Post date: May 10, 2013 2:47:59 PM
Shares in Anglo American Platinum extend their losses to trade down more than four percent after the world's largest platinum producer says it plans to cut 6,000 South African mining jobs, fewer than half the 14,000 initially proposed.
RUSTENBURG, SOUTH AFRICA (REUTERS) - Shares in Anglo American Platinum (Amplats) extended their losses to trade down more than four percent after the world's largest platinum producer said on Friday (May 10) it plans to cut 6,000 South African mining jobs, fewer than half the 14,000 initially proposed.
The move is aimed at restoring profits without triggering a backlash from the government and restive unions.The cuts will take 250,000 ounces out of global platinum production this year and a further 100,000 ounces a year in the medium term, the company announced on Friday.
The world's top platinum producer, a unit of Anglo American, added in an announcement it would also keep open one of four shafts slated for closure near the platinum belt city of Rustenburg.
The reduced number of job losses is likely to soften the blow for South Africa's ruling African National Congress (ANC), which faces an election next year, but it remains to be seen if it appeases the anger of powerful local unions.
Industry sources had told Reuters last week the final plan, hammered out after months of tough talks with the government, would demand as few as 5,000 redundancies.
"It's very negative for the profitability and therefore the share prices of mining companies. We're moving towards a situation where the state is more activist in the day to day affairs of mining companies, so it's very negative for companies. It remains to be seen how much interference government will involve but they will certainly be weakness in this company share prices, it might not be visible today but over the coming three to four years as commodity prices drop further as operating costs rise even higher and the temptation or the need to retrench workers intensifies we're going to see companies unable to do so because of government decrees," said mining analyst Loan Sharp.
Hours before the announcement, activists from the militant Association ofMineworkers and Construction Union (AMCU) in Rustenburg, where the main impact of the lay-offs will be felt, said they would not tolerate any job losses.
Social tensions are running high after violence rooted in a labour turf war between AMCU and the dominant National Union of Mineworkers (NUM) killed more than 50 people last year and provoked illegal strikes that hit production.
"Our response to the announcement by Anglo Platinum is really, we are shocked, we understand that unemployment is very high in this country, we have been hoping that we'll be able to create more jobs and more so because we are aware that even before these illegal strikes driven by AMCU (Association of Mineworkers and Construction Union) faced the industry, already the platinum sector was facing a challenge. Now they are using these strikes as if it is a reason for them to retrench, we believe that Anglo should also be engaged, we should find avoidance measures and train those who will be laid off to make sure they can find (work). But you can't think of retrenching first, we should look for avoidance measures," said NUM president Senzeni Zokwana.
The unrest was a major reason why Amplats suffered its first loss last year.
With unemployment at more than 25 percent and elections due next year, the government has taken a strong line in the negotiations with Amplats.
The average South African mineworker has eight dependants, so the social and political consequences even of reduced lay-offs will be far reaching.
"As a union we won't take lightly the fact that people will lose their jobs. We know very well that the jobs that are done on the mine, there is no relationship to the broader economy, if the mine retrenches you... It's very high that you won't find work for many years to come," added Zokwana.
AMCU has made good on strike promises in the past, including in January when it briefly closed several mines when the initial Amplats plan was unveiled. Its leaders said in Johannesburg on Thursday they would not back such wildcat strike action.
For Amplats, reining in costs and cutting production to such an extent that it lifts the price of platinum - used for emissions-capping catalytic converters in motor vehicles - is crucial to getting back to profit.
AMCU emerged as the dominant union in the platinum shafts last year after it poached tens of thousands of disgruntled members from the NUM, a political ally of the ruling African National Congress.