Amplats restructure plan unleashes political storm

[] – ANGLO American’s proposal to restructure the platinum mines of its 78%-owned Anglo American Platinum (Amplats) has detonated in the most spectacular of circumstances with unions wanting to stop the process while the country’s government has accused the UK group of flaunting minerals legislation.

South African mines minister, Susan Shabangu, has subsequently announced her intention to launch an investigation into whether Amplats and its parent, Anglo American, have complied with the country’s mineral rights regulations. In a robustly-worded statement, Shabangu accused the companies of a complex form of mineral hoarding – an activity the 2004 Minerals and Petroleum Resources Development Act (MPRDA) was intended to overthrow.

And there may be more political fallout to come for Amplats and Anglo American. With Amplats CEO, Chris Griffith, acknowledging he was unsure of worker support for the Associated Mineworkers & Construction Union (Amcu) on his mines, the upstart union has called a press conference on Friday (18 February) in which it is expected to up the ante against Amplats’ review of operations that has, to all intents and purposes, deteriorated into a public relations disaster.

For its part, the National Union of Mineworkers (NUM) has described the restructuring as “shocking’, and said it wanted to negotiate with Amplats. “The NUM will engage the company in a bid to save these jobs and appeals on workers to work together to safeguard their own jobs,’ NUM general-secretary, Frans Baleni, told Sapa.

Another union, UASA, said that as Amplats had informed workers of its intention to cut jobs before any consultations, it had already broken a regulation of the Labour Relations Act.

Griffith said his company had “no desire to work against the regulator and that the R800m the company had set aside in its social plan in the wake of the planned retrenchments did not illustrate a company with a care-less approach to its obligations.

Amplats earlier today published details of its long-anticipated restructuring in which it said some 400,000 ounces of platinum capacity would be curtailed, while it would eventually sell its Union mine, and shut down some of its refining capacity. Up to 14,000 jobs could be affected by the restructuring, it said

“We did not take the decision on retrenchments lightly,’ said Griffith. “We are sensitive to the political consequences, but I can’t comment further until I have properly studied the DMR’s statement,’ he added.

Analysts said the results of the restructuring had been largely expected. “The platinum price and associated equities have been rallying since December 2012 on expectations of both this news and stronger primary demand, in our view,” said Goldman Sachs.

However, Shabangu declared her department had been undermined by having only received a week’s notice of Amplats’ and Anglo American’s intentions.

Furthermore, she said the work achieved by MIGDETT (Mining Industry Growth Development and Employment Task Team), a tripartite process established in 2008 and involving unions, Government and the private sector, had been damaged.

Said Griffith: “We are uncomfortable with the idea we have undermined MIGDETT. The problems of the platinum sector were before MIGDETT for a long time. It should be no surprise as the platinum sector is in serious trouble, Amplats is in serious trouble,’ he added.

However, Shabangu said that Amplats had failed to minimise job losses in terms of Section 52 of the MPRDA, the DMR would “… undertake a comprehensive investigation on the various aspects as announced in their statement”.

As part of the investigation, the DMR would “… focus on patterns of capital investments made towards these assets for long term sustainability and optimal exploitation of mineral resources”.

This investigation would also be broadened to include Anglo American’s compliance with South Africa’s minerals legislation in which the DMR would “… subject the entire Anglo American portfolio of mining rights to regulatory scrutiny to ensure compliance to prescripts”.

Zinghapi Jakuja, a spokesperson for the DMR, said that in general terms mining companies are not granted long-term mining rights so that they can put them on care and maintenance. In her statement, Shabangu accused Amplats of “… a complex form of hoarding of minerals …” that would “… deprive the country of economic growth and workers of their livelihoods”.

“If things get much more vitriolic for Amplats it will be very tough for Anglo to manage,” an analyst said. “It’s entirely possible that shareholders will ask Anglo to take a bath on Amplats [divest of its stake] and bag the risk,” he said.

The political ramifications of Amplats’ restructuring plan were uppermost in the minds of analysts earlier today. “There is little doubt that, following the Marikana-related industrial action last year, we are likely to see significant unrest in the area affecting all employers,” said Macquarie First South.

Peter Leon, an attorney for Webber Wentzel, said that the DMR had acted spuriously. “The DMR cannot stop a mining company from closing assets or putting them on care and maintenance provided the company has acted in terms of the law,’ he said. “It sounds like the DMR has been very unhelpful.’