PROPOSED RECONFIGURING OF ANGLO AMERICAN PLATINUM
A comprehensive review of the Company’s portfolio of operations was conducted in 2012. This review culminated in the announcement, on 15 January 2013, of the proposed operational changes. The Company has subsequently agreed with the Department of Mineral Resources and labour unions to follow an extensive consultation process which will not take more than 60 days, beginning 30 January 2013.
As a result of the review, the Company proposes to:
- reconfigure its Rustenburg operations into three mines with aligned processing operations
- divest the Union mines at the right time − in order to maximise value under different ownership
- deliver R3.8 billion of annual benefits by 2015, through efficiency and cost-reduction initiatives, including annual savings of R390 million from optimising its overhead structure
- provide a comprehensive package
of support to its employees and communities in Rustenburg and the labour-sending areas
- create at least 14,000 new jobs to balance the number of jobs that may be affected by the restructuring
The Company’s review of its business is in response to its revised expectations for platinum demand growth and a number of structural changes that have eroded profitability in recent years, including capital intensity, mine depths, ore grades, higher-than-inflation unit cost increases, jewellery demand elasticity and the increasing secondary supply of platinum. Amplats has previously stated that a number of its mines have been under considerable economic pressure for some time. The continued operation of unprofitable shafts within the current configuration, and in light of the Company’s revised expectations in terms of demand and cost, is not sustainable.
Amplats therefore proposes to reconfigure its Rustenburg operations into a sustainable 320,000 oz to 350,000 oz platinum producer across three operating mines. It is proposed that four unsustainable, high-cost shafts, namely Khuseleka 1 and 2 and Khomanani 1 and 2, should be put on long-term care and maintenance. As a result the Company’s production profile could be reduced by approximately 400,000 oz per annum, with a baseline production target of 2.1 to 2.3 million ounces per annum.
It is proposed that the Rustenburg processing operations will also be reconfigured to align with the revised mining footprint, which may include closing the Waterval UG2 Concentrator and No 2 Smelting Furnace.
Amplats believes that the Union mines (Union) are likely to be of greater
value under different ownership, particularly in comparison to the other attractive growth options in the Company’s portfolio, and Amplats thus proposes to divest Union at the appropriate time. In the interim, it is proposed that Union be reconfigured to protect near-term value, by stopping mining activities at the Union North declines, combining the Union North and South shafts into one operation and putting the Mortimer Merensky Concentrator on long-term care
As a result of the proposed changes to the business, it is regretable that up to 14,000 jobs may be affected, 13,000 of them in the Rustenburg area.
Amplats takes its social responsibilities seriously, particularly with regard to its employees and surrounding communities. Employees affected by the proposed restructuring will be supported by a comprehensive set of interventions that comprise the social plan. The job-creation initiatives will focus on housing, infrastructure and small business development in Rustenburg and the labour-sending areas.
The Company will be required to fulfil a number of legal requirements and will be guided by local and international best practice.
The South African Department
of Labour gazetted social plan guidelines in 1999, which guide large-scale retrenchment.
The guidelines stipulate that when more than 500 employees (or +10% of a workforce) are to be retrenched, then a social plan must identify alternative forms of employment, self-employment or social development that can be used to mitigate the impact of the retrenchment.
The guidelines in section 4 of the Social and Labour Plan (SLP) of the Department of Mineral Resources (DMR) detail downscaling obligations for a company in this position,
- The company must establish a future forum where retrenchment and planning for life after retrenchment are discussed.
- The company is obliged to devise mechanisms to save jobs, and to avoid job losses and a further decline in employment.
- Where job losses cannot be avoided, the company is obliged to develop mechanisms to provide alternative solutions and procedures for creating job security.
In response to these requirements, Amplats has committed to a set of obligations that include:
- consultation with affected employees, Government and unions
- counselling and job-seeker support
- alternative employment- and enterprise-development support
- opportunities associated with redundant infrastructure
- food security interventions
Other requirementsAnglo American’s Socio-Economic Assessment and Mine Closure Planning guidelines provide additional guidance. The Company has also consulted the Mine Closure Toolkit of the International Council for Mining and Metals. The Guidelines for Multinational Enterprises of the Organisation for Economic Co-operation and Development requires that the effects of downsizing be minimised and mitigated “to the maximum extent practicable”, while the United Nations Global Compact (UNGC) has produced a Good Practice Note for institutions considering large-scale downsizing, which is based on the “Managing Retrenchment” Good Practice Note of the International Finance Corporation (IFC).
