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Anglo Mining Rights at Risk on Plan to Idle S. Africa Output

Jan. 16 (Bloomberg) -- South Africa’s mines minister said Anglo American Plc risks losing some mining rights after its platinum unit revealed plans to cut the equivalent of 7 percent of world production of the metal and as many as 14,000 jobs.

Anglo American Platinum Ltd. Chief Executive Officer Chris Griffith should have consulted South Africa before its decision, Mines Minister Susan Shabangu told reporters in Pretoria.

“I was with Chris in December and he didn’t even give me a hint,” Shabangu said yesterday in the city. “We were dancing together and now he wants me to collapse with a heart attack.”

Amplats, as the world’s biggest platinum producer is known, will idle four shafts and cut output by 400,000 ounces a year, or as much as 19 percent of its total, the company said.

Mining companies in South Africa are struggling to cope with higher costs as a spate of strikes led to above-inflation wage gains. Producers in the continent’s largest economy idled nine platinum shafts and dismissed 3,332 workers in the second half of last year, the Department of Mineral Resources says.

Amplats “has to take drastic and significant actions to save the company,” Griffith said on a call yesterday. The proposals follow a review of operations announced in February.

Workers refused to go underground at yesterday’s night shift to protest against the job cuts, Lesiba Seshoka, spokesman for the National Union of Mineworkers, said in a phone interview today.

License Demand

Anglo American dropped 3.7 percent to 1,961 pence by the close in London trading, the biggest slump in almost four months, after Shabangu’s comments on Amplats’s parent.

“We can fine them, we can put pressure on them, there are certain things we can take away from them in terms of their rights,” she said. “I don’t issue threats, it’s a fact.”

The country should revoke some Amplats licenses and auction them, the ruling African National Congress said in a statement.

Anglo American takes its social responsibilities seriously and will continue to consult with all of its stakeholders on the proposals in line with the law, said Emily Blyth, a spokeswoman.

“We fully respect Minister Shabangu’s concern about jobs, which we also share,” Anglo’s Blyth said in an e-mailed reply to questions. The company’s “announcement is about creating a viable and sustainable platinum business for the future.”

Loss Forecast

Shabangu’s criticism “is worrying given the Department of Mineral Resources can technically remove Amplats’ extraction permits and give them to someone else if the mines are not being used,” said Peter Attard Montalto, a London-based emerging-markets economist at Nomura International Plc.

Job cuts at the company may include 13,000 in Rustenburg, near the site of a strike at Lonmin Plc last year where 46 died as a result of the worker unrest and police shootings.

Anglo American’s decision to mothball platinum operations in Rustenburg for an undefined period “demonstrates that the company believes it is ethically acceptable to execute a complex form of hoarding of minerals and deprive the country of economic growth, and workers of their livelihoods,” Shabangu said.

Amplats said Jan. 14 it would post a 2012 loss because of walkouts by mineworkers that cut its output by 306,000 ounces.

Reorganization Costs

“The market was expecting that,” Walter de Wet, an analyst at Standard Bank Plc, said of the Johannesburg-based company. “But if you take 400,000 ounces in total over a two-or three-year period, that’s bigger than the market expected.”

Amplats’s reorganization will cost an estimated 3.2 billion rand ($365 million), including 1.2 billion rand on the job cuts, Finance Director Bongani Nqwababa said on the conference call.

The company will invest money in helping to create work in the affected areas, focusing on small-business and housing development, to try to deliver as many new jobs as it cuts.

“Anglo American recognizes the potential impact of these proposals on our people and their communities,” said Cynthia Carroll, departing chief executive officer of Amplats’s parent, which owns 79.8 percent of the platinum producer. Anglo this month appointed Mark Cutifani as CEO to succeed Carroll.

Amplats intends to reduce capital expenditure by 25 percent in the next decade to 100 billion rand, it said. The mining company also cut its annual output target to 2.1 million to 2.3 million ounces from 2.6 million ounces previously.

It plans to reconfigure Rustenburg operations into three mines and will shut the Khuseleka 1 and 2 and Khomani 1 and 2 shafts, reducing output by 320,000 to 350,000 ounces a year.

World platinum supply dropped 9.9 percent to 5.84 million ounces in 2012, figures compiled by Johnson Matthey Plc show.

To contact the reporters on this story: Paul Burkhardt in Johannesburg at pburkhardt@bloomberg.net; Franz Wild in Johannesburg at fwild@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

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