Monday, February 08, 2016

Anglo American Chief Warns Mining Groups Set for More Pain
James Wilson and Andrew England in Cape Town
Financial Times

Mark Cutifani, chief executive of Anglo American, warned on Monday that the mining industry was set to deteriorate further this year amid the worst commodity slump since the financial crisis.

His blunt assessment came as South Africa’s mining minister expressed frustration that companies including Anglo were not consulting more with the government over restructuring plans that are costing tens of thousands of jobs in the country.

Mr Cutifani, speaking at the Mining Indaba, South Africa’s largest mining conference, said commodity markets were on the steepest downward trajectory in his four decades in the sector.

He confirmed Anglo was preparing to sell or shut lossmaking assets as part of a sweeping restructuring due to be unveiled next week.

“We can’t rely on a reversal of this price slump any time soon,” he said. “For many of us in the industry, 2016 is already shaping up to be the most challenging yet . . . things may still get worse before they get better.”

Anglo’s platinum unit on Monday reported a pre-tax loss of R14.1bn ($874m) for 2015, compared with a profit of R454m in 2014, highlighting the challenges for the group.

Anglo American Platinum, which has been scaling down its operations in South Africa, recorded R14bn in impairments on its assets. However, Amplats said its operations generated R4bn of free cash flow from operations, helping the company to cut net debt from R14.6bn at the end of 2014 to R12.8bn in December last year.

Platinum companies based in South Africa, which has 80 per cent of the world’s reserves of the metal, have been battling spiralling costs and a slump in prices, while trying to recover from a crippling five-month strike in 2014.

The downturn in platinum has been one of the largest challenges for Anglo, which is alone among large global diversified miners in producing the metal used in jewellery and the car industry.

South Africa’s mining sector has shed more than 47,000 jobs in the past three years, and a further 32,000 are now the subject of formal consultations that could lead to redundancies.

Large-scale job losses in South Africa are politically sensitive, with the government and mining companies suffering fraught relations in a country blighted by anaemic economic growth and rampant unemployment.

Mosebenzi Zwane, South Africa’s mining minister, complained at the conference that natural resources companies including Anglo, which traces its roots to the country, have not consulted the government sufficiently.

He told the Financial Times: “It’s a global phenomenon, [companies] need to restructure and I respect that and it should not be taken as if South Africa has a problem . . . I am saying to them, ‘Let’s minimise the impact’.”

He added: “We will take a multi-faceted approach as government to do everything in our power to keep jobs. We are saying ‘Give us a chance to try and assist’.”

Mr Zwane said the government was committed to addressing regulatory uncertainty in South Africa — an oft-repeated complaint of miners operating in the country.

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