The UNGC and IFC guidance requires one or a combination of the following measures:
- The retraining of affected employees
- Career and financial counselling
- The promotion of local economic development opportunities
- The outsourcing of functions and services to affected employees
- Assistance with finding new employment
Profile of potentially affected employees
More than two-thirds of employees that may be retrenched fit the
- African (95%)
- Male (92%)
- Less than 45 years old (68%)
- Have worked for less than five years (70%)
- Band B worker (79%)
- Living in rented accommodation (67%) or SAV (15%)
- Originates from the North West (32%), Eastern Cape (32%), Mozambique (13%) or Lesotho (6%)
- Member of major mine community (more than 10% of the workforce)
- Major rural labour-sending areas (more than 5% of the workforce):
- North West − including Moses Kotane Local Municipality
- Eastern Cape − including the King Sabata Dalindyebo and Nyandeni local municipalities in the OR Tambo District Municipality, and the Mbashe Local Municipality in the Amatole District Municipality
- Gauteng − including Ekurhuleni Local Municipality
- Limpopo − including Modimolle Local Municipality
- Lesotho − no municipal data available
Possible impacts of the proposed changes
To understand the impacts that the restructuring may have, it is important
to understand the context, including:
- the characteristics of affected employees/suppliers (e.g. debt levels, educational levels, housing status) and their associated dependants (e.g. households, employees)
- the demographic profile of directly and indirectly affected areas, including service levels and capacity constraints
- the economic contribution of the Amplats mines to the areas directly affected, as well as to other affected economies
The loss of income for employees and suppliers has a secondary impact on:
- affected employees’ dependants
- local suppliers’ employees and the supply chains
- mine communities and communities in the labour-sending areas
- Government, at the national, provincial and local levels
Based on the identified impacts, a set of proposed mitigation plans has been developed which takes into account the following:
- Required interventions or plans that are typically included in social plans
- Past experience of successes to draw from
- The availability of potential delivery partners
- Anticipated effectiveness/likelihood of success
- Necessary conditions for success
Proposed approach to implementation
A programmatic approach will be adopted to cluster and schedule implementation once the proposed plans have been discussed with unions and Government.
Four key programmes are reflected in the plan:
Subsidies for social services
This refers to housing subsidies; bursaries for one dependant; and healthcare (only for employees and their dependants in the rural LSAs).
Alternative livelihoods development in the Rustenburg Local Municipality
This covers counselling, retraining and job-seeker support. Amplats will work together with employees to prepare the latter for decisions on (i) how best to use their retrenchment packages and (ii) which of the training on offer would give them the greatest benefits. These services thus also support
some of the longer-term mitigation subplans, such as expanded enterprise development, the anchor housing project and the enhanced local procurement focus.
Integrated rural development in the rural LSAs
This refers to counselling, retraining and job-seeker support for those that are finally affected by the proposed restructuring. Amplats will work together with employees to prepare the latter for decisions on (i) how best to use their retrenchment packages and (ii) which of the training on offer would give them the greatest benefits. These services thus also support some of the longer-term mitigation subplans, such as expanded enterprise development and the integrated rural
The final items to be included in the social plan for implementation will be negotiated as part of the section 189 process. The bulk of expenditure on the plan, which goes beyond previous best practice in South Africa, will occur during 2013 and 2014.
The plan requires an investment of approximately R890 million, spread over five years. Half of the estimated investment is discretionary. The details of the social plan will be negotiated with employees and their representatives during the process known as the “section 189 process”.
Currently the main objectives of the plan are to:
- provide a comprehensive set of mitigations
- provide support to directly and indirectly affected stakeholders in order to minimise the negative impacts of restructuring and help as many affected stakeholders as possible to remain economically active
The proposed sequence for implementing the social plan is shown in the diagram below.
The proposed social plan has been “pressure tested” by some of our expert advisers. The details of the plan will form part of the extensive consultations with stakeholders to further test the robustness of our assumptions and obtain their additional input before it is finalised.
Dedicated resources and teams will be assigned to implement the plan once it has been agreed with relevant stakeholders, including Government, unions and affected employees.