July 25, 2011 / 6:55 AM / 6 years ago

UPDATE 3-Amplats sticks to output goal despite strike threat

* Eight employees were killed in H1

* H1 earnings up as expected on sales, prices

* Potential strike looms, output target at risk (Recasts, adds CEO on strike, platinum price, details)

By Ed Stoddard

JOHANNESBURG, July 25 (Reuters) - Anglo American Platinum , which produces 40 percent of global platinum, is sticking to its tough 2011 output target, despite the threat of strikes from miners demanding more than four times the company pay offer.

Its first-half headline earnings rose 20 percent, as expected, on higher sales and prices. But the unit of global giant Anglo American produced 1.2 million ounces in a tough first half and needs to raise output to meet its full-year target of 2.6 million ounces.

It was hamstrung with more safety stoppages in the first quarter than all last year. Eight employees were killed at work during the first six months of 2011.

“Reaching that target will likely require them to not have to face a labour strike,” said Leon Esterhuizen, an analyst at RBC Capital Markets in London.

Amplats plans talks this week with the National Union of Mineworkers, which is demanding a 20 percent wage hike, well above the company’s offer of 4.6 percent and also higher than South Africa’s 5 percent inflation rate.

“By implication, it could mean they will settle at relatively high wage increases -- probably around 10 percent,” Esterhuizen said.

Safety issues have also strained Amplats’s relations with its workforce.

Chief Executive Neville Nicolau told Reuters: “We’re confident that our collective bargaining process will come to a positive resolution”.

“Our strategy ... is to get back whatever we have given in wages in the form of productivity increases,” Nicolau said.

STICKING TO ITS GUNS

The company said its forecast remains unchanged at 2.6 million ounces of platinum in 2011 despite the impact of the Japanese earthquake, concerns about European sovereign risk and monetary policy to contain inflation in China.

Nicolau said at a presentation the company was sticking to its forecast of platinum fetching an average of $1,800 an ounce for the remainder of the year.

He told Reuters that market fundamentals meant “a price of closer to $2,000 an ounce would be more appropriate”, but the company’s forecast remained at $1,800.

Spot platinum on Monday was down 0.2 percent at $1,789.49 an ounce after rising 2.6 percent last week.

Headline earnings rose 20 percent to 1,236 cents in the six months to end-June, compared with 1,028 cents a year earlier. It declared a dividend of 1.3 billion rand ($192 million), or five rand a share.

The company’s long battle with rising costs continues, compounded by higher fuel and power prices, and it said cash operating costs rose 13 percent to almost 13,000 rand per refined ounce.

Amplats said it was targeting a unit cost of around 12,000 rand per refined ounce but a higher personnel bill would make this difficult.

Amplats shares closed down 0.2 percent at 600 rand on Monday, underperforming a 0.2 percent uptick in Johannesburg’s Top-40 index . ($1 = 6.782 South African Rand) (Editing by David Dolan, Jon Herskovitz and Will Waterman)

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