Amplats a step closer to become a low cost mining firm
ANGLO American Platinum ( Amplats) took a big step towards its goal of becoming a low-cost miner by selling its labour intensive Rustenburg mines this week, a move that should shrink its output but help to boost profits.
Amplats, the world’s biggest platinum producer, sold the mines for R4.5 billion to Sibanye Gold, after they were hit by a five-month pay strike last year that shook investor confidence in South Africa.
In the aftermath of the strike, Amplats reconfigured the five mines it operates near Rustenburg into three, but they were still losing money.
More cash
Chief executive Chris Griffith said by offloading the mines, Amplats would have more cash to invest in more profitable operations. The company expects to shave R6bn in costs over the next two years by delaying projects and re-designing mines to make them less capital intensive.
Griffith said the firm’s crown jewel, Mogalakwena mine, accounted for more than a third of mining sales revenue in the six months to June. Rustenburg contributed just above 20 percent despite its size.
Amplats will buy all of the platinum mined from the Sibanye operated mines until December 2018.
“It’s a double whammy for Amplats, they managed to bring costs down and de-risk the business in one go,” said Adrian Williams, an analyst at Avior Capital Markets.
Next on the chopping block is another of Amplats’ labour-intensive mines, Union, and two other joint ventures, as part of its strategy to run shallow mechanised mines.
Nearest rival Impala Platinum has also said it would mechanise some of its shafts where possible. It backtracked on a plan to sell its Marula mine after attracting disappointing offers.
South Africa accounts for about 70 percent of global platinum production, and Amplats has the most to gain from a strategy that reduces costs at a time when the metal’s spot price is near six-and-a-half-year lows below $1 000 (R13 517) an ounce.
Despite these hurdles, Sibanye chief executive Neal Froneman, who has a record of turning underperforming mines into money makers, is betting he can turn around Amplat’s Rustenburg mines.
Sibanye, a spin-off from Gold Fields, runs ageing deep-level bullion mines where it has cut costs by 26 percent partly by shedding jobs. – Reuters