Anglo American Platinum (Amplats) is restructuring its operations which could result in the loss of 3 700 jobs and closure of the Mortimer smelter.
The group is battling depressed platinum group metals (PGM) prices, load shedding from Eskom which reduced production by 82 000 ounces in the year to December 2023, and rising costs, its results showed yesterday.
Amplats is the latest South African PGM miner to embark on a restructuring exercise as prices of the precious metal remain subdued. Last year, Sibanye-Stillwater and Impala Platinum also said they were reducing costs by offering voluntary retrenchment schemes to some employees.
For Amplats, the restructuring has come against a dip in its financial performance for the year ended December 2023. Headline earnings tumbled 71% to R14 billion after cash operating costs surged 8% to R43.9bn mainly as a result of inflationary increases of R1.9bn and an overall 15% energy cost escalation to R1.1bn.
Market analyst Thabang Malome said the dip in financial performance reflects a “tough operating environment” in South Africa. Shares in the company, however, traded marginally stronger by 0.60% in afternoon trade at R732.14 after it also announced that it had embarked on a restructuring exercise to cut costs .
Craig Miller, CEO for Amplats, said yesterday as many as 3 700 jobs could be impacted across its South African operations under the proposed Section 189A process. This involves consultations with trade unions, affected employees and will be facilitated by the Commission for Conciliation, Mediation and Arbitration (CCMA).
“Only when the consultation process is concluded will the final number of impacted jobs be known. In parallel, we have initiated a contractor/vendor review process that could impact approximately 620 service providers/contractors,” said Miller.
The contractor and vendor review process at Amplats could “result in the renegotiation of certain contract terms and scope, not renewing contracts when they expire and terminating other contracts” within the contractual provisions.
At the same time, Amplats has also embarked on a strategy to have its concentrators producing higher grade concentrate.
This would result in the production of the same PGM content at lower concentrate throughput volume, which would bring additional benefits of reduced furnace capacity.
“(This) allows us to place the Mortimer smelter on care and maintenance, thereby reducing operating costs, capital expenditure and enhancing overall processing competitiveness,” said Miller.
The suppressed PGM prices, “combined with higher costs, as a result of above inflation energy costs, increased drilling activities, and higher labour and mechanical spares costs were the main drivers of a further 67% decline in earnings before interest, tax, depreciation and amortisation (Ebitda) to R24bn against an Ebitda margin for mining activities of 35%”.
Miller said production was 1% lower, primarily due to lower metal-in-concentrate production and due to the impact of Eskom load curtailment, although sales volumes increased by 2% due to drawdown in refined stock.
Amplats made payments amounting to R16bn on salaries and wages, R5bn in taxes and royalties and R30bn towards local procurement against R12bn paid in dividends during the period.
Amplats also completed the disposal of its 50% interest in Kroondal Platinum Mine. This meant that Kroondal had transitioned to a 100% third-party purchase of concentrate (POC) arrangement.
After re-investing R21bn in 2023, Amplats now expects to save R5bn in costs and another $5bn in stay-in business capex this year, as a response to headwinds emanating from the low PGM prices.
The company is also now targeting all-in sustaining costs of $1 050 per 3E ounce in 2024 and is re-sequencing growth investments that will improve near-term cash but preserve long-term optionality.
BUSINESS REPORT