[miningmx.com] – IT’S hard to believe speculation that Anglo American
Platinum (Amplats) will relent over a significant part of its restructuring plans for the
Rustenburg shafts. According to Reuters, as few as 5,000 jobs will be axed as opposed
to the 14,000 that led to the three months of extended consultation with government
and unions.
William Tankard, director of mining at Thomson Reuters GFMS, makes the important
point that allowing government to intervene in the affairs of business will only
eventually worsen the crisis in the South African platinum sector.
“If industry can’t restructure, then it will become difficult to justify new capital
investment,’ said Tankard speaking at the launch of the Thomson Reuters GFMS
platinum and palladium survey on May 2. “No restructuring will be bearish for
platinum which will put more pressure on new capital spend,’ he added.
It will also place other platinum companies in a parlous position.
Impala Platinum (Implats) raised the prospect on April 2 in its third quarter production
report that the fall in the platinum group metal prices lately had significantly impacted
the viability of several of its shafts. They were either marginal or loss-making it said.
“The steep drop in PGM prices has had a further significant impact on group
profitability with a growing number of shafts either marginal or lossmaking,’ the
company said. “These units are being monitored on a continuous basis to determine
their on-going viability,’ it said.
Analysts think the likelihood of further closures is high. Were Amplats to acquiesce on
its restructuring, it would put Implats in a difficult position.
Either way, the June wage discussions with unions will be interesting affairs for both
Amplats and Implats.
Is it possible that Amplats, if it does rejig its restructuring, will ask in return for a new
multi-year wage agreement with unions; afterall, the platinum sector hasn’t yet
established a common negotiating platform with unions?
Perhaps, although one analyst responds that there are practical problems with this.
“How do you get an agreement with unions when the membership is so split: +50% at
Rustenburg, but 50/50 at Amandelbult and Union, and 0% (for other unions) at
Mogalakwena, and agreements are struck at the company level, not on a mine-by-
mine basis?’ he asked.
In the meantime, there’s more bad news for investors in Implats. News of margin
pressure will almost certainly mean the company passes its final dividend in the 2013
financial year, as well as not paying a dividend at all in the 2014 financial year.
Three fatalities at the Lease Area which occurred outside Implats’ reporting period
hints at more production troubles to come as they will have certainly involved the
issue of Section 54s stoppages. This would negatively impact production in the fourth
quarter of the company’s 2013 financial year.
Shares in Implats were down another 1.7% today taking declines since the beginning
of the calendar year to a hefty 25%. Yet its investment case remains the strongest of
the platinum stocks on the JSE, says Christopher Nicholson, an analyast for RMB
Morgan Stanley Research.
“Whilst the risk of further negative news on Zimbabwe (largely discounted) or ongoing
labour unrest in the region remains, we believe that consensus earnings already price
in the current operating difficulties at the Implats lease area on a FY2014 time
horizon,’ he said in a note.
“Additionally, Implats remains the lowest operationally geared (lower mining costs
and stable margin refining business) of the three majors, which remains attractive
given current low metal prices,’ he said.
