Anglo American plc ("Anglo American") notes today'sannouncement by Anglo American Platinum Limited ("Anglo American Platinum" or "the Company"), its 79.8% owned subsidiary.
Anglo American supports Anglo American Platinum's conclusions of the review of its business, announced in February 2012, and endorses the clearly defined proposed strategy to create a sustainable, competitive and profitable platinum business for the long term benefit of all its stakeholders.
Cynthia Carroll, Chief Executive of Anglo American and Chairman of Anglo American Platinum, said "Anglo American Platinum has concluded its thorough business review in the context of the Company's revised demand growth expectations and the many structural changes that have affected the profitability of the platinum business in recent years. In that context, Anglo American Platinum has identified the optimal mining configuration and the appropriate processing footprint, overhead structure and commercial strategy to improve profitability and drive greater performance. The objective has been clear from the outset - to create a sustainable business by facing the tough and necessary decisions for the benefit of all its many and varied stakeholders.
"Anglo American recognises the potential impact of these proposals on our people and their communities. We have designed a comprehensive socialplan to ensure we make a positive difference in the Rustenburg and labour sending areas, creating at least the same number of new jobs as may be affected as part of the restructuring. A stable and competitive Anglo American Platinum will be on a sure footing to continue substantial investment in South Africa for the long term, enabling more secure employment for its 45,000 employees and delivering more sustainable returns."
The full text of the Anglo American Platinum announcement is set out below:
Anglo American Platinum takes action to create a sustainable, competitive and profitable platinum business
Anglo American Platinum Limited ("Anglo American Platinum" or "the Company") has concluded the review of its business, announced in February 2012, to create a sustainable, competitive and profitable platinum business for the long-term benefit of all its stakeholders.
As a result of the review, Anglo American Platinum proposes to:
- reconfigure its Rustenburg operations intothree mines, with aligned processing operations
- divest the Union mines at the right time - tomaximise value under different ownership
- deliver R3.8 billion of annual benefits by 2015, through efficiency and cost reduction initiatives, including annual savings of R390 million from optimising its overhead structure
- provide a comprehensive package of support toits employees and communities in Rustenburg and the labour-sending areas
- create at least 14,000 new jobs to balancethe number of jobs that may be affected by the restructuring
The Company's review of its business is in response to its revised expectations for platinum demand growth and a number of structural changes that have eroded profitability in recent years, including capital intensity, mine depths, ore grades, higher-than-inflation unit cost increases, jewellery demand elasticity and increasing secondary supply of platinum. Anglo American Platinum has previously stated that a number of its mines have been under considerable economic pressure for some time. The continued operation of unprofitable shafts within the current configuration, and in light of the Company's revised demand and cost expectations, is not sustainable.
Anglo American Platinum therefore proposes to reconfigure its Rustenburg operations into a sustainable 320-350,000oz platinum producer across three operating mines. Four unsustainable, high-cost shafts, namely Khuseleka 1 and 2 and Khomanani 1 and 2, will be put on long-term care and maintenance. As a result the production profile will be reduced by approximately 400,000oz per annum with a baseline production target of 2.1 - 2.3 million oz per annum.
The Rustenburg processing operations will also be reconfigured to align with the revised mining footprint, which may include closing the Waterval UG2 Concentrator and No. 2 Smelting Furnace.
Anglo American Platinum believes that the Union mines ("Union") are likely to be of greater value under different ownership, particularly in comparison to the other attractive growth options in the Company's portfolio, and it therefore proposes to divest Union at the right time. In the interim, it is proposed that Union be reconfigured to protect near-term value, by stopping mining activities at the Union North Declines, combining Union North and South Shafts into one operation and putting the Mortimer Merensky concentrator on long-term care and maintenance. The restructuring of joint venture operations has also been reviewed in order to optimise long-term profitability and competitiveness. This may include rationalisation of farm boundaries to optimise life-of-mine extensions and other commercial considerations.
Prevailing and forecast market conditionsnecessitate cash preservation and the optimal allocation of capital. The proposed restructuring of the operations will ensure more effective capital allocation towards the Company's mines that are best placed to sustain and create employment over the long term. The Company proposes to reduce its planned capital expansion expenditure over the next 10 years by approximately 25% to R100 billion to focus investment on low-cost, high-margin projects.
In line with the proposed changes to Anglo American Platinum's mining and processing operations footprint, the Company proposes to deliver R3.8 billion of annual benefits by 2015 through cost reduction and efficiency improvements, including savings of R390 million to be achieved through a redesign of the Company's overhead structure.
As a result of the proposed changes to the business, a total of up to 14,000 jobs may be affected, 13,000 of which will be in the Rustenburg area.
Anglo American Platinum will continue to take its social responsibilities seriously, particularly to its employees and surrounding communities, and proposes to provide a comprehensive package of support to any affected employees and communities. In particular, the Company will target the creation of at least 14,000 jobs - an equivalent number of jobs to those that may be affected by the restructuring. The job creation initiatives will focus on housing, infrastructure and small business development in Rustenburg and the labour-sending areas.
Chris Griffith, CEO of Anglo American Platinum, says:
"The platinum business has attractive underlying fundamentals, but we are facing tough decisions to restore profitability to our operations. We must evolve to align the business with our expectations of the platinum market's long-term dynamics and address the structural changes that have eroded profitability over time. We have reviewed our business across the entire value chain, building upon the steps taken toimprove operational performance in recent years, and will be consulting extensively with our stakeholders in relation to our proposed changes.
"We have designed a comprehensive social plan to ensure that we can compensate for any necessary labour restructuring and make a positive difference through job creation. By creating a sustainable, competitive and profitable business, we will be in a stronger position to continue substantial investment, provide more secure and stable employment, and to benefit our customers, suppliers, shareholders - which include more than one million beneficiaries in our local communities and key labour sending areas via our Alchemy community share ownership programme and some 48,000 employees in our Kotula employee share scheme - and the South African economy as a whole."
View previous press releases