Anglo American Platinum Warns Strike Could Lead to More Cuts

CAPE TOWN, South Africa--Anglo American Platinum Ltd. (AGPPY), the world's largest platinum producer, warned Monday that the strike underway in South Africa could force the company to consider other cuts at the business if it continues for much longer, a move that would deal a blow to an already ailing sector and an important pillar of South Africa's economy.

Chief Executive Chris Griffith said some of its mines remain "marginal" and "if we have a protracted strike we will have to rethink those mines going forward."

Mr. Griffith's comments come as the world's three largest platinum producers--Anglo American Platinum, Impala Platinum Holdings Ltd. (IMP.JO) and Lonmin PLC (LONMY)--are trying to end a strike that was started Jan. 23 by the dominant union in the sector, the Association of Mineworkers and Construction Union, to demand higher wages. The strike is costing the industry about $18 million a day in lost revenue. A second union, the National Union of Metalworkers, joined the strike Monday at Anglo American Platinum.

Last week, Lonmin said due to the strike it would may have to lower its production outlook for the year.

Anglo American Platinum, which is majority owned by U.K.-listed miner Anglo American PLC (AAL.LN), Monday posted a smaller net loss attributable to shareholders of 1.37 billion South African rand ($122 million) for 2013, compared with a loss of ZAR6.68 billion the year before, when the company was hit by an industry-wide strike.

The company said the loss in 2013 was due to one-time costs of ZAR1.5 billion related to its restructuring and asset write downs of ZAR2.8 billion. Anglo American Platinum said a higher tax rate also led to the loss for the year.

The company said that its headline earnings, excluding write-downs and exceptional restructuring costs, showed a return to profit despite the industry-wide strike.

Operating profit totaled ZAR2.0 billion for the 12 months ended Dec. 31, up from a loss posted in 2012 of ZAR6.33 billion. Revenue increased by 22% on the year to ZAR52.4 billion. Refined platinum sales increased to 2.32 million ounces from 2.17 million ounces the year before.

In 2013, the company started to implement a plan to reduce output and employees to improve the profitability of the platinum mining business. The company reduced its five mines in the Rustenburg area to three and reduced jobs by 7,500, which included moving about 2,300 people to other positions within the company.

Mining accounts for 6% of South Africa's gross domestic product and mineral exports make up 60% of export revenue. Companies have already cut several thousand jobs because of costly strikes and a weakening demand environment in the past two years, a blow to South Africa's high unemployment rate of around 24%.

The workers on strike now are demanding that their employers raise entry-level salaries to ZAR12,500 rand ($1,150) a month from around ZAR5,000. Companies have offered an up to 9% increase.

If companies agreed to the union demand, that would increase costs by ZAR13 billion, Mr. Griffith said, adding that is not something the industry can afford right now.

Write to Devon Maylie at [e-mail]

Order free Annual Report for Lonmin Plc

Visit http://djnweurope.ar.wilink.com/?ticker=GB0031192486 or call [phone]

Order free Annual Report for Anglo American Plc

Visit http://djnweurope.ar.wilink.com/?ticker=GB00B1XZS820 or call [phone]

Order free Annual Report for Anglo American Plc

Visit http://djnweurope.ar.wilink.com/?ticker=US03485P2011 or call [phone]

Order free Annual Report for Anglo American Platinum Ltd.

Visit http://djnweurope.ar.wilink.com/?ticker=US03486T1034 or call [phone]

Order free Annual Report for Impala Platinum Holdings Ltd.

Visit http://djnweurope.ar.wilink.com/?ticker=US4525533083 or call [phone]

Order free Annual Report for Lonmin Plc

Visit http://djnweurope.ar.wilink.com/?ticker=US54336Q2030 or call [phone]

Order free Annual Report for Anglo American Platinum Ltd.

Visit http://djnweurope.ar.wilink.com/?ticker=ZAE000013181 or call [phone]

Order free Annual Report for Impala Platinum Holdings Ltd.

Visit http://djnweurope.ar.wilink.com/?ticker=ZAE000083648 or call [phone]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires