Amplats expects to lay off 3,700 workers

Anglo American Platinum (Amplats) has initiated a section 189A process that is likely to result in the retrenchment of 3,700 employees across its platinum mining business as it seeks to reduce R5bn in costs.

The group reported that profit for the year decreased 71%, due largely to a 35% decline in the platinum group metals (PGMs) dollar basket price during the 2023 financial year.

Amplats CEO Craig Miller said on Monday that low prices, the drop in profit and “ongoing macroeconomic pressures” had compelled the company to take active steps to secure its longterm sustainability. As a last resort, it began a restructuring process in terms of section 189A of the Labour Relations Act.

The process will involve consultation with stakeholders, including trade unions and other affected non-unionised employees. Only once this had concluded would the final number of affected jobs be known. However, Amplats said the restructuring was expected to affect 3,700 employees (about 17% of its employees) and the company would also review contracts with 620 service providers.

“The majority of employees impacted will be at Amendelbult [comprising two mines located in Limpopo], followed by processing operations as a result of Mortimer Smelter being placed on care and maintenance,” Miller told investors during a presentation on Monday.

The restructuring process, which includes restructuring at the corporate office last year, is expected to contribute 40%, or R2bn, to the overall operational cost savings of R5bn.

Amplats acting CFO Sayurie Naidoo told Business Day the other R3bn would come from a review of service provider contracts (R500bn to R700bn), placing the Mortimer Smelter on care and maintenance (R500m), and another R500m “coming out of overheads such as study cost, exploration, and research & development spend”.

“We’ve got another R1bn coming out of further operational efficiencies such as consumption of diesel and other utilities,” she said.

Even if the need for further cost-cutting should arise, Miller said Amplats would not consider any delays in the 460MW energy offtake agreement concluded with Envusa Energy.

Miller told Business Day that this deal with Envusa was fundamental for the group.

“Not only will we add an additional 460MW energy to the grid, it will also come at a cheaper cost. Some of the cost increases we have seen are substantial — our energy bill has increased by about 70% over the last five years,” he said.

In addition, said Miller, access to this green energy would place the group in a position to supply a “decarbonised” product to many of its customers that would either attract a premium or at least not incur any carbon taxes that countries such as those in the EU would impose on high-intensive carbon products coming into their countries.

Also, said Naidoo, there was no real capital outlay Amplats would incur given that it was just an offtake agreement that would replace its Eskom bill.

“We have worked hard to address aspects in our business that are impacted by both the global and local challenges facing the PGM industry and have already implemented several key cost-saving initiatives.

“However, given the market outlook and protracted lowprice environment … further measures are required to build the resilience that will sustain this business,” Miller said.

In its 2023 financial results released on Monday, the group reported a 67% drop in earnings before interest, taxes, depreciation and amortisation. Its headline earnings of R14bn were 71% lower than 2022.

Sales increased 2%, but this was not enough to make up for the 35% decrease in the PGM dollar basket price and a 5% drop in production from its ownmanaged mines.

The Minerals Council SA noted in its Facts and Figures report for 2023, published earlier in February, that the drop in PGM prices, coupled with high labour and electricity prices, could potentially affect 4,0007,000 mining jobs in 2024.

The report showed that the value of total sales of PGMs for 2023 was expected to have declined by about 33%, led by palladium and rhodium prices, which dropped by 36% and 56.5%, respectively, compared with 2022. These two metals accounted for 60% of the PGM basket income split in 2023.

PGM prices weakened in 2023 despite an estimated 7% increase in PGM automotive demand, which accounted for about two-thirds of total PGM demand, Amplats said.

The increase in PGM automotive demand did not translate into an equal increase in sales because car companies added to their inventories of PGMs in the first half of 2022 as insurance against further supply disruptions after Russia’s invasion of Ukraine. “This was not repeated in 2023, meaning PGM purchasing was naturally lower, and given widespread expectations of a surplus market in coming years, some automakers seem happy to run lower stocks than before,” the group said.

For 2024, said Amplats, auto analysts forecast little or no growth in production in the key light vehicle market. This assumed that with pent-up demand sated and inventories rebuilt, production would only increase if there was consumer appetite to buy more vehicles.