Pay talks may end platinum’s brief reprieve
PLATINUM-producing companies have had to fast-track costcutting measures to reduce debt after a slowdown in global demand and a drop in the platinum price.
But the three major producers had been struggling with debt long before China slowed its demand — and whether they are ready to face the upcoming platinum wage negotiations is the big question.
Peter Major, a mining analyst at Cadiz Corporate Solutions, said: “From an income-statement perspective they are in better shape. The rand has lost 15% since October so at least now most of our mines are . . . covering their costs.”
But he added that if companies have to give up the little margins they have gained because of a weak rand to increase wages without an increase in productivity, they will not survive long. “It’s not so much the increase the union is asking for, it’s how much the union is giving for it. You can’t have one party always giving and the other not giving at least as much back. It’s unsustainable,” he said.
Lonmin, which has been one of the worst-performing platinum companies, has R6-billion in cash in the bank, thanks to a third rights issue that was completed recently.
The most recent rights issue, which raised $397-million (about R6.2-billion) that was used to reduce debt, was done to prop up the company after a drop in platinum prices and a decline in demand. The first one was completed when the company implemented an unsuccessful mechanisation process in 2009, and the second followed the Marikana massacre in 2012.
Impala Platinum said it had lowered its production forecast for the 2016 financial year to between 630 000 ounces and 650 000 ounces as it estimated a loss of about 50 000 ounces due to a fire in January this year. The company closed its highcost mechanised operations 8 Shaft and 12 Shaft in December last year because the mines were running at a loss. Just like Lonmin, Impala said it was sitting with R6.4-billion in the bank. The company’s total debt, excluding leases, has increased by R1.2-billion to R7.96-billion.
Anglo American Platinum said last month that it had R12.8-billion net debt, down from R14.6-billion, and had recorded impairments of R14billion. However, the company managed to increase refined platinum production 30% year on year and platinum sales by 17% during 2015.
Smaller mines had less flexibility than the big companies, said Major.
Northam Platinum, which announced a loss of R273-million for the six months to end-December, said its three-year wage agreement, signed in October, was in effect; it sets out annual increases of 6% to 8%.
Royal Bafokeng Platinum reported a first full-year net loss
You can’t have one party always giving . . . it’s unsustainable
of R3.77-billion to December 2015 and impairments of about R4.5-billion in its Rasimone Platinum and new Styldrift mine, which will reach steady production only in 2020.
Most of the company’s unionised workers belong to the National Union of Mineworkers; it is not going into negotiations this year as the first phase of its wage agreement is effective until June next year.
‘There’s not too much wrong with asking for R12 500 per month as starting pay as long as the companies are getting what they are paying for — an experienced and productive worker,” said Major.
“But Joseph [Mathunjwa, head of the Association of Mineworkers and Construction Union] wants the mining companies to pay R12 500 per month entry level when the miner has no skill, experience or track record. That doesn’t make sense,” he said.