Susan Shabangu’s threat that she would withdraw the mining licences for Anglo American Platinum (Amplats) led to the Anglo group’s value eroding by R40bn last week, according to miningmx.com.
The statement by the Minister of Mineral Resources triggered such a rush among foreign investors that the rand weakened by 1.8% to about R8.88 to the dollar after her outburst on Tuesday and remained at this level for the rest of the week.
The share price of Anglo American, which owns 79.8% of Amplats, began falling sharply minutes after Shabangu’s news conference ended in Pretoria.
Since Tuesday morning (January 15), the share price has weakened by 9.8% from a high of R291.45 just prior to Shabangu’s news conference to R262,82 on Thursday (January 17).
This represents a depreciation of R40bn in the group’s market capitalisation. In this period, Amplats’s share price fell by 10.8% to R445.40 – a fall of R14.6bn in its market capitalisation.
The currency traded at the weaker level for the rest of the week, even after Anglo’s and Amplats’s share prices strengthened slightly on Friday when it was announced that an agreement had been reached with Shabangu to follow a 90-day consultation process about the plan to close four of Amplats’s shafts that are running at a loss.
Manus Booysen, joint head of the mineral rights division at legal firm Webber Wentzel and one of the country’s leading mineral rights experts, said the agreement to hold consultations presumably eliminates any likelihood of the mining licences being suspended.
He expressed serious concern about Shabangu’s comments, which were repeated in harsher terms on Friday by Gwede Mantashe, ANC secretary-general, and Enoch Godongwana, the party’s head of economic policy.
“Mineral rights and mining licenses are registered property on land where huge investments are made. Even the Minister can’t simply suspend them – it can only be done after a thorough legal process,” he said.
“The fall in share prices shows clearly what investors think about such statements – they simply pack up and leave – and simply as a result of ill-considered statements made in the heat of the moment.
“Our mining industry is under pressure. It’s very important for us to stay calm,” Booysen said.
An analysis of Amplats’s production and employment figures over the past approximately 10 years shows that even after job cuts of 14,000 workers the group still has too many people in his employ.
If the job cuts are carried out, Amplats’s workforce will shrink from 59,000 to 45,000. Its production capacity will fall from 2.5 million fine ounces to between 2.1 million and 2.3 million fine ounces per year.
However, the group already produced 2.2 million fine ounces in 2002 – with a workforce of 36,000 people.
The problem started in 2000 when Amplats decided to increase its production capacity from two million fine ounces to 3.5 million fine ounces in 2006 to comply with the strong demand at the time. This required investment of R12.6bn, but ultimately Amplats’s workforce grew to just under 78,000 in 2008.
However, production never came close to 3.5 million fine ounces because the rand strengthened so much in 2003 and 2004 that several projects were cancelled. The peak was in 2006, when 2.8 million fine ounces of refined platinum were delivered to the market, but it dropped back to 2.3 million in 2008.
Analysts have long realised that too much platinum was being produced and that a surplus was building up.
Early last year, Paul Walker, deputy head of the respected Gold Fields Minerals Services in London calculated that the annual surplus was between 300,000 and 350, 000 fine ounces. “Production will definitely have to be cut. Amplats as the market leader is the logical candidate for this.”
