that are not at the right end of the cost curve,” one industry source familiar with Amplats said. “With the platinum price where it is, they need to take a hard look. Historically, they have only tinkered round the edges.”
Source: Reuters. For more information, click here.