Anglo to Move Away From Labor-Intensive Platinum Mining – by Firat Kayakiran (Bloomberg News – April 24, 2014)

Anglo American Plc (AAL), the world’s biggest platinum producer, plans to switch to mechanized open-pit mining from labor-intensive underground output, as its South African operations remain crippled by a three-month strike.

The company aims to make the transition in five to 10 years to improve productivity, Chief Executive Officer Mark Cutifani said at the company’s annual general meeting in London yesterday. The change would have to be carried out in a way that’s “sensitive to its social ramifications,” he said.

A third day of talks between producers and union officials ended yesterday without a resolution or plans for further negotiations. Output at Anglo American Platinum Ltd. (AMS) dropped 39 percent in the first quarter because of the walkout over pay, Anglo said yesterday. The company reduced its forecast for full-year production by as much as 13 percent, with more cuts possible if the deadlock persists.

Cutifani “is bang on,” Paul Gait, an analyst at Sanford C. Bernstein Ltd. in London, said in an e-mail. “The only way to get safe platinum is to get people out of the stope. Labor inflation in South Africa is running far faster than productivity gains in underground mines. That basically makes it a non-viable long-term option.”

More than 70,000 members of the Association of Mineworkers and Construction Union have been on strike at the world’s three biggest platinum producers since Jan. 23, the country’s longest mining-industry stoppage, according to the Chamber of Mines.

The strike has cost the companies about 14.5 billion rand ($1.4 billion) of revenue collectively and employees 6.4 billion rand in wages, the producers said on a joint website.

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