Anglo American to restructure its platinum division

Following the appointment of a new CEO, Anglo American has also announced a massive shake up of its platinum business.

The miner originally announced a review of its platinum business last year, with chief of the division, Chris Griffith, explaining that it was in a bid "to address the structural changes that have eroded profitability over time".

"The structural changes that we've seen in our business have come about as a result of very substantial increasing costs above inflation. We've seen those cost increases come from increasing mining depths, decreasing grades from mining more UG2, increasing capital intensity and substantial increases above inflation of wages and of electricity.

"In addition to these huge cost pressures, we've seen a lower demand for platinum than we had previously anticipated, lower over the last few years but also lower going forward than we had previously anticipated."

The review also came at a time that South Africa's platinum sector was shaken by a continual worker unrest, which strangled the country's output and left many workers injured or killed.

However the miner stated that in no part did this drive the need for rapid change, Griffith saying that "we announced in February of 2012, much earlier than the strike action commenced, that we would be reviewing our platinum business. We've also made it clear for some time that our platinum business has been under serious economic pressure".

"Although it's clear that the strike action has put additional economic pressure on the company, the strike action was not the cause of the platinum review."

Griffith stated that one of its first acts will be to close its unprofitable mines, slashing production rates and jobs.

"What that means for us is that our company will reduce the amount of platinum that we produce to about 2.1 million to 2.13 million ounces per annum.

"The majority of the reduction will come from the Rustenburg area where we previously had five operating mines. We'll be reducing those five operating mines to three operating mines and produce in the Rustenburg area about 320,000 to 350,000 ounces on a sustainable basis going forward. This is a reduction from the 540,000 ounces that we've been producing over the last few years.

He added that "in line with the reduced mining footprint, the smaller amount of ounces that are produced, this will then require a smaller processing footprint. And as a result of that we'll be shutting our Waterval UG2 concentrator in the Rustenburg area and putting on care and maintenance our Number 2 smelter".

Anglo American will also sell off its Union mine.

"We believe that the Union mine will be of greater value under different ownership particularly when compared to our own portfolio of growth opportunities.

"For that reason we plan to sell the Union mine at the right time. In the interim phase we will be reconfiguring the Union mines. We will be stopping Union North declines and combining the Union North and the Union South into one mine," he said.

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