Rio Tinto Group shuttered its Richards Bay Minerals unit on Wednesday and paused a $463m (R6.7bn) expansion project amid escalating violence in surrounding communities that led to an employee being shot and injured. The stoppage will further sap investor sentiment in a country where business confidence is near the lowest level in two decades.
The freezing of the Zulti South project comes as President Cyril Ramaphosa battles to stimulate growth and retain the nation’s last investment-grade credit rating. South Africa’s economy contracted for a second quarter this year in the three months through September as farming, mining and factory output slumped.
The decision to halt operations was preceded by weeks of community protests in the area around the mine, causing “on-and-off disruptions,” said RBM Managing Director Werner Duvenhage. The demonstrations aren’t related to the company, but endanger employees’ lives and require government intervention, he said.
Losses will be “significant,” according to Duvenhage, who said he doesn’t know when RBM will resume operations.
Community disruptions around mines are leading to huge losses for producers, Anglo American Platinum Chief Executive Officer Chris Griffith said in October. Many protests relate to the provision of municipal services and housing, while some communities also complain they get few benefits from mines, even as their lives are disrupted by relocations and pollution.
South Africa has also faced xenophobic attacks and violence against women. While Ramaphosa has made combating crime a top priority since taking office, the number of murders climbed to the highest level in at least a decade in the 12 months through March.
Smelters at the site in the KwaZulu-Natal province are operating at a reduced level after an escalation of criminal activity directed at staff, London-based Rio said Wednesday in a statement.
Rio shares were little changed in London trading.
Output for 2019 is expected to be at the low end of a guidance range of 1.2 million to 1.4 million tons and Rio is contacting customers to minimise disruptions. RBM employs about 5 000 staff and contractors, and exports titanium dioxide slag, used to create ingredients for products including paint, plastics, sunscreen and toothpaste.
“We have taken decisive action to stop operations to reduce the risk of serious harm to our team members,” Bold Baatar, Rio’s CEO for energy & minerals, said in the statement.