[miningmx.com] — IT’S perhaps ironic that last year’s labour unrest has worked in the favour of platinum producers, with Anglo American Platinum (Amplats) saying on Friday the resultant lower production would hold the platinum market in balance this year.
This could offer some short-term respite and provide the platinum price some strength, but no miner would be resting on its laurels in the next few years.
“If South African platinum production returns to pre-strike levels, then the market would be oversupplied,’ Amplats said in its production report for the quarter to end-March.
The company reported group refined platinum production of 583,000 ounces, 2% lower year-on-year.
The lower production could work in favour of platinum miners in the short-to-medium term, but Amplats has far graver issues to address.
Its plan to cut 14,000 jobs in an effort to increase the efficiency of its South African operations, was met with hostility from government and labour earlier this year and remains the subject of ongoing negotiations between the parties.
“[Amplats] will make a requisite announcement on the outcome of the consultation process at the appropriate time,’ the group said on Frida.
The importance of finding a way forward for the restructuring of the company, as well as an improvement in the state of the industry’s labour relations, cannot be overstated.
The stakes are high for labour as well. The Association of Mineworkers and Construction Union (Amcu) – after displacing the National Union of Mineworkers at a number of mines – might not be willing to relinquish its newly gained power by agreeing on a collective bargaining wage agreement process for the platinum sector.
“For the platinum companies the overall operating and pricing environment remains tenuous at best, and is arguably the worst conditions the companies have experienced over the last decade,’ said Justin Froneman, a platinum industry analyst for Standard Bank Group Securities.
Amplats said it expected platinum sales for the year would be 2.2 million ounces to 2.3 million ounces.
The group’s refined platinum production from its own units was 390,000 ounces, down 6% year-on-year, a result of illegal strikes at its Rustenburg operations.
Amplats said its cash unit costs target would approximately be R16,500 per equivalent refined platinum ounce for 2013 (around R9,000 per PGM ounce). The current PGM basket price of R10,500 oz does not compare well, particularly when one considers the capital expenditure required to maintain existing operations.
It was for this reason Froneman said it was absolutely imperative that Amplats received the go ahead for its planned restructuring.
“Looking at the financials from 2012, there needs to be pretty substantial changes across the company to address the cash burn.’
