UPDATE 2-Implats aims to cut jobs at S.African Marula mine

Fri May 27, 2011 5:22am EDT

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* Operation staffed for higher output targets * Implats has a 73 percent stake in operation

(Adds analysts, union comment, background)

By Ed Stoddard and Yumna Mohamed

JOHANNESBURG, May 27 (Reuters) - Impala Platinum (IMPJ.J), the world's second largest platinum producer, said on Friday it aimed to cut staff at its Marula subsidiary in South Africa because of a persistent failure to meet production targets.

It said in a statement job cuts would be needed since the operation is staffed for higher production levels which will not be met. It said it would not reach its target of 95,000 ounces of refined platinum per year by 2013 but annual output would remain at 70,000 ounces.

Its share price briefly pared gains on the news but then bounced back. At 0840 GMT it was trading two percent higher at 186.85 rand compared to a 0.88 percent increase on the All-share index .JALSH.

Implats said Marula "has continued to underperform against the operational targets that management has set."

The company may face resistance from unions on the job cuts front as labour relations in South Africa are strained and the annual round of wage talks are kicking off.

"We will really not be welcoming any job cuts as a union especially when the focus of the entire country is on job creation," said National Union of Mineworkers (NUM) spokesman Lesiba Seshoka.

But he said the union would wait for the start of the consultation process which is required by law.

Impala has a 73 percent stake in Marula.

Analysts said such a move on jobs was needed if production targets were not being met. "They are getting back to basics on the mining side, re-positioning the mine for the future," said David Davis, an analyst with Standard Bank Group Securities.

Abri du Plessis, chief investment officer Gryphon Asset Management, said:

"It's important for mines to keep profitability. While it is unfortunate when jobs have to be cut, you can't fault them for making a prudent business decision. It is the right move."

Miners are keen to take advantage of high commodity prices by boosting production but are equally keen on containing spiralling costs in South Africa, which include rapidly rising wages and power prices.

The NUM is demanding a 14 percent pay rise for its members at Implats, far above inflation which was 4.2 percent in April [nLDE7431OE].

Last year, the union and Implats agreed on a 7.5-8 percent rise in wages after talks which took weeks and only just managed to avoid a strike.

The platinum price XPT= on Friday was trading about one percent higher at $1,784 an ounce. (Additional reporting by Olivia Kumwenda)

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