Implats: Platinum strike could last much longerComment on this story
London - The crippling four-month miners strike in South Africa could last much longer, the chief executive of Impala Platinum said, adding that feedback from initial court-mediated talks with the world's biggest producers and main mining union was lukewarm.
South African platinum miners Anglo American Platinum (Amplats), Impala Platinum (Implats) and Lonmin have been battered by a strike over wages that began on January 23 and has cost the trio collectively almost $2 billion in lost revenue.
The stoppage has also turned increasingly violent, with the National Union of Mineworkers reporting one of its members was stabbed to death on his way to work at Amplats, the fifth such killing in the past two weeks.
The talks, aimed at ending South Africa's longest-ever mining dispute, started on Wednesday and should last for up to three days.
“So far as hope is concerned, the feedback that I have got was lukewarm from yesterday but they are going back into session today,” Implats chief executive Terence Goodlace, in an exclusive interview with Reuters, said about the talks.
Asked how long the strike could last, Goodlace said: “It's almost like how long is a piece of string. I suppose the proper answer to it is that it could go on for much longer because we are so far apart between the two parties... My expectation is they will probably go on for longer.”
Platinum prices hit their highest since September last year at $1,493.90 per ounce after Goodlace's comments.
The strike has cut about 40 percent of the world's platinum supply and is having a massive impact on losses, Goodlace said.
Implats, the world no. 2 platinum producer, is losing 60 percent of its gross output and due to the reduced production it was forced to cut supply to clients to 40 percent of demand on average, since the beginning of May.
Priority is being given to its local customers.
“All of the people doing autocatalyst business in South Africa will get what we produce first and then the balance will be looked at with other (off shore) customers,” Goodlace said.
Implats has taken measures to cut costs by 70-75 percent as the strike drags on: it has cut power and reduced underground work to the bare minimum in strike-affected areas.
It also sent some employees who wanted to come back to work on forced leave.
Once the strike is over, it will take the company at least three months to get back to full production as it needs to retrain workers, take them through medical checks and carry out works to ensure the affected mines are safe to work in again.
“One of the big risks for us is what is the working capital we require in building back up to full production. That can expose the company quite significantly because we are not going to get any revenue as we refill our pipelines ... because everything is being drained,” Goodlace said.
He also said the company was unlikely to pay a year-end dividend given the damage on lost revenue caused by the strike.
Implats had reported an 11 percent rise in half-year profit in February, having recovered from strikes in 2012.
Due to the latest strike, Implats has put the development of three news replacement shafts in the Rustenburg area no hold.
“There is a hiatus because of the strike. Once we have got a sense of when we get back to production ... we'll make a decision on how fast or slow to build up the new shafts,” he said. “There might be a scenario where we slow down capital even more.”
In Zimbabwe, where Implats operates through its subsidiary Zimplats, the country's largest platinum producer, the company was working to re-establish a pre-existing base metals refinery, which would mainly process nickel and copper and should cost slightly more than $100 million, Goodlace said.
Zimbabwe, which has the world's largest platinum reserves after South Africa, has ratcheted up the pressure on companies mining in the country to add more value locally.
The government has given platinum producers a deadline of two years to set up a refinery or face a ban on unrefined exports.
Some industry insiders however argued the amount of platinum produced in Zimbabwe is too small to make construction of a $2-3 billion refinery economically viable and say there is not enough energy there to run a power-hungry plant smoothly.
In March, Zimbabwe said it was considering a proposal from Impala for the construction of a platinum refinery.
Asked about this plan Goodlace said: “It is a significant investment and you have to take the context of the platinum industry into account ... You have to take logical steps. You have got to do base metals first.” - Reuters