JOHANNESBURG (Reuters) - Miner Impala Platinum (IMPJ.J) will slash about a third of its workforce over two years in one of the biggest rounds of job cuts by one mining company in living memory in South Africa as the platinum industry faces a day of reckoning.
The number of platinum miners employed in South Africa, the world’s largest producer of the precious metal, has fallen from a peak of almost 200,000 in 2008 to 175,000 in the face of depressed prices and soaring costs, fuelling labour and social unrest.
Job cuts are politically sensitive in the country and Mines Minister Gwede Mantashe, a gruff former trade unionist, called Implats’ announcement on Thursday “a clear example of a company that is careless...Their reckless actions add injury to insult”.
Mantashe urged Implats in a statement “to reconsider its actions” but there seems little the government can do, with a clear legal framework companies can follow before they embark on large-scale staff cuts, which includes consultations with unions.
Implats’ planned job cuts are focusSed on its labour-intensive, conventional Rustenburg operations, where the number of shafts will be reduced to six from 11 with production cut to 520,000 ounces per annum from 750,000 ounces.
Its shares were around 4 percent higher in afternoon trade after earlier rising 6 percent, reflecting investor support for the tough moves.
The 13,400 jobs on the line over two years, out of a workforce of about 40,000, is steeper than plans by miner Sibanye-Stillwater (SGLJ.J) to cut 12,600 over three years at acquisition target Lonmin (LMI.L).
Most of South Africa’s conventional platinum shafts are losing money, according to the Minerals Council South Africa, while the handful of mechanised ones are profitable. But an unforgiving geology makes mechanisation challenging in South Africa and is not an option at Rustenburg.
“The only option for conventional producers today is to
fundamentally restructure loss-making operations to address cash-burn and create lower-cost, profitable businesses that are able to sustain operations and employment in a lower metal price environment,” Chief Executive Nico Muller said.
GRAPHIC - South African platinum miners manage to maintain production despite job cuts: reut.rs/2LcJWYr
The company said in March it narrowed its first-half loss by 70 percent to 21 cents per share but warned then that steep cost cuts were on the horizon as it reviewed Rustenburg, which has been a flashpoint of labour violence in the past. The company has not made a profit in six years.
Costs at Implats have been soaring over the last few years, making it the highest cost producer among the country’s three largest platinum miners.
GRAPHIC: Costs rise at the top three producers of platinum - reut.rs/2La44ux
Muller told journalists an alternative would be to sell shafts it plans to close if buyers could be found, but that would not be easy.
Sibanye-Stillwater is in the process of acquiring Lonmin’s nearby operations but is unlikely to have the appetite for further acquisitions as it grapples with the fall-out from a spate of deaths at its gold mines.
Job cuts are tough to swallow in South Africa, where the economy is barely growing and data this week showed the unemployment rate rose to 27.2 percent in the second quarter from 26.7 percent in the first quarter.
“This (the jobs cuts) is disconcerting considering the high unemployment rate in the country,” said Mantashe, a senior figure in the ruling African National Congress who once headed the National Union of Mineworkers.
The typical South African mine worker has around eight dependants, multiplying the social hardships associated with lay-offs in an economy still defined by glaring racial income disparities. Black workers will account for the vast majority of the job cuts.
AMCU, the majority union at Implats, was not immediately available for comment. The union led a five-month strike in 2014 at the operations of the world’s three largest platinum miners, including Implats.
“We are very concerned about the social implications,” Muller said.
He said an initial 1,500 jobs will be cut in the first round, confirming a Reuters report on Wednesday.
Additional reporting by Zandi Shabalala in London; Editing by Alexander Winning and Emelia Sithole-Matarise