JOHANNESBURG (miningweekly.com) – Implementing the R12 500-a-month minimum basic wage demand of the Association of Mineworkers and Construction Union (AMCU) would be “catastrophic” and leave the company with no alternative but to close the entire Impala Rustenburg, Impala Platinum (Implats) CEO Terence Goodlace said on Thursday.
In view of that, Implats remained committed to further discussions with AMCU and was determined to find a solution that would allow better wages and benefits for its employees, preserve jobs and ultimately ensure the survival of the business, Goodlace said at the company’s presentation of results for the six months to December 30.
The company had succeeded in signing wage agreements with the National Union of Mineworkers (NUM) at its Marula mine and at its platinum refineries in Springs.
However, the company remained in dispute with AMCU with the strike at Impala Rustenburg continuing for five weeks.
The total mine shutdown at Impala, primarily for the safety of employees, had cost the company 80 000 oz of platinum production, which at current price equated to R1.7-billion in lost revenues.
“On a personal level, I would like to see all of our employees back at work while we earnestly complete these negotiations,” he said.
“There is no winner in a strike of this nature. Employees have no earnings and the longer we leave underground operations and processing facilities unattended, the worse it will get.”
On offer were an increase in wages and benefits by the industry of R2-billion in the first year alone, at a time when the industry was struggling.
“We can simply not afford this R12 500 basic wage demand as it would more than double the current wage bill and constitute a basic wage increase of more than 150%,” Goodlace said.
In the last six months, Implats generated revenue of R7.3-billion and paid wages of R4-billion, during which time management was paid no additional remuneration.
Consumables and power cost R2.4-billion and R2-billion was invested in future production and to create a sustainable business future, resulting in a net cash loss of R1-billion.
Prolonged strike action would only exacerbate the situation.
“Merely implementing the R12 500 wage demand would be catastrophic and leave us with no other alternative but to close the whole of [Impala] Rustenburg down,” Goodlace said.
Of huge concern was the performance of Impala, which recorded a headline loss of R171-million.
Given the current industrial relations climate, the board had decided not to declare an interim dividend.
“To my knowledge, it’s probably the first time that the company has done this. It just shows the seriousness of the situation,” he added.
With the underground left unattended, rust was setting in and the longer it stands unoperated, the longer it will take to build up.
After the last strike, it failed to build up, though it is currently in a better position from a face-availability perspective and more organised on what would need to be done.
Recovery is expected to be protracted and from one to two months will be required to get the mine up and running again.
In the six months to December 31, Implats posted higher headline earnings, greater revenue and improved production.
Safety was 31% better and cash net of overdraft rose from R275-million to R3.4-billion.
There was better performance from Zimplats, in Zimbabwe, and on the eastern limb of the Bushveld Complex, while the Marula and Two Rivers mines did better.
Mine-to-market production rose 9.2% to 677 300 oz of platinum compared with the corresponding six months a year ago, mainly owing to the build-up of metal and higher volumes at Zimplats, where the second phase of anexpansion project is being ramped up.
Third-party production toll-treated by Impala decreased by 55.3% to 109 200 oz after the company cut deliveries from an insolvent recycling customer.
Consequently, gross refined platinum production decreased by 9.1% to 786 500 oz, which represented a blow to wholly owned subsidiary Impala Refining Services (IRS).
The cost rise was held at a moderate 2.2%, increasing the cost of producing an ounce of platinum to R16 310.
While capital expenditure (capex) fell to R2-billion, or 5.5%, in line with cash preservation, capex continues on the development of the three new shafts.
The financial performance was hit by lower global demand for platinum-group metals, mainly owing to poor European economic growth, high aboveground stocks and the strike.
But this was offset by more production at Zimplats and the weaker rand:dollar exchange rate.
Revenue rose to R16.5-billion, which is R1.4 billion, or 9.5%, higher than in the six months to December 2012, with a 16.1% increase in the palladium price helping to claw back R357-million and lower dollar metal prices being more than offset by the weaker average rand:dollar exchange rate achieved of R10.09, compared with R8.43 in the corresponding period last year.
However, a R550-million impairment of long-term receivables hit IRS.
Cash generated from operations amounted to R1.9-billion, which was down on the R3-billion in 2012.
Cash used as capex, of R2.7-billion, went on shaft building at Impala's 20, 16 and 17 shaft projects.
The rise of cash to R3.4-billion was mainly owing to the convertible bond, which was raised post the comparable six-month period.
Net debt of R4.3-billion was up on the R3.2-billion at the end of June 2013.
Implats said that the quantity of available metal continued to surprise despite the strike and the rapid uptake of the recently launched South African-based platinum exchange traded fund, which by year end had become the largest in the world with more than 900 000 oz taken up in just over seven months.
This combination of mixed fundamental news was sufficient to see a significant sell-off in the futures markets where some 1.8-million ounces of platinum and just over one-million ounces of palladium were liquidated.
Global vehicle sales grew by 3.9% and 83-million cars were sold, the highest number ever recorded.
Platinum and palladium remained in a supply deficit for the year, but were bedevilled by aboveground stocks.
The focus at Impala Rustenburg remains on the development of the three new major shafts. At the end of this reporting period the ramp-up of 20 Shaft was on schedule, and first stoping production had commenced at 16 Shaft.
While the sinking of 17 Shaft is on target, the strike is impacting schedules and management will only be in a position to provide any definitive impact after employees return to work.
In the eastern Bushveld, tonnes milled at the Two Rivers platinum mine rose by 4.2% to 1.66-million and, together with improved processing efficiencies, resulted in an 8.3% increase in platinum production in concentrate to 90 100 oz.
At the Marula platinum mine, also on the eastern limb, tons milled rose 12.6% to 0.93-million, with the operation remaining on track to increase production to 86 000 oz/y by 2016. Unit costs a platinum ounce in concentrate decreased by 4.9% to R18 188 owing to higher volumes.
In Zimbabwe, Mimosa mill throughput increased by 3.6% to 1.24-million tons and platinum production in concentrate amounted to 52 600 oz.