Anglo American Platinum (Amplats) suffered a R1-billion negative cash outflow at its loss-making Rustenburg platinum mine in the six months to June 30.

And Union Section, the other part of its restructure request that has led to the pro-longed consultations with government and labour, ‘burnt’ R350-million in the same period.

Free cash flow generated from Amplats oper- ations remains weak owing to unrelenting cost pressures and lower labour productivity.

The company’s net debt rose by R2.7-billion to R13.2-billion.

The lower cash generated by operations, future funding requirements and ongoing uncertainties in the global economy prompted the board to continue its suspension of the dividend.

The difficulties in the platinum market con- tinue to be as severe as they were when govern-ment compelled Amplats to postpone the remedial action the JSE-listed company pro-posed on January 15.

Too much uneconomic upper-group two (UG2) ore is mined and costs are too high as a result of the current configuration of the Rustenburg mine and the Union mine.

From those two mines, where Amplats artic-ulated the need for restructuring more than seven months ago, some R1.3-billion of cash went out the door in six months.

Admittedly, the cash outflow from the two operations would have been substantially less had Amplats managed to sell all the platinum-group metals (PGMs) that it produced in the period; refinery maintenance often precludes this, resulting in more PGMs being sold in the second half of the year than in the first.

“We will see some extra cash come through in the second half of the year, but that still doesn’t make the problem of Rustenburg and Union go away,” Amplats CEO Chris Griffith tells Mining Weekly in a video interview.

The proposal made seven months ago was for Rustenburg to be restructured into three operating entities, removing 250 000 oz to 300 000 oz a year of high-cost production and mothballing the Rustenburg shafts, Khuseleka 1 and 2 shafts and Khomanani 1 and 2 shafts.

The two Union mines, which are seen as being of greater potential value under different ownership, are being consolidated into one in preparation for their disposal.

“The process has already started and we have a sale team commissioned. In the next couple of weeks, we’ll be able to take that process to the mine,” Griffith adds.

It is the lucrative Mogalakwena opencast mine on the northern limb of the Bushveld Complex in Limpopo that is currently carrying the company.

“It’s mining well and it’s producing a lot of money,” says Griffith, who adds that with Mogalakwena always come the substantial copper and nickel credits.

Also, the company is well aware that only a moderate injection of additional capital expenditure (capex) could release another 100 000 oz of PGMs a year from Mogala-kwena’s existing concentrator and base-metal refining capacity.

Another plus was that two Amplats joint venture mines, Kroondal and Bokoni, came through with standout first-half performances.

Kroondal production was up 20% and Bokoni had its best second-quarter perfor-mance in five years, increasing production by 26%.

Amplats intends spending R6-billion to R7-billion capital in the next three years, half of which will be to ensure that existing operations can be kept going.

The other half will involve more capex at the Twickenham project on the eastern limb of the Bushveld Complex, at Unki, in Zimbabwe, and also at Mogalakwena.

Shaft barrels are continuing to be sunk at Bathopele, in the Rustenburg Section, and investment continues.

“But what we need to do is to spend that money very wisely and, particularly at Rustenburg, we’re not spending as much capital on the UG2 projects and the decline shafts.

“We need to be able to invest through the cycle so that when the cycle turns again, we are well placed to continue our operations,” Griffith says.

On the upcoming wage talks, the former Kumba Iron Ore CEO says he is “fairly convinced” that there will be constructive dialogue.

“There is a greater understanding of the difficulty that the industry is in and that was a very important hurdle to overcome. Government now understands the difficulties of the gold and platinum industry.

“Although it may not sound like it, I think unions are also getting a better understanding of the difficulties, and that unrealistic wage demands are only going to end up with more job losses,” he says.

London mining analyst firm Liberum Capital says in a note, however, that the ability of mining CEOs to make a significant impact is severely restricted in South Africa, where the firm sees the mining industry being forced to operate in a “seminationalised manner for the welfare of the State”.