Anglo Sees ‘Tough Call’ on Platinum If Profits Don’t ImproveAndre Janse van Vuuren
Anglo American Plc’s chief executive officer said he will close or sell more mines at the company’s South African platinum unit if profits don’t improve next year.
Anglo American Platinum Ltd., the biggest producer of the metal, is reducing staff, idling three shafts and cutting annual output by 350,000 ounces to revive earnings growth. It will fire about 3,300 workers, and 3,600 will be redeployed or voluntarily quit, the Johannesburg-based producer said today in a statement.
“I’d expect that we can see the turnaround and that we can see it on the ground next year,” Anglo American CEO Mark Cutifani said yesterday in an interview in the city. “At the end of the day, if we have shafts or operations that don’t make money, then we’ll make the tough calls.”
Platinum producers in South Africa, which has the largest known reserves, are seeking to curb costs after strikes last year led to above-inflation wage increases while prices dropped. Amplats, as Anglo American’s Johannesburg-based platinum unit is known, needs to deliver a 15 percent return on capital, in line with the rest of the group’s businesses, Cutifani said.
“If operations bleed cash, then they will be closed or sold,” said Cutifani, who took over as CEO of Anglo American in April. “If they are not delivering the returns but they are creating cash, they certainly wouldn’t be closed, but they would be considered for sale.”
South Africa, which makes up 45 percent of Anglo American’s sales, should complete a review of its mining taxes as quickly as possible, Cutifani told a Johannesburg conference yesterday. The ruling African National Congress in December rejected calls in the country to nationalize mines in favor of higher taxes.
“We must do this quickly as uncertainty is the greatest enemy in the minds of our important long-term supporters,” said Cutifani, also president of South Africa’s Chamber of Mines.
Anglo American has identified 60 percent of the savings it is seeking to achieve from its “commercial” activities and early-stage projects, the CEO said in the interview.
It plans to raise annual cash flow by $1.3 billion in 2016, by saving $300 million from capital allocations on early-stage projects, about $500 million from “commercial” operations and $500 million from organizational changes, Cutifani said in July.
Anglo American can cut overhead costs 20 percent by erasing duplication at corporate offices and operations, the CEO said. It will report in December how savings will be made, he said.