Implats embarks on review after strike

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Terence GoodlaceImplats Indepedendent Newspapers. Impala Platinum chief executive Terence Goodlace. Photo: Simphiwe Mbokazi.

Johannesburg - World number two platinum producer Impala Platinum said on Thursday it had launched a strategic review that could include a shift to mechanisation in the wake of a five-month strike that hit its Rustenburg operations in South Africa.

The company also warned of a tough time ahead on the cost front as it struggles to ramp up production after the strike and rolls out pay increases of up to 20 percent.

“Costs in 2015 are not going to be pretty,” chief executive Terence Goodlace said in a conference call with journalists.

Implats' shares fell more than 4.5 percent, making them the biggest decliner on Johannesburg's Top-40 index, which was down around 0.4 percent.

The results of the strategic review will be unveiled in December and Goodlace said it might not entail job cuts at Rustenburg, where he said “we don't need less labour, we need more labour” as it strives to expand the operation.

But he said the review would also be looking at new technology and boosting productivity in the labour-intensive shafts around Rustenburg, which rely heavily on a poorly-educated migrant workforce drawn from rural areas.

“We are looking at modernising the workplace and will mechanise where we can,” Goodlace said.

Mechanisation almost always refers to the replacement of human labour with machines and so it would ultimately mean a reduced workforce.

But the platinum belt around Rustenburg, with its narrow seams, presents geological and engineering challenges to mechanised mining methods.

A painful restructuring is expected in South Africa's platinum sector in large part because of the strike by the Association of Mineworkers and Construction Union (Amcu), the longest in the nation's history, which ended in June.

Prices for the precious metal used for emissions-capping catalytic converters in automobiles also remain depressed.

Implats' rivals Anglo American Platinum and Lonmin were also hit by the strike and Amplats has said it plans to sell or spin off some of its mines.

Lonmin said this week it had not yet decided on the size and shape of any restructuring.

Industry sources have told Reuters the company is looking at a blueprint which will include the shutdown of some shafts and lay offs.

Job cuts are a thorny issue in South Africa, where the unemployment rate is close to 25 percent, and in the platinum belt could trigger strike calls by Amcu, whose members have downed tools in the past to protest against planned lay-offs.

EARNINGS, PRODUCTION DOWN

Implats lost 320,000 ounces to the strike, which would be worth around $450 million (R4.8 billion) at current spot prices.

Group production fell 25 percent to 1.178 million ounces.

Goodlace said that, as the company ramped-up operations, it expected to produce 250,000 ounces at the strike-hit Rustenburg shafts in the six months to the end of December, compared to 390,000 ounces last year - underlining the impact of the stoppage.

Headline earnings per share slumped 74 percent to 86 cents from 329 cents, in line with guidance Implats provided to the market earlier this month.

But the company's balance sheet held up as it benefited from a weaker rand currency against the US dollar, which lifts platinum's price in local terms, and reined in costs to preserve cash.

Its net cash at the end of the year stood at 4.3 billion rand compared to a restated 4.1 billion rand at the end of its 2013 financial year. - Reuters


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