Amplats selling strike-hit mines

2014-07-21 14:38

World number-one platinum producer Anglo American Platinum is to sell a swathe of its most labour-intensive South African mines after a five-month strike shattered its hopes of ever making them profitable.

The mines account for over half of the company’s workforce but only a quarter of production, and their viability was dealt a blow when miners won pay increases of up to 20%. Amplats said it would now focus on its more mechanised mines.

For the miners who faced hardship in their campaign for better pay, a sale could increase the risk of future lay-offs.

The buyers are likely to be companies with an existing focus on deep-level, labour-intensive mines, which may have more appetite than Amplats for the challenge of making them commercially viable.

One of the biggest hurdles will be stiff opposition to any job cuts from union leaders and politicians. Sensing potential conflict ahead, the National Union of Mineworkers (NUM) condemned the plan to sell the mines.

“Any sale is going to result in job losses and this is a punishment for poor workers,” the union’s general secretary Frans Baleni said today.

Amplats said it would sell its Union Mine, its operations at Rustenburg and South African joint venture Pandora, calling them “good long-life assets”.

Amplats’ Rustenburg operations employ around 20 000 people while Union has about 7 000, representing more than half of the company’s head count.

Some analysts have said the five Rustenburg mines and Union Mine could be worth between $1 billion (R10.63 billion) and $2 billion (R21.25 billion), but others were far more pessimistic.

Excluding the joint ventures Pandora and Bokoni, “we value the combination at a negative $800 million, hence simply giving the assets away would be deemed a result”, said Nomura analysts.

Amplats chief executive Chris Griffith said a number of potential suitors had expressed an interest.

“This is not a fire sale,” he said, holding out the possibility that the mines could be listed if they don’t find a buyer.

He said the company had not been forced to sell because of the strike, insisting it had been repositioning in favour of less labour-intensive activities for some time.

But the stoppage has clearly forced its hand because of the heavy losses in production and revenue.

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