JOHANNESBURG (Reuters) - Anglo American (AAL.L) remains committed to its South African platinum mining business but only if it pays its way, the group’s new chief executive said on Thursday.
Anglo American Platinum (AMSJ.J), the world’s largest producer of the precious metal, fell to a loss last year because of low prices and strikes in the country, which sits on four fifths of the world’s known platinum reserves.
The company has been trying to hammer out a restructuring plan for the business but fierce government and union resistance led it to rein in plans for 14,000 job cuts to just under 7,000. The company will give a further update on the process on Friday.
Asked whether Anglo American was committed to staying in South African platinum, CEO Mark Cutifani told Reuters: “Yes we are..., as we are for all of our commodities. But if they don’t deliver, they won’t stay in the portfolio. Nothing is sacrosanct.”
The nation’s mining sector was rocked last year by violent, wildcat strikes rooted in a union turf war that killed dozens of people, cost billion of dollars in lost output and triggered credit downgrades for Africa’s largest economy.
More strikes in the gold sector could begin this weekend as a militant and restive workforce seeks pay hikes of up to 150 percent, which the companies say they can ill afford.
Cutifani said investors were “sick” of the bad news coming out of South Africa, a trend that had destroyed the value of mining shares in the resource-rich country.
“Investors have South African fatigue. If you look at the series of bad news stories that have come out of South Africa since 2011 it really has weighed on share prices,” said Cutifani, who is also the president of South Africa’s chamber of mines.
“The mining index has underperformed the Johannesburg All-share index. We’ve destroyed value. Whether it’s London, whether it’s New York, whether it’s Timbuktu, they’re all sick of the bad news coming out of South Africa,” he said.
Since the start of 2011, Johannesburg's mining index .JMINI has shed 18 percent against a gain of 32 percent on the All-share index .JALSH, which has scaled a series of record highs this year. Anglo American Platinum shares have tumbled 40 percent in the same period.
Cutifani knows South Africa’s mining industry well, having been the chief executive of Johannesburg-based AngloGold Ashanti (ANGJ.J) - which is not part of the Anglo stable - before assuming his new position at the London-listed global mining company.
He said about 50 percent of South Africa’s gold and platinum shafts were “underwater” at current prices and he feared a new round of stoppages would hit jobs in a country with an unemployment rate of over 25 percent.
“If we do end up going into strikes, I do fear for jobs and shafts,” Cutifani said.
With wage talks deadlocked, more strikes seem likely.
The National Union of Mineworkers (NUM) will give gold producers on Friday 48-hours’ notice of its members’ intention to strike over deadlocked wage talks, a source with direct knowledge of the matter said on Wednesday.
“I hope we are able to salvage something at the 11th hour,” Cutifani said.
Additional reporting by David Dolan; editing by Tom Pfeiffer