Implats said the cuts will impact 2,500 people, and cited low metal prices and increased production costs as contributing factors.
Impala Platinum (JSE:IMP,OTCMKTS:IMPUY) is considering layoffs at its Rustenburg operation in South Africa due to low metal prices and increased production costs.
Last week, the world’s second-largest platinum miner released its annual results for the year ended June 30, 2017, commenting that returning to a cash-neutral position at the mine by 2019 is a priority.
It followed that news up on Monday (September 18) with the announcement that it has initiated a consultation process that “may lead to staff reductions” at the site.
The company implemented a mining optimization project at Rustenburg in January 2017 as one of several initiatives aimed at improving its overall performance. However, CEO Nico Muller said that despite those efforts, Implats must now look at staff cuts.
“Unfortunately, we are now left with no further option in the prevailing operating environment, but to consider further restructuring processes that may lead to a reduction in the number of employees,” he said. The company’s share price fell over 3 percent on the news.
About 31,000 people are currently employed by Implats, and the company estimates that around 2,500 could be impacted in the near term. The company has seen marked declines in labor productivity over the last few years, and production has dropped at Rustenburg from a historical base of about 1 million ounces of platinum per year to an expected 680,000 to 720,000 ounces for the 2018 financial year.
As of Monday, platinum was selling for $991.40 per ounce compared to $1,033 at the start of the year. Speaking about the market, Muller said that while Implats remains confident in platinum’s long-term fundamentals, it will remain heavily focused on cash preservation in the short to medium term.
“Our view is that the current metal price environment could conceivably stay lower for even longer, and should be viewed as ‘the new normal,'” he said. The company is also particularly focused on improving performance at its Marula platinum mine, another South African operation.
In addition, Implats continues to struggle against the weak South African rand, which has continued “to place unprofitable shafts at risk, along with challenges related to safety incidents and associated operational stoppages, as well as increasing production costs.”
South Africa itself remains a challenging environment as well, as does Zimbabwe, another country where Implats operates. South Africa’s mining charter is on hold until December, but if it is implemented, miners will have to allow black shareholders to own stakes of at least 30 percent in their operations.
Meanwhile, Zimbabwe has proposed a 15-percent export levy on raw platinum exports. Implats said last week that it would consider shutting down its Mimosa mine in the country if the government goes ahead with the levy because it would make the mine unviable. The tax is expected to enter force in 2018 and was designed to encourage miners to establish local smelting and refining facilities.
At close of day Monday, Implats’ share price was down about 20 percent year-to-date on the Johannesburg Stock Exchange.
Don’t forget to follow us @INN_Resource for real-time news updates!
Securities Disclosure: I, Melissa Shaw, hold no direct investment interest in any company mentioned in this article.