THE BOTTOM LINE
Amplats, Kumba turnaround can give Eskom a jolt
A master class in how to deal with underperforming assets, high debt and relentless conditions
Contrast, if you will, how the private sector digs itself out of a hole, compared with its vastly inefficient peers in the public sector.
This week Anglo American Platinum (Amplats) and Kumba Iron Ore, both companies in the Anglo American family, gave a master class in how to deal with underperforming assets, high debt, and relentless operational conditions, and still come out on the other side.In the case of Amplats, which is hostage to the same weak metals price affecting everyone, the platinum miner has moved to a net positive cash balance of almost R500-million as of its half-year results. That’s no mean feat considering that in 2017 it had net debt of R5.9-billion and almost R15-billion in 2014. How did it get there?
Notwithstanding the fortune of having one of the lowest-cost new mines in the platinum world, Mogalakwena, Amplats still had to make tough calls.
It sold mines that it could not defend keeping. It shut shafts that were losing money. It slashed its staff bill by 60%, mainly through those asset sales to other, possibly more gung-ho, players. It held firm against union demands.
The result is a company that can stand on its own, invest in its future, pay its staff, and hand shareholders a return.
This is where capitalism works. There is no backstop, other than shareholders who may be called on to support a company out of their own free will. It can be brutal at times, but it helps ensure that what is of value survives, and may even prosper. Eskom would do well to pay attention.