Rothschild’s Anglo American to Sell South African Mines*
By Cecilia Jamasmie
South Africa, Africa’s largest economy, holds about 80% of the world’s known platinum reserves, accounting for about 70% of global output. Maybe it’s time to nationalize the mines…
Anglo American’s (LON:AAL) platinum unit, Amplats, revealed details Monday about the planned sale of its strike-hit mines in South Africa, where the company recently lost 420,000 ounces in production causing first-half profit to plunge.
“Both management time and capital are finite,” the company, which is the world’s number one platinum producer, said in a statement.
“The decision has been made to possibly exit certain assets that will be better placed in the hands of a new owner.”
The assets on the block, disclosed the company, are its Union and Rustenburg mines in South Africa and its Pandora joint venture… The Union and Rustenburg operations account for just over 25% of Anglo American Platinum’s annual platinum production and more than half of its workforce.
Anglo American Platinum said it is still assessing its Bokoni operation, adding it plans to keep its smelting and refining operations in both Union and Rustenburg. It will also retain its mine in Zimbabwe and several others lower-cost assets in South Africa.
The National Union of Mineworkers (NUM) expressed its disappointment and threatened to make the process difficult.
“Any sale is going to result in job losses and this is punishment for poor workers. They are an established platinum operator and any sale will have certain consequences,” NUM general secretary Frans Baleni told Reuters.
Nothing new under the Sun
The news doesn’t come as a surprise for those following the latest developments at Amplats mines. In an April interview, chief executive officer Mark Cutifani said he didn’t think those mines were key to the company. His statement took on a whole new meaning after Amplats reported it had lost output worth about $1.1bn during the five-month strike over pay at its mines, the same ones that last year accounted for over 40% of the company’s total platinum production.
Sibanye Gold (NYSE:SBGL) —South Africa’s top bullion producer— has been repeatedly hinted as the most likely buyer for Anglo’s mines in the platinum belt.
Mark Cutifani, who became Anglo American’s chief executive officer in April 2013, said last year he considered performance at the mining group to have been “unacceptably poor” and set a goal of improving Anglo’s return on capital to at least 15% by 2016 from about 8% in June.
Amplats profit for the first six months of the year ended June 30 was a mere ($40.3 million (429 million rand) compared with a net profit of 1.22 billion rand in the year-earlier period. The company said equivalent refined production during the period fell to 715,000 ounces from 1.18 million ounces in the first half of 2013. Refined platinum sales for the first half of 2014 fell to 1.04 million ounces on the year compared with 1.074 million ounces.
South Africa, Africa’s largest economy, holds about 80% of the world’s known platinum reserves, accounting for about 70% of global output, used for jewellery, catalytic converters in vehicles, and as a key source of hard currency for the country, among other applications.