JOHANNESBURG (miningweekly.com) - As platinum producer Anglo American Platinum (Amplats) emerged from a year of extensive restructuring, the company reported a return to profitability and stabilised production.

Amplats turned its operating profit around from a loss of R6.33-billion in 2012, to R2-billion for the 12 months to December 2013, while revenue jumped 22% to R52.4-billion, driven by higher sales volumes and the impact of the weakening rand/dollar exchange rate.

Headline earnings swung back into the black, rising to R1.5-billion in 2013 from the loss of R1.5-billion incurred in 2012, while headline earnings a share reached R5.56, compared with the loss of R5.62 a share last year.

“The main focus of the year under review was the completion of the portfolio review and then beginning to execute its outcomes. The resultant once-off restructuring costs of R1.5-billion and asset write-downs of R2.8-billion, combined with a higher effective tax rate, gave rise to an attributable loss for the year of R1.4-billion or R5.25 a share,” explained Amplats CEO Chris Griffith.

The restructuring emerged amid turbulent market conditions and a volatile industrial relations environment. “We made it clear that we needed to reduce unprofitable production and align our production with market demand,” he told Mining Weekly Online.

RESTRUCTURING PLAN

During the financial year under review, Amplats achieved R1.9-billion of the targeted R3.8-billion in savings to be achieved by 2015.

Griffith indicated that the full value of the “significant number of cost-saving initiatives” implemented last year would be realised in 2014, with further cost and revenue benefits achieved through initiatives such as labour efficiency programmes and supply chain initiatives.

The group’s restructuring plan saw the consolidation of five Rustenburg mines into three, the establishment of a new operating model and associated organisational design for the company and the idling of the Khomanani mine and the Khuseleka 2 shaft, as well as the shutdown of the uneconomical Union North mine decline, the merging of the Union North and South mines and the cutting of the staff at the Johannesburg-based head office by half.

The portfolio review affected over 7 000 employees.

“By year-end, more than 5 000 people had left the organisation through voluntary separation measures – and none through forced retrenchment,” he noted, adding that 2 300 were redeployed to vacancies at other mines.

The company had initially planned to implement an aggressive restructure plan that would have shed up to 14 000 jobs to pull back profitability in the strained industry, but had scaled back job losses to balance out cost cuts and the threat of labour unrest.

CAPEX CUTS

The group had also suspended capital expenditure (capex) to between R6-billion and R8-billion and set production targets at 2.3-million ounces a year for the next three years.

“Capital allocation will continue to focus on the highest return and lowest risk opportunities in line with the company’s value-enhancing strategy and capital austerity programme,” Griffith explained.

“While Amplats will continue to face headwinds in 2014, we remain fully committed to returning the company to a state of sustained profitability that will benefit all of our stakeholders. Our efforts to optimise efficiencies and the implementation of ongoing savings will remain a key priority. In 2014 we will continue to invest in the business in line with our strategy and to reap the benefits of the structural changes that we worked so hard to implement in 2013.”

The company did not expect further write-downs or significant production reduction unless the company was hit by “sustained strike action”.

STRIKE WARNING

Over 80 000 workers downed tools on January 23 in a strike led by the Association of Mineworkers and Construction Union (AMCU) across Amplats, Lonmin and Impala Platinum (Implats) platinum operations, demanding wages of R12 500 a month.

Griffith stated that “at some point” the impasse between labour, unions and employers needed to be resolved.

“At the moment we are not close together … their [AMCU’s tabled] demands are completely unsustainable.

“If we were to give the demands on the table at the moment, it would increase the costs of the company by R13-billion. We have already increased our debt levels from R10.5-billion to R11.5-billion this year. All that would mean is that we just close the company down,” he exclaimed.

AMCU this week rejected the three platinum producers’ revised wage offer, sticking to its original R12 500 demand.

Amplats, Implats and Lonmin proposed a three-year agreement with increases of 9% for A-band, 8.5% for B-band and 7.5% for C-band employees, which included miners, artisans and officials, during the first year.

In the second year of the agreement, A-band employees would get an increase of 8.5%, while B- and C-band employees would get increases of 7.5% and 7% respectively.

The agreement for the third year comprised a 7.5% increase for A- and B-band employees, and a 7% increase for C-band workers.

“The company is trying to find a sustainable percentage that the union would accept. At the moment, there is a philosophical demand rather than a realistic demand,” Griffith told Mining Weekly Online.

The platinum producers and AMCU have been engaged in negotiations pertaining to wages and certain conditions of employment since the latter part of last year and were now participating in an ongoing Council for Conciliation, Mediation and Arbitration-mediated wage negotiation process.

PRODUCTION

During the year under review, Amplats produced and sold 2.3-million platinum ounces in line with its strategy, with both Mogalakwena and Unki reporting record production.

The group’s joint venture operations produced 753 000 oz – a 11% jump on the prior year – owing to higher production volumes at Bokoni and Kroondal.

“The productivity improvement initiatives implemented at Kroondal and Bokoni, focusing on underground mining efficiencies, working place flexibility, changes to the support regimes and transition to owner mining contributed to delivering excellent results,” said Griffith.

Amplats also boasted its “best-ever” safety performance during 2013, with the lowest injury frequency rates ever recorded and a halving of fatalities from 25 in 2007, to 12 in 2011 and then again in 2013, with six fatalities.