[miningmx.com] – THE dust has settled on the tiff between Government and Anglo American Platinum (Amplats) regarding the proposed restructuring of the firm’s Rustenburg mines.
One senses, however, faultlines in the relationship between big business and Government will inevitably lead to more tremors. “It’s a very difficult relationship,’ said Chris Griffith, CEO of Amplats who was at the centre of the storm and whom mines minister, Susan Shabangu, labelled as arrogant for not having discussed the looming crisis more thoroughly.
“It’s a very difficult time for everyone. Perhaps government is seeking to deflect attention, or it could be frustration; unions are battling for survival. It’s really fraught,’ he says in an interview following the company’s year-end results announcement last week.
The results made for sober reading; Griffith is adamant the company long consulted with Government regarding its restructuring plans, first announced in early 2012. It would have been useful, however, (if not illegal unfortunately) to have first shared some of the figures contained in the year-end results with Shabangu before announcing the restructuring in which some 14,000 jobs are imperilled. They show a business in profound financial distress.
Operating free cash flow fell 108% and led to a net outflow of R717m. Debt increased to R10.5bn. The outcome was a headline earnings per share loss of R5.62 compared to a profit of R13.65/share in the previous year. Apart from the passing of the dividend, Amplats’ balance sheet is under stress. Bogani Nqwababa, Amplats’ finance director, dismissed the likelihood of Lonmin-type debt convenant-breaking, but Amplats is hard-pushed nonetheless.
The meaning of this there’s little wriggle room in respect of adjusting Amplats proposed restructuring. Griffith says the Section 189 issued on the restructuring calls for a 60-day consultation period with unions procedurally, a process which has been extended to include the minerals resources department (DMR) in addition to the Labour Department. But it’s not a moratorium on the restructuring.
In any event, there’s not much Amplats can really change, hence the difficulties that lie ahead. Government may have expectations of shoe-horning Amplats into some kind of compromise restructuring programme, but the fact of the matter is that some 400,000 ounces/year of platinum producing capacity is underwater.
Another line in the financial results, show cash operating costs per refined ounce of some R16,364 against the previous year’s R13,552 – an increase of 17% year-on-year. Griffith says the restructuring won’t have any immediate impact on costs. Double-digit operating inflation is a fact of life for South African mining firms hence warnings from the sector about the 16% increases in power tariffs Eskom is asking the National Energy Regulator of South Africa to contemplate.
In time, Amplats is hoping to replace high cost ounces at its Rustenburg mines with lower cost ounces from elsewhere, but it’s a drawn-out process. It will redeploy some jobs; hopes to generate others, but it’s an uncertain future.
The overlay to Amplats’ distress, is the feeling that Government has done little to ease the regulatory uncertainty that routinely swirls around the mining sector’s annual jamboree, the Mining Indaba, held in Cape Town.
Cynthia Carroll, the departing CEO of Anglo American, doesn’t think the South African government has fundamentally changed in approach. “It’s an evolution,’ she says of its policies and approaches, but she agrees that the government’s inclusiveness tolerates untenable policy discussions more than it ought. The nationalisation dragged on for far too long, for instance.
Speaking to Miningmx, Enoch Godongwana, head of the ANC’s economic transformation committee, said the mining industry should hold out little hope of profound adjustments to proposed amendments to the Minerals and Petroleum Resources Development Act (MPRDA). This is despite a submission being compiled by the Chamber of Mines of SA which will argue that greater ministerial discretion on implementing laws creates more uncertainty for investors.
“It is not a fait accompli,’ said Shabangu in response to questions at a Mining Indaba press conference. This may give miners hope; it may not. Management at mining firms on numerous occasions at the Mining Indaba conference acknowledged distrust between Government and the sources of white-owned capital was at a high. The sector through 2013 will call for cool heads.
