Tuesday October 8, 2013, 4:15am PDT
By Charlotte McLeod - Exclusive to Platinum Investing News
Anglo American Platinum (OTCMKTS:AGPPY), the world’s largest platinum miner, is in trouble again.
Platinum Investing News last looked at the company midway through July, when it was knee deep in turmoil caused by wildcat strikes at its Thembelani and Khuseleka platinum mines, both located in Rustenburg, South Africa. At the time, unhappy workers were demanding the reinstatement of 19 officials from the Association of Mineworkers and Construction Union (AMCU) and pushing for Amplats to suspend planned job cuts; they were also hoping to force Amplats to shut the National Union of Mineworkers (NUM) out of its operations.
While those strikes have since ended, workers’ dissatisfaction about Amplats’ impending job cuts — which would see 3,158 workers retrenched even as Amplats retains contract workers — has not been resolved. As a result, on September 27, over one-fifth of the staff at Amplats’ mines near Rustenburg did not show up for work. The action is legal, and, according to Reuters, is “in keeping with a change of tactics by AMCU.” The NUM is not participating in the strike, though a union official told Reuters its members are being intimidated “to stop them from going to work.”
Though Amplats and the AMCU have been engaged in talks since the strike began, they have so far failed to make any headway; according to Joseph Mathunjwa, president of the AMCU, that’s at least partially because Amplats has changed its position. “We agree in principle and then on following day, when we want to cement the deal, it is changed,” a recent Miningmx article quotes him as saying.
This lack of progress now has Mathunjwa considering more drastic options. He said yesterday that the AMCU will “ask for a secondary strike by our members in different sectors to support the very same cause,” Bloomberg Businessweek reported. Given that the AMCU represents most of the employees at the largest mines of Harmony Gold Mining (NYSE:HMY), AngloGold Ashanti (NYSE:AU) and Sibanye Gold (NYSE:SBGL), such a threat could be damaging if carried out.
Amplats has said it is losing 3,100 ounces of platinum-group metals production per day as a result of the strike.
Into the fire?
Unfortunately for Amplats, even if it manages to resolve matters with the AMCU, it will still not be in the clear — last month, Thandi Modise, premier of South Africa’s North West province, declared a drought across the entire province, ultimately leading the country’s Department of Water Affairs to direct platinum operations near Rustenburg to cut their water consumption.
Thus far, Impala Platinum Holdings (OTCMKTS:IMPUY) and Lonmin (LSE:LMI), the two largest platinum producers in the world after Amplats, do not seem fazed by the announcement. Natascha Viljoen, executive vice president of process and sustainability at Lonmin, commented that her company has “plans in place to manage water usage as stringently as possible,” as per Reuters, while Bloomberg quotes Johan Theron, a spokesperson for Implats, as saying that while Implats has been asked to cuts its use of fresh water by 10 percent, mining has not been affected.
The story may not be the same for Amplats, however. An Environmental Leader article notes that the company has been asked to halve its use of water, a significantly bigger cut than Implats’ 10 percent.
The upside of both the strike and water restrictions is that they have pushed platinum prices up.
“With half the industry out on strike, plus the news we’re hearing about water restrictions, platinum has had something of a step up,” Jonathan Butler, a Mitsubishi (TSE:8058) analyst, told Reuters, adding that “[c]ost increases in water have been very significant in the last few years, contributing overall to the double-digit rises in inflation in the mining sector as a whole.”
The news outlet notes that spot platinum was up 1.1 percent, at $1,377.24 per ounce on Friday afternoon, on track for its biggest single-day rise in over two weeks. Monday, the metal reached a high point of $1,400.
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.