ANGLO American Platinum (Amplats) warned of R14bn of impairments to mines where it has halted production or development, and for investments in other platinum companies.
Amplats, the world’s biggest producer of platinum in which Anglo American owns an 80% stake, said its headline earnings, which strip out those impairments, would be at least 20% or R157m lower than the previous year’s profit of R786m that had been dragged lower by a five-month wage strike action at its Rustenburg mines.
Contributing to falling earnings was a R900m payment for retrenchments, with 2,720 people including 420 managers and senior staff, leaving Amplats during the year from Twickenham, Rustenburg, Union and other mines in the group.
Amplats forecast that it would save R200m in labour costs next year. CEO Chris Griffith said earlier this year big projects would be put on hold.
Amplats has agreed a sale of its Rustenburg mine to Sibanye Gold and has impaired the mine by R4.6bn. It plans to dispose of Union next year. It will exit its Pandora joint venture with Lonmin and the Bokoni venture with Atlatsa Resources.
The Bokoni mine is to shed 2,500 jobs by the end of this year as it shuts loss-making production. Amplats, which has a 23% stake in Atlatsa and 49% of Bokoni, has written off R1.4bn in those interests and R2bn in loans to Atlatsa and its black economic empowerment shareholder.
“Atlatsa’s ability to service its debt obligations in the context of the current market conditions, where Bokoni mine is its main source of funding, is doubtful at current price levels,” it said.
Amplats put its Twickenham mine, which it is converting to a mechanised mine from a labour-intensive operation, into care and maintenance after suspending development work there, resulting in the loss of 550 jobs. The carrying value was halved to R2.2bn. The development of a shaft at Tumela mine has been stopped.
The deep changes made at Amplats to become a more mechanised, profitable company are part of Anglo’s broader restructuring strategy outlined on Tuesday, with CEO Mark Cutifani outlining plans to cut the diversified company’s portfolio to between 20 and 25 of its best mines, down from 55 assets through sales and closures.
One analyst said it appeared iron ore featured at the bottom of Anglo’s list of priority assets during a presentation to Anglo’s investors on Tuesday.
Kumba Iron Ore, 70%-owned by Anglo, was forced to change its mine plan for the second time in two years to cope with a weak iron ore price that shows no signs of improving because of high output levels of the steel ingredient by the world’s top three iron ore miners and subdued demand from China.
Anglo chief financial officer Rene Medori warned that Kumba’s debt covenants would come under pressure next year because of lower iron ore earnings, but he declined to give any further details, citing confidentiality agreements.
At Sishen, Kumba’s flagship mine and the biggest iron ore mine in SA, the production forecast for next year was lowered by 10-million tonnes to 26-million tonnes as the new mining plan was implemented to deliver ore to Saldanha port at $30/tonne.
“Our industry is under tremendous pressure, with the market now pricing in a more muted trend for the iron ore price over the medium to longer term,” said Kumba CEO Norman Mbazima.
“This is driven mainly by the expectation that supply growth will remain strong, against the backdrop of an ever more cautious outlook on China’s economic growth trajectory,” Mr Mbazima added.
Kumba will lower its costs by removing almost 100-million tonnes less of waste rock to expose the iron ore at the ageing Sishen mine.