HomeNewsShabangu attacks Amplats' dramatic plans for the future

Shabangu attacks Amplats’ dramatic plans for the future

Mines minister
Susan Shabangu
Cape Town, South Africa — 16 January 2013 – Mines minister Susan Shabangu has launched a scathing attack against Anglo American Platinum (Amplats) “’ the world’s top platinum producer and an 80%-owned subsidiary of mining giant Anglo American “’ following yesterday’s announcement of dramatic structural changes to its business to ensure its long-term competitive and profitable position in the sector.

BDlive reports that Amplats announced that it was putting four shafts at its Rustenburg complex into care and maintenance, and that it had earmarked its Union mine for sale, which affects the employment of at least 14,000 people.

The minister accused Amplats of undermining the department by taking decisions without proper consultation.She said the department had not been consulted at all by the company about its plans.

“We regard this decision as unilateral, but also the company disrespects the regulator in the way that it has made its own decision. It has come up with its own plan, finalised the plan and told us of its decision, which has major implications for our country.”

She said the department would investigate the manner in which the company had been mining. She said it was public knowledge that there had been an oversupply of platinum.

“Anglo has disappointed this country by contributing to the unemployment of this country, but also by not being the best businesspeople in this country who are able to mine and do business in a sustainable manner,’ she said.

MINING.com adds that Amplats yesterday revealed its intentions to close and sell off several of its mines in South Africa, as part of a long-awaited review of operations, and said it would start by shutting down four shafts in Rustenburg and divesting from its Union mine complex in Limpopo.

“The platinum business has attractive underlying fundamentals, but we are facing tough decisions to restore profitability to our operations,” said Amplats CEO Chris Griffith.

With 14,000 jobs at risk, the move is likely to have major implications for South Africa’s unsettled labour relations. The plan will also impact global markets, as platinum supply will decrease significantly.

The Amplats announcement comes on the back of an extremely difficult year, littered with profit-damaging illegal strikes and a rapidly decreasing demand for the group metals. While the company’s primary priority is to sustain its business and return shareholder value, the impact of its announced actions will have a dramatic effect on the South African mining sector, the entire Rustenburg area and ultimately the South African economy, reports MiningNe.ws.

Numerous equipment and supply companies stand to lose consulting, supply order and maintenance contracts over the long term, hurting a much larger direct mining-dependent business sector as well.

The announcement follows an 11-month business review, which the company first publicised in February 2012 and looks to reconfigure its Rustenburg operations into three mines with aligned processing operations; divest the Union mine (at the right time) to maximise value under different ownership; deliver R3.8 billion of annual benefits by 2015, through efficiency and cost reduction initiatives, including annual savings of R390 million from optimising its overhead structure; provide a comprehensive package of support to its employees and communities in Rustenburg and the labour-sending areas; and create at least 14 000 new jobs to balance the number of jobs that may be affected by the restructuring.

“We must evolve to align the business with our expectations of the platinum market’s long-term dynamics and address the structural changes that have eroded profitability over time. We have reviewed our business across the entire value chain, building upon the steps taken to improve operational performance in recent years, and will be consulting extensively with our stakeholders in relation to our proposed changes,” said Griffith.

“Amplats has identified the optimal mining configuration and the appropriate processing footprint, overhead structure and commercial strategy to improve profitability and drive greater performance. 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,” said Cynthia Carroll, outgoing CEO of Anglo American and Amplats chairman.

The company aims to reduce its planned capital expansion expenditure over the next 10 years by approximately 25% to R100 billion, to focus investment instead on low-cost, high-margin projects.

In line with the proposed changes to its mining and processing operations footprint, the company proposes to deliver R3.8 billion of annual benefits by 2015 through cost reduction and efficiency improvements, including savings of R390 million to be achieved through a redesign of the company’s overhead structure.

Amplats will look to reconfigure its Rustenburg operations into a sustainable 320,000 to 350, 000ozpa platinum producer across three operating mines. Four unsustainable, high-cost shafts, namely Khuseleka 1 and 2 and Khomanani 1 and 2, will be put on long-term care and maintenance.

As a result, the production profile will be reduced by approximately 400 000 ozpa with a baseline production target of 2.1 to 2.3 Mozpa.

The Rustenburg processing operations will also be reconfigured to align with the revised mining footprint, which may include closing the Waterval UG2 concentrator and No 2 smelting furnace.

The restructuring of joint venture operations has also been reviewed in order to optimise long-term profitability and competitiveness. This may include rationalisation of farm boundaries to optimise life-of-mine extensions and other commercial considerations.

As a result of the proposed changes to the business, a total of up to 14,000 jobs may be affected, 13,000 of which will be in the Rustenburg area.

Amplats will continue to take its social responsibilities seriously, particularly to its employees and surrounding communities, and proposes to provide a comprehensive package of support to any affected employees and communities. In particular, it will target the creation of at least 14 000 jobs – focusing on housing, infrastructure and small business development in Rustenburg and the labour-sending areas.
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Sources: BDlive, MINING.com and MiningNe.ws. For more information, click here.