[miningmx.com] – JUST over a month before his resignation, former
Anglo American Platinum (Amplats) CEO, Neville Nicolau told Miningmx the
group had no intention of biting the bullet for the industry; that is, idling or
mothballing ounces while the share prices of other platinum producers benefited.
Speaking to Jan de Lange, a journalist for Sake24 and a Miningmx
correspondent on the publication’s Mining Yearbook (2012), Nicolau commented:
“That [restructuring] should be done by producers who are in trouble’.
“We have a contribution to make and we will do our bit, but our overheads on the
processing side would make us unprofitable if we cut back too much.
“These days I tend to become somewhat rude when people suggest that. Do they
expect us to become unprofitable in order to improve the share price of another
company?’
Nicolau said Amplats had already done the hard yards three years ago when it
removed 25,000 people from its payroll through a number of shaft closures, three of
which were in the Rustenburg area. “We have done that work. Sooner or later we
will see the benefits.’
Nicolau was in his fifth year at the helm of Amplats, which is a very different beast
now than it was in 2007, when Ralph Havenstein left the company.
“When I started out, we were in the highest cost quartile. Today we are at the
bottom of the cost curve. The problems we had last year with some rising costs were
in line with the rest of the industry – it was the same problems experienced by
everybody else.
“Three of our Rustenburg mines are at the top of the cost curve, but those are all
busy with short-term capital projects that will start producing within the next nine to
18 months. Costs will fall into line with the rest of the group shortly afterwards’.
The projects Nicolau was referring to were Thembalani, Khuseleka and Khomanani,
which will have remaining life spans of between 30 and 50 years after completion of
their capex-projects.
Nicolau said Amplats ranked its shafts according to their unit costs per production in
relation to the basket price received for every platinum ounce.
“If you do that and divide the company into units smaller than the current mines,
there is not a single unit that will be in trouble for the remainder of this year, even
if the platinum price remains at its current level [$1,415/oz at the time of writing].
“We’re not making as much profit as we would like to, but our business is actually in
very good condition.’
Many other producers are not in the same boat. Low platinum prices aside,
production figures have plummeted due to labour unrest and strikes, furnace failures
and Section 54-related safety stoppages.
“The safety stoppages really went overboard last year, but since Christmas we have
no reason to complain, and we as a company are not going to say anything more
about Section 54s.’
Nicolau said the restructuring or review process should be viewed as a re-look at all
operations, and not a pending cutback exercise.
“If there are unprofitable ounces, we will determine whether it is [part of] a capital
project that will improve going forward [and] continue with it. But if there is no
profitable outlook, we will close it down.’
Commenting on the market outlook, Nicolau said: “In the middle [of] 2011, the
market was in a recovery and the platinum price was very good. The only real
problem was the strong rand. But towards the end of last year it was very clear the
Section 54 stoppages were hurting us. We didn’t turn out the production we
expected and the market changed. The rand has weakened somewhat, but not
enough to offset other variables.
“For the first time as far as I can remember, the budgeted metal price for a financial
year was higher than the real price at the beginning of the year – as in a lot. So we
had to give people warning that things have changed’.
Amplats lowered its guidance for 2012 from 2.7 million ounces to between 2.5 and
2.6 million ounces. Similarly, capital expenditure was scaled back from R9bn to R8bn
and most recently to R7.3bn.
“Cutting capex back is not a bad business decision, as it may look from the outside;
it is carefully considered and coordinated. Truth be said, we initiated many projects
too early [in the past] and completed it too soon. We can now utilise that
flexibility.’
Commenting on market intelligence, Nicolau said: “We produce 40% of the world’s
platinum and need to determine our own market behaviour. We can’t rely only on
Johnson Matthey and GFMS for that.
“We won’t grow production a lot more than the market’s growth. And we will do that
safely and cost effectively. Within our portfolio we know have the flexibility to do
that: get more growth from Mogalakwena, which is a high-margin operation, and
less from Rustenburg where the margins are smaller.’
A different version of this interview appears in The Mining Yearbook 2012, which
is out now in shops with Finweek
