* Labour leaders threaten strikes after plan
* Khuseleka, Khomanani mines mothballed, Union for sale
* Platinum price higher than gold for first time in 10
* Amplats, Anglo shares fall after government concern
By Ed Stoddard
JOHANNESBURG, Jan 15 Anglo American Platinum
plans to mothball two South African mines, sell another
and cut 14,000 jobs, risking a repeat of last year's violent
strikes as the world's largest producer of the precious metal
struggles to stem losses.
Reaction to the long-awaited plan from Amplats on Tuesday
was swift, with the government accusing the company of betraying
its trust and a labour leader threatening strikes across its
South African operations if the closures go ahead.
Improvements at Amplats, 80 percent owned by mining group
Anglo American, are critical to the fortunes of its
underperforming parent. In 2006, Amplats made up a quarter of
Anglo's operating profit, but that has dwindled as the platinum
firm struggles with rising costs and weak prices.
Investors welcomed the plan to cut output by almost a fifth
- or 400,000 ounces a year - and begin a shift to profitable
production as the first step in Anglo's own recovery.
But a labour leader promised to fight any attempt to put
mines under "care and maintenance", when output is halted but
they are maintained enough to be reopened in future.
"If they put any shaft on care and maintenance, all of the
operations will go on strike. Nothing like this will be
allowed," said Evans Ramogka, labour leader in Rustenburg.
Most of the cuts will fall in Rustenburg, in South Africa's
platinum belt about 120 km (70 miles) northwest of Johannesburg.
Rustenburg was the centre of last year's strikes when about 50
people died, including 34 shot dead by police at rival platinum
producer Lonmin's Marikana mine in August.
Analysts cautioned that the size of the headline reduction
could be overstated, as it was from planned production - a level
Amplats has not reached for several years. Against market
forecasts of output, it may be closer to 300,000 ounces, only a
little above most analysts' expectations.
"I would expect discontent among unions, among workers, but
Amplats has drawn a line in the sand," said analyst Des Kilalea
at RBC Capital Markets, adding that other producers would be
watching to determine their own next steps.
The price of platinum rose over 2 percent to 3-month
highs after the announcement, leaping past gold for the first
since March last year, on tighter supply in South Africa, site
of 80 percent of known platinum reserves.
Anglo shares fell more than 4 percent after the government
expressed its concern. Mines minister Susan Shabangu said
Amplats had "betrayed the trust" between the company and
Shabangu contradicted Amplats' claims that it had engaged
with the government: "There was never a consultation. They've
come up with their own plan, finalised their plan and told us,"
she told a news conference.
Amplats said earlier this week it would sink to a full-year
loss because of last year's wildcat strikes in many of South
Africa's platinum and gold mines. The unrest was rooted in a
union turf war and aggravated by income disparities within the
industry and low wages for dangerous work.
The 14,000 affected jobs amount to almost a quarter of
Amplats' workforce including contractors, and three percent of
South Africa's mine labour force. If the jobs are cut, the
losses would set back government efforts to cut unemployment
from 25 percent.
Support for the ruling African National Congress (ANC) is
waning among miners before a general election in 2014. The
National Union of Mineworkers (NUM), a base of ANC electoral
support, is rapidly losing members to the militant Association
of Mineworkers and Construction Union (AMCU) and other groups.
Amplats - which will also reduce smelting capacity and
review marketing arrangements and joint ventures - said it would
try to replace the jobs through supporting housing and small
business initiatives in the Rustenburg area.
Shabangu dismissed the efforts - which will cost Anglo 470
million rand ($53 million) out of a total restructuring cost of
3.8 billion - as a "public relations exercise", echoing
sceptical comments from angry mineworkers.
"Fourteen thousand jobs? In which sector? Brick-laying?" she
The ANC also attacked the restructuring as "cynical and
dangerous" and said it justified a review of mining licences
across the industry, still largely controlled by the white
minority 19 years after the end of apartheid.
SAVING THE COMPANY
Amplats said the cuts are critical for its survival: "This
is not a knee-jerk reaction to unions, this is not a short-term
response to an economy that may improve in a month or two's
time," Chief Executive Chris Griffith told reporters.
"The company has to take these drastic and significant
actions to save the company and the employment of an additional
45,000 people," he said.
Even by the standards of the struggling platinum industry,
the company's profitability is weak. Its operating margin over
the last 12 months was 7.3 percent, compared to a 13 percent
average of seven of its industry rivals, Reuters data showed.
Platinum's labour-intensive nature has intensified the
storm for Amplats, which faces rising wages, power and input
costs. At the same time, demand has sagged for a metal used in
making diesel cars, sales of which are falling in Europe.
Amplats said on Tuesday that two of its mines in Rustenburg
- Khuseleka and Khomanani - would be put on "long-term care and
maintenance" because of their costs.
The group will also sell its Union mines "at the right
time". Griffith said the company had not yet talked to potential
buyers or had interest expressed by other companies.
The proposed overhaul, which will be subject to two months
of consultation with unions and others, will have to be pushed
through by Anglo American's new chief executive.
Mark Cutifani, who takes over in April, has defended
investing in South Africa but is a pragmatist with operational
experience who improved returns at fellow mining company
"This might not be easy to implement, given the militancy of
the workforce, but it looks sensible," said one of Anglo
American's 20 largest investors. "The platinum market is likely
to see more balanced supply/demand when this has gone through."