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This interview was originally aired on RSG Geldsake (in English, with an Afrikaans introduction that has been translated here).
RYK VAN NIEKERK: Anglo American Platinum [Amplats] is the largest single producer of platinum group metals [PGMs] in the world. It has five mines in the Bushveld Complex in South Africa and another one in Zimbabwe. [Parent] Anglo American owns around 80% of the company.
The group announced its 2023 financial results today, which underline the effect of a 35% drop in PGM prices last year. Total turnover decreased by 24% to R124 billion. Headline earnings fell by 71% to R14 billion and the group declared a final dividend of R9.30/share, bringing the total dividend for the year to R21.30. This is 80% lower than the 2022 dividend.
The biggest news, however, is that Amplats announced the expected layoff of around 3 700 of its 20 000 workers – this represents around 17% of its workforce.
On the line is Craig Miller. He is the CEO of Anglo American Platinum. Craig, thank you so much for your time. It was a tough year and many other miners have also announced significant declines in their profitability – but a 17% cut of your workforce seems significant. Can you put it into context?
CRAIG MILLER: As we announced today – really as a measure of last resort – we do need to restructure the company and therefore we’ve entered into the process of having consultations and engagements under Section 189 of the Labour Relations Act to really effect the reduction in people, in structures. That’s really in response to the decline in PGM prices and also the near-term outlook for PGMs – particularly what’s going on from a global macroeconomic environment.
High interest rates and lower economic activity are certainly weighing on demand for PGMs from an outlook perspective.
And therefore we’ve needed to respond as a business in order to set ourselves up to be sustainable into the long term because prices we know will recover, but we think they’re probably a bit longer out than what we’ve experienced historically, and [we are] therefore setting ourselves up to be that sustainable company and restoring our competitiveness.
RYK VAN NIEKERK: The 17% cut in your workforce means that you will fire virtually one out of every five workers you have. Have you ever cut the workforce to that extent in the past?
CRAIG MILLER: Certainly the measures that we outlined today are very significant. I don’t underestimate the impact that they [will] have on so many of my colleagues, their families and the communities where they live.
But what’s really important for us, taking into consideration the impact on the 3 700 people, but more importantly around preserving the jobs and the economic contribution that we make for the 18 000 people that will be remaining as part of the business into the future – as I’ve touched on, [there is] the economic contribution that we continue to make in South Africa; either through the payment of taxes to the fiscus or the ongoing salaries and wages that we will make, or the investments that take place in the community.
So it is a difficult decision. It is significant. We don’t underestimate just how difficult it actually is and the impact that it has.
But really it is important for us to be able to set up the business to be sustainable into the future and to benefit from when prices do recover.
RYK VAN NIEKERK: But it must be one of the most aggressive cuts Anglo American Platinum has undertaken in recent years.
CRAIG MILLER: It’s certainly very significant. I think the company has been through various restructuring processes over a number of years, and so for me it’s really around where the business is at the moment.
We need to improve our productivity. We need to drive the efficiencies that are required for us to be able to withstand the current price environment – and that’s really been the focus of the organisation in the recent weeks as we’ve put together this proposed restructuring.
It clearly is still subject to consultation with the affected employees and organised labour as well. That’s the process that we will embark upon with them, and if there are opportunities to mitigate this we’ll be certainly open to understand what those could be.
RYK VAN NIEKERK: You’ve referred to the significant drop in the platinum group metal prices. I think the number that was used was around 35%, which the industry had to absorb last year. But how much of the decline in your profitability stems from the drop in prices, and perhaps how much stems from structural problems in South Africa like electricity supply and logistics?
CRAIG MILLER: The impact of prices was the most significant. As you pointed out, the basket price for platinum group metals reduced by about 35%.
The biggest contributors to that are both palladium and rhodium, which were down between 37% and 58% respectively.
So that was quite material and accounted for about R40 billion of the price reduction.
But we did see our costs increasing by about R9 billion in the year. That was predominantly driven by higher energy prices, higher above-inflation prices for consumption.
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And the high energy prices are really a reflection of the electricity tariffs that have continued to increase year on year – and those are clearly just not sustainable at this level and therefore require us to make the proposed restructuring that we announced.
I will say this: the impact of load curtailment on our business last year was also meaningful. It represented around 3% of our total volume or 80 000 ounces. So yes, we have been impacted by load curtailment, as has the rest of the South African country, and that does weigh on the decisions that we’ve had to take as a company and have outlined today.
RYK VAN NIEKERK: Now 2024 is an election year and of course the ruling party is really trying to build a campaign based on job creation, so this is not good news for them. I’m sure you’ll have a few urgent requests for meetings. What would your response be in those meetings to justify these retrenchments?
CRAIG MILLER: As I’ve been obviously communicating with a number of stakeholders today as we’ve launched the process:
The really important aspect for me is setting the business up for sustainability into the long term.
I think people recognise that the decline in prices has been incredibly sharp in 2023, and we as a business need to be able to respond to that, just given the market outlook. That’s really been part of the stakeholder engagement that we’ve had with so many stakeholders in the last couple of weeks.
Certainly we are protecting the business. We’re protecting, as I said, the 18 000 jobs that will remain with the business post the implementation of this restructuring, and importantly contribute to the South African economy in the long term.
That’s really been part of the messages that I’ve been articulating to both those affected employees and so many of our other stakeholders.
RYK VAN NIEKERK: Those could be interesting meetings and I think I’d love to be a fly on that wall.
But let’s talk about the prospects of PGM prices. Earlier you said you don’t foresee a significant improvement in the prices, but how do you expect the demand and the prices to be over the next year or so?
CRAIG MILLER: Our forecast is we’ve obviously seen prices decline this year because of the macroeconomic environment.
We don’t see very much an increase in demand for PGMs in the near term on the back of higher interest rates and people not necessarily buying new motor vehicles. As you know, two thirds of the product that we make goes into motor vehicles. So that’s limited upside from a demand perspective.
You do have the continued penetration of battery-electric vehicles into the automotive sector. Battery-electric vehicles don’t have any PGMs in them today, and so that’s weighing on demand. And actually we are forecasting that palladium, which is in a supply deficit this year, will move into a supply surplus in 2025, and that is weighing on its price.
So from a long-term perspective, however, we do fundamentally believe that the demand for PGMs is absolutely there, particularly as you transition to a greener, cleaner environment and the opportunity to decarbonise, and the critical role that PGMs can play in that space, particularly from a hydrogen perspective – either through the generation of hydrogen or through mobility.
As we outlined, I think you would’ve seen some of the announcements last week in partnership with BMW and Sasol.
We’re trialling a fuel-cell electric vehicle here in South Africa, and that fuel-cell electric vehicle has PGMs in it.
And so if we’re able to have just 10% of future demand and automotives being driven by fuel-cell electric vehicles, that’ll create a demand segment of about eight million PGM ounces.
So we are particularly excited about the long term and the long-term opportunities for PGMs. We just need to navigate these short-term challenges.
RYK VAN NIEKERK: Craig, thank you so much for your time. That was Craig Miller, the CEO of Anglo American Platinum.
