EDITORIAL: Platinum miners at a tipping point (Business Day Live – July 23, 2014)


THE decision by Anglo American Platinum (Amplats) to put some of its Rustenburg mines on sale is hardly surprising. The market and industrial relations turmoil of the past few years was destined to reach a tipping point, and it looks like it has arrived.

In essence, the world’s largest platinum producer has decided to rid itself of its biggest headaches, and hopes someone has the appetite for the pain. The best mines are usually bought, not sold.

After the longest strike on record, driven by the Association of Mineworkers and Construction Union (Amcu), which often demonstrated a poor long-term game, Amplats must have had enough of managing a relationship in which trust seemed impossible to achieve. As counterintuitive as it may sound, the ability of unions and management to manage their sometimes adversarial partnership is a significant factor in staying invested.

The company’s relationship with Amcu is clearly frayed, and it is entirely possible that a way forward in light of further restructuring became a distant prospect.

With the sale of these assets, Amplats also would no longer have to deal with a historical migrant labour problem that requires a lot of funds to mitigate, including the possibility of building houses for all its employees.

Should a buyer be found, this enormous financial commitment would be taken off Amplats’ shareholders, while the new owner would have the responsibility to go through with the initiative. It is one of the more likelier requirements of a revised Mining Charter when the current five-year period comes to an end in December.

Though the sale may solve immediate problems for Amplats, the difficulty of the underlying issues may be underscored by whether or not a buyer can be found at all. Amcu has already made it clear that it will oppose any restructuring that leads to job losses, and it is difficult to see how it would accept this regardless of who the owner is.

In the final analysis, whoever the eventual owners of the discarded assets are, the government and unions will have to reckon with long-delayed difficult decisions that may be politically unpalatable.

The weak platinum market, high input costs and labour volatility have long made restructuring a very real possibility, but, as Amplats found, one that is full of political hurdles.

For the rest of this editorial, click here: http://www.bdlive.co.za/opinion/editorials/2014/07/23/editorial-platinum-miners-at-a-tipping-point