Mining firms deny underselling

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IOL BR Platunum  4099 Independent Newspapers Mineworkers from Amplats' Khuseleka mine near Rustenburg in North West stand in a queue waiting to be handed food parcels. File picture: Boxer Ngwenya

Johannesburg - The R12 500 monthly wage demand by the Association of Mineworkers and Construction Union (Amcu) could already have been met if the three big platinum producers had not sold their platinum group metals (PGMs) below global market prices, the Alternative Information & Development Centre (AIDC) said yesterday.

Anglo American Platinum (Amplats), Impala Platinum (Implats) and Lonmin denied the allegations and dismissed the analysis as simplistic.

The Cape Town-based NGO said the underselling had resulted in a forfeiture of potential revenue of more than R15 billion over 10 years. This was not only a forfeiture of the revenue to the companies and their shareholders but represented a loss in tax revenue for the government and for possible investment in South Africa.

Brian Ashley, a director of the AIDC and an Amcu negotiator, said: “We are not alleging any illegal activity of the three companies, Amplats, Implats and Lonmin. We are looking at [wage demand] affordability.”

The AIDC has been commissioned by the Marikana commission of inquiry to investigate the financial position of Lonmin before 2012, in respect of its capacity to meet the wage demands of its workers.

Ashley said during the course of this investigation, the AIDC had found a peculiar trend, that Lonmin was for the past 10 years “systematically selling its metals” below the global market prices.

The research was conducted by Dick Forslund, a senior economist at the AIDC who consulted the market prices for PGMs, including the historic average prices in dollars an ounce, which are reported on websites.

He said marketplaces visited were the London Platinum and Palladium Market, which sets the daily fix, and Johnson Matthey. The period examined was from 2004 to last year. Other sources were the companies’ annual reports and their sustainable development reports.

The AIDC said the sum of seemingly forfeited revenues between 2004 and last year amounted to the equivalent of R1.9bn for Lonmin and about R2.8bn for Implats.

It said the difference between the achieved price and the average global market price was not very large, often just a few percent below or even less than 1 percent.

It was the scale of production, the number of years, the lower price achieved for all or most of the PGMs sold and the high price of these metals that accounted for the accumulated billions of forfeited rands.

Forslund said the pattern of “selling too cheaply” appeared not to be the result of so-called forward selling. Lonmin says it does not engage in forward contracts for PGMs.

Forslund quoted Amplats’s 2013 report as stating: “The ability to place forward contracts is restricted owing to the limited size of financial markets in PGMs.”

The 2007 annual report of Amplats is quoted as saying: “Anglo Platinum has not entered into forward contracts, nor contracts of a similar nature, to reduce the effects of metal price volatility.”

Forslund said it would be important for the “cartel” to reveal who its customers were, to assure the public that they were not selling to firms linked to themselves.

Charmane Russell, a spokeswoman for the three companies, said: “The producers note comments made by the AIDC. Regrettably, the AIDC’s inferences have been drawn from extremely simplistic sales calculations. They do not seek to deal with the fundamental issue on hand, which is about affordability.”

Amplats says on its website that it has long-term contracts with seven companies listed on various stock exchanges to supply them with PGMs.

Sue Vey, a spokesman for Lonmin, said when these allegations were first made by Ashley at the Cape Town Press Club last week and subsequently repeated by the AIDC, the company had issued a statement saying that these allegations were without substance and completely false.

“As a public company, Lonmin’s financial statements are subject to regular and thorough auditing processes by an independent auditor, and are submitted and carefully assessed by South African tax authorities. The financial statements and accounts are readily available at www.lonmin.com. We will not therefore be answering any further questions on the matter,” she said.

Johan Theron, a spokesman for Implats, said the company had responded to these unfounded and unproven allegations in the strongest possible terms and it viewed the inflammatory and unsubstantiated accusation in a serious light.

Theron said Implats had consistently sold metal at a premium to the market over many years. “As you would know, all metal sales and taxation activities are subject to careful assessment by the company’s external auditors as well as the tax authorities.” - Business Report



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