Amplats warns of 3,700 retrenchments as PGM prices plunge
Anglo American Platinum (Amplats) says it might cut up to 3,700 employees – 17% of its workforce – after 2023 headline earnings plunged 71% in the face of a 35% fall in prices of platinum group metals (PGMS).
Amplats made the restructuring announcement on Monday, 19 February, alongside its annual results for 2023.
The unit of global mining giant Anglo American said headline earnings for the year slumped 71% to R14-billion, while ebitda – earnings before interest, taxes, depreciation and amortisation – fell 67% to R24-billion.
Amplats said the main driver behind this collapse in profits was “a 35% decrease in the PGM dollar basket price, most notably palladium and rhodium. The lower prices also impacted the purchase of concentrate inventory measurement, which resulted in a R10-billion increase in cost of sales compared with 2022.”
PGM prices have been waylaid by a range of factors including a fragile global economic recovery and regulations to eventually phase out the use of internal combustion engines on the road. Such engines require
emissions-cutting catalytic converters, and PGMS are their key ingredient.
“As was the case in 2022, our profitability continues to be impacted by lower PGM prices and above-inflation cost increases in utilities and consumables,” CEO Craig Miller said. “As outlined in December’s investor
update, in response to external pressures due to the low PGM basket price, we have embarked on an action plan of cost reduction measures targeting R5-billion in operating cost saving and a further R5-billion saving in stay-in business capital spend by focusing only on critical work.”
It’s all a far cry from two years ago when the company was generating record profits from record prices, a state of affairs that saw it and other PGM producers throw the cashstrapped Treasury a lifeline as they paid historic levels of tax and royalties.
Treasury no longer has that crutch, and up to 3,700 mining jobs are now at stake in what the company said was a “last resort”.
“…the company has had to take active steps and as a last resort commenced a restructuring process in terms of Section 189A of the Labour Relations Act 66 of 1995,” Amplats said. “The restructuring is expected to impact a total of 3,700 employees.”
Amplats also said that “contracts with 620 service providers are in scope for review”.
That underscores the scale and complexity of a business like Amplats, with 620 representing about two-thirds of its service providers. This does not mean they will all be cut but, presumably, some will be.
PGM executives have been warning of looming layoffs for months. In a country with an unemployment rate of more than 40% by the widest definition, job cuts are a thorny social issue. The typical mine worker has several dependants, and so layoffs are far-reaching.