[miningmx.com] – MARK Cutifani, CEO of Anglo American, this week defended a refusal to meet wage demands issued to its subsidiary Anglo American Platinum (Amplats) by the Association of Mineworkers & Construction Union (AMCU), saying they were unaffordable.
“This is one of those challenges we have to take on as an industry, as a company and as a country,’’ Cutifani told the Melborne Mining Club this week. “I’m comfortable we’ll get there but it does need us to stand our ground and be constructive and find a solution to work in the long term,’ he said.
He added that although productivity in South Africa was a tenth of levels in Australia, the company already paid a fifth of the Australian wage. The AMCU is seeking a R12,500 per month minimum wage for the lowest paid at Amplats. It called a strike on January 23 which is now into its 20th week with no sign of resolution in place.
The graph below, produced by Roger Baxter, senior economist and head of strategy at the Chamber of Mines of South Africa, demonstrates the gulf in productivity rates of miners in Australia and South Africa.
For every $1 spent on wages, some $5.25 in value is created in Australia versus value totalling $1.81 in South Africa.
Recent discussions between Amplats and its counterparts Impala Platinum and Lonmin have sought to focus on why the 30% plus demands of AMCU are not affordable. It’s likely data of this type is being used.
The graphs below demonstrate the gulf in worker expectations and the financial ‘do-ability’ of the wage demands by the platinum producers.
Here’s what happens to the margin of South Africa’s platinum producers if the companies were to incorporate AMCU’s wage demand. The margin includes amounts companies spend on capital development.
Even incorporating the platinum companies’ offer of a 9% increase for workers, the ability to withstand a deterioration in the platinum price is limited.
It would also appear that a 9% salary increase for miners in the platinum sector does not necessarily remove a requirement for restructuring.
