Anxious times for platinum miners as output sputters

Business

Anxious times for platinum miners as output sputters

Thousands of jobs on the line if prices don’t recover

Allan Seccombe

The long-awaited and much-delayed closure of South African platinum mines is gaining momentum after years of under-investment and cross-subsidisation of unprofitable operations as companies held out for improved prices.
South Africa is the world’s leading source of mined platinum, accounting for 80% of global supply, but years of stagnant prices, unsettled labour relations and inexorable cost increases have eroded profit margins, rendering more than half of the country’s platinum mines marginal or unprofitable.
This has meant companies have had little money beyond sustaining capital to invest in growth projects, sparking warnings from CEOs in recent years of South African platinum supply falling further from its 2006 peak of 5.6 million ounces. It has already fallen to about 4.3 million ounces a year.Northam CEO Paul Dunne has warned of steadily declining output, mainly because of under-investment in existing mines and in new projects to replace old operations, forecasting a drop below 4 million ounces.In the latest results from Impala Platinum (Implats), the world’s second largest miner, CEO Nico Muller spoke of the closure of four shafts within two years, taking 190,000oz of production out of circulation.
A number of unprofitable mines have been kept open longer than they should have been in the face of resistance from the government and other stakeholders, including labour, and with some companies hoping for a recovery in moribund PGM prices to save them from the exercise. The unprofitable Bokoni and Maseve mines were shut in 2017.
Lonmin is also undertaking a major restructuring of its mines in a desperate attempt to stave off severe financial problems and secure an all-share takeover bid by Sibanye-Stillwater. Neal Froneman, Sibanye’s CEO, issued Lonmin a stark warning recently that the company’s shareholders would not agree to acquiring Lonmin if there was debt in the company and its mines not put on an even keel.
Lonmin has to cut 13,000 jobs to prepare the business for Sibanye’s takeover and position it to repay debt.
Waiting for the rally
Anglo American Platinum has sold its deep-level and labour-intensive mines since it ran into a political firestorm in 2013 when it said it was to retrench 14,000 employees, shut four shafts and sell its Union mines. The world’s largest platinum miner has since sold all its Rustenburg mines to Sibanye and sold its Union mine, leaving it with shallow, mechanised, profitable mines.
Northam, which has the world’s deepest platinum mine at Zondereinde, and has scrambled to get shallow, modern and mechanised assets into its portfolio to ride out the weak platinum price cycle. Dunne has said this strategy will create 6,500 jobs.
The newcomer to the heart of platinum production, Sibanye, has come into the business at a time when profits are under pressure and the outlook is unclear, with a long-anticipated rally in platinum prices failing to materialise.

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