Mining giant Anglo American plc, owner of the world’s second-biggest diamond producer, will keep on investing in new South African projects for as long as operations remain profitable.
“We will continue to support South Africa, but at the same time we have to remain profitable,” Anglo American chief executive Mark Cutifani was quoted by Bloomberg News as telling reporters at the Venetia diamond mine, owned by Anglo’s De Beers unit.
“Sometimes we have to make tough decisions and make sure we get that balance right.” De Beers have started the US$2 billion expansion of the Venetia open-pit operation, including an underground mine, which will extend the life of the asset beyond 2040.
Anglo’s underlying earnings fell% to US$2.84 billion in 2012 following a decline in commodity prices and an increase in costs. Its Anglo American Platinum Limited (AMS) unit, which is the world’s biggest producer of the metal and has most of its operations in South Africa, is consolidating five mines with nine shaft systems into three operating mines to reduce output and help return to annual profit.
Anglo, based in London, may report underlying earnings of US$2.1 billion this year, according to the average estimate of 20 analysts surveyed by Bloomberg.
“The most important thing is that we manage within our means and when prices pull back we have to be very careful where we spend our money and we have to make sure we have the right margins. We have to work both sides.”
Underground output at Venetia is forecast to start in 2021 and the below-surface operation will replace the open pit as South Africa’s biggest diamond mine, De Beers said in an e-mailed statement. The operation, which contains an estimated 96 million carats of gems, will support more than 8,000 direct jobs.
The global market in polished diamonds may reach US$31 billion by 2016, De Beers forecast last year. OAO Alrosa produced 34.4Mcts of diamonds last year, surpassing De Beers’s 27.9Mcts output, to become the world’s largest producer of the gems.
South Africa must “provide the right environment for growth,” President Jacob Zuma told reporters earlier this week at the Venetia mine near Musina. “This includes the implementation of transformation measures and also the promotion of labour-market stability in the sector.”
Inter-union rivalry has fuelled tension at South African platinum mines, where the National Union of Mineworkers has lost its status as the most powerful workers’ body to the Association of Mineworkers and Construction Union. At least four union members have died this year as the organisations compete for membership.
Strikes shaved 0.5 of a percentage point off economic growth in 2012, and an estimated 0.3 of a percentage point this year, Zuma said in June.
Source: Bloomberg News. For more information, click here.