Agitated investors are applying the screws to mining industry
American Platinum chief executive Chris Griffith told the Joburg Indaba that investors were no longer interested in seeing companies chasing deals that destroyed capital.
“Investors are sending a message. They're critical of us and our ability to generate returns. They do not want us to generate volumes, they want us to generate returns,” said Griffith.
Griffith said the company was asked a lot of questions on whether it was looking for additional mergers and acquisitions and whether it would move to invest outside of South Africa.
“The best resources for platinum group metal (PGM) are in South Africa, We are a company that is generating good returns. While we are getting enquiries, we are not getting pressure to move outside of South Africa,” he said.
South Africa accounts for 80 percent of global platinum supply, and a number of marginal and loss-making mines have been shut in the past few years on depressed metal prices in an environment characterised by oversupply and high input costs.
The PGM price environment has however rallied in the past six months, driven by higher palladium and rhodium prices.
Nico Muller, chief executive of Impala Platinum, said since its inception, the PGM industry had been driven by confidence that demand would increase into infinity.
Muller said the industry burnt cash in developing new supply with investment jumping from R8 billion to R25bn until the 2008 financial crisis.
“In South Africa, our balance sheets are forcing us to not support loss-making assets,” Muller said, adding no one wanted to support loss-making mines.
Sibanye-Stillwater became the latest company to announce restructuring plans at its Marikana mines to address the ongoing financial losses experienced at these operations with certain shafts having reached the end of their economic reserve lives.
The company said last week it would enter into consultations with relevant stakeholders in terms of Section 189A of the Labour Relations Act regarding the restructuring of its Marikana operation, previously owned by Lonmin.
Sibanye-Stillwater, which merged with Lonmin in June, said about 5270 jobs, consisting of about 3904 employees and 1366 contractors, were expected to be lost due to planned restructuring at its Marikana operation.
Muller said shareholders were demanding a prudent approach to growth. “Acquisitions have been a sensitive topic. Shareholders are now in favouring lower risk lower-cost opportunities."
Labour comprises around 60 percent of costs in mining.