Amplats, Minas Rio expected to be Cutifani’s biggest headaches at Anglo – by Leandi Kolver (April 19, 2013)

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Analysts in the South African mining industry believe that new Anglo American CEO Mark Cutifani’s biggest challenge might be platinum mining company Anglo American Platinum (Amplats), based on the recent volatility of the sector, plagued by violent strikes and uncertainty.

The significantly overbudget Minas Rio iron-ore project, in Brazil, is a close second. Cutifani replaced former Anglo American CEO Cynthia Carrol on April 3. Mining Weekly reported in January that Liberium Capital analyst Ben Davis had said that the challenges arising from the “structurally defunct” Amplats and the continuing capital cost increases at the Minas Rio project had no easy solutions.

South Africa’s Public Investment Corporation said that Anglo American’s “main issues” centred on capital allocation, project management and operational challenges, which, taking Cutifani’s experience into consideration, could be dealt with.

Amplats posted its first loss last year, with the loss partly stemming from flat metal prices and cost increases of more than 15% a year and from illegal strikes rooted in a turf war between members of the Association of Mineworkers and Construction Union and the National Union of Mineworkers.

Amplats confirmed that, as a result of the illegal industrial action and the subsequent ramp-up period of its mines that started in November, total lost refined platinum equivalent production, including that from joint ventures and associates, amounted to 273 000 oz during the fourth quarter of 2012, of which 82 000 oz was lost during the ramp-up period, Mining Weekly reported in January.

Mining Weekly also reported that Amplats was set to embark on a restructuring programme after a year-long review of its operations had revealed several unsustain-able operations.

The group said it would reconfigure its Rustenburg operations into three mines – with processing operations – and sell off its Union mines “at the right time” to increase value under different ownership.

“The platinum business has attractive underlying fundamentals, but we are facing tough decisions in trying to restore profitability to our operations. We must evolve to align the business with our expectations of the platinum market’s long-term dynamics and address the structural changes that have eroded profitability over time,” said Amplats CEO Chris Griffith.

Amplats proposed to reduce production at its Rustenburg operations to between 320 000 oz and 350 000 oz across three operating mines, while placing its unsustainable, high-cost Khuseleka 1 and 2 shafts and the Khomanani 1 and 2 shafts on long-term care and maintenance.

Griffith said this would slash the com- pany’s production by about 400 000 oz/y, with a baseline production target of 2.1-million to 2.3-million ounces a year.

The group would also consider whether to shut down its Waterval upper group two concentrator and No 2 smelting furnace as it aligned its processing operations with the restructured operations.

Amplats also said it would halt mining activities at the Union North Declines, combine the Union North and South shafts into one operation and place the Mortimer Merensky concentrator on long-term care and maintenance as it prepared to sell the operations.

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