Business Maverick

LABOUR PAINS

Amplats to retrench up to 3,700 workers in ‘last resort’ as PGM prices, profits sink

Amplats to retrench up to 3,700 workers in ‘last resort’ as PGM prices, profits sink
The Anglo American Platinum Waterval Smelter in Rustenburg, South Africa, 10 March 2021. (Photo: Waldo Swiegers / Bloomberg via Getty Images)

Anglo American Platinum (Amplats) said on Monday that it might cut up to 3,700 employees – 17% of its workforce – after 2023 headline earnings plunged 71% in the face of a 35% fall in platinum group metals (PGMs) prices.

Amplats made the restructuring announcement alongside its annual results for 2023. 

To wit, the unit of global mining giant Anglo American said headline earnings for the year slumped 71% to R14-billion, while Ebitda – earnings before interest, taxes, depreciation and amortisation – fell 67% to R24-billion.

Amplats said the main driver behind this collapse in profits was “a 35% decrease in the PGM dollar basket price, most notably palladium and rhodium. The lower prices also impacted the purchase of concentrate inventory measurement which resulted in a R10-billion increase in cost of sales compared with 2022.”

PGM prices have been waylaid by a range of factors including a fragile global economic recovery and regulations to eventually phase out the use of internal combustion engines on the road. 

Such engines require emissions-capping catalytic converters and PGMs comprise their key ingredient. 

“As was the case in 2022, our profitability continues to be impacted by lower PGM prices and above-inflation cost increases in utilities and consumables,” CEO Craig Miller said in a statement. 

“As outlined in December’s investor update, in response to external pressures due to the low PGM basket price, we have embarked on an action plan of cost reduction measures targeting a R5-billion in operating cost saving and a further R5-billion saving in stay-in business capital spend by focusing only on critical work to ensure the integrity and reliability of our assets.”

It’s all a far cry from two years ago when the company was generating record profits from record prices, a state of affairs that saw it and other PGM producers throw the cash-strapped Treasury a lifeline as they paid historic levels of tax and royalties. 

Treasury no longer has that crutch, and up to 3,700 mining jobs are now at stake in what the company said was a “last resort”.

“… the company has had to take active steps and as a last resort commenced a restructuring process in terms of Section 189A of the Labour Relations Act 66 of 1995 (S189A),” Amplats said.

“The restructuring is expected to impact a total of 3,700 employees across the business.” 

That represents 17% of Amplats’ workforce, which is significant. A chainsaw rather than a pair of scissors is being applied here. 

Amplats also said that “contracts with 620 service providers are in scope for review”.

That underscores the sheer scale and complexity of a business like Amplats, with 620 representing about two-thirds of its service providers. This does not mean they will all be cut but, presumably, some will if the company can provide services cheaper in-house. 

PGM executives have been warning of looming layoffs for months as prices fall and costs rise. Many shafts are clearly burning rather than making money.

Read more in Daily Maverick: ‘We can’t be blind to the market’ — Northam CEO paints bleak PGM picture 

In a country with an unemployment rate of more than 40% based on its widest definition, job cuts are a thorny social issue. The typical mine worker has several dependants, and so the consequences of layoffs are far-reaching. 

In such an environment, layoffs are a “last resort” and this will likely not be the last Section 189 notice issued by a South African PGM producer this year. DM

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