The platinum arm of Anglo American Amplats has announced that it will cut 6 000 South African mining jobs – less than half the 14 000 initially proposed – as it strives to restore profits without triggering a backlash from the government and restive unions.
The world’s top platinum producer said it would keep open one of four shafts slated for closure near the platinum belt city of Rustenburg. The company did not go through with its original plan under intense government pressure.
Amplats said the move was necessary to get the company back on the path to profitability after reporting a drop of more than 140% in headline earnings in 2012.
Unions have vowed to fight any job cuts and a fresh strike is likely.
It is expected that the decision will cut production capacity by 250 000 ounces this year, around 11% of last year’s total production.
The decision is a hammer blow to South Africa’s already struggling mining sector, which is straining under labour disputes and shrinking margins.
Last August 34 people were killed in one day at the nearby Lonmin platinum mine, freezing production for months.
Since then mines in the region have been hit by a series of wildcat strikes, go slows and clashes between established and more militant up-and-coming unions.
At Amplats the shooting of five mineworkers by guards in February was sparked by a turf war between the the main National Union of Mineworker (NUM) and a smaller upstart Association of Mineworkers and Construction Union (Amcu).
The wave of violence has spooked investors, but also led to a slew of sector-wide wage hikes.
In January, Amplats announced a major restructuring plan that would cut up to 14 000 jobs and save R3.8 billion a year.
The company said that cost-saving target remains; under the plans, Amplats would divest from struggling mines and split remaining Rustenburg operations into three units.
That announcement was met with a furious response from the government, which described Amplats as behaving like a “child”.
“The company believes it is ethically acceptable to execute a complex form of hoarding of minerals and deprive the country of economic growth and workers of their livelihoods,” said Mining Minister Susan Shabangu.
Amplats agreed to revisit the decision.
Today’s announcement of vastly reduced job losses will offer little succour to the government, which has been largely unsuccessful in its efforts to bring down unemployment.
At least one in four workers currently has no job and growth is anaemic compared to the rest of Africa, which is expected to grow at more than 5% this year.
The timing is also embarrassing, coming as South Africa holds the the World Economic Forum’s “African Davos” in Cape Town.
Amplats also has operations in Zimbabwe and Brazil. Its parent company, Anglo American, is one of the world’s largest mining companies.