Anglo is preparing sweeping cost cuts, say sources

Johannesburg/London — Anglo American is preparing to freeze spending on growth and widen job cuts in SA going far beyond its initial savings target and paving the way to mothballing some higher-cost platinum mines, say informed sources.

Anglo’s sweeping spending cuts could be announced as soon as Friday, when the miner updates investors on its three-year outlook, five sources said.

The sources said measures include shelving an ambitious plan to boost output at Anglo American Platinum’s key Mogalakwena mine, and, if metal prices remain depressed, placing on care and maintenance some shafts at the Amandelbult complex in the longer term, which had been initially targeted for mechanisation and output expansion.

A concentrator plant at Amandelbult could also be placed on care and maintenance, said one of the sources.

The moves are likely to result in further job cuts at the operations and lower output guidance, they said. 

The global miner had initially targeted saving $500m by cutting corporate jobs and some costs at head offices in Johannesburg, London and other locations.

Scaling down on spending could save an additional $1bn by the end of 2024, with most expected from its platinum operations, one of the sources said, as the company becomes the latest to feel the impact of the price rout ripping through the world’s top platinum producer, SA.

Anglo American declined to comment.

SA’s platinum mining output has been declining gradually over the past decades as investors baulk at investing in new mines amid threats to the metal’s future demand from a rapidly growing battery electric vehicle (EV) sector. Platinum, palladium and rhodium are used in devices that curb exhaust emissions from diesel and petrol engines.

A rapid and precipitous plunge in the prices of palladium and rhodium has already forced other SA producers, including Sibanye-Stillwater and Impala Platinum (Implats), to swiftly move to cut jobs in a bid to preserve margins.

Anglo is also expected to cut jobs and costs at its other SA unit, Kumba Iron Ore, where stockpiles had grown to 9-million tonnes by September on worsening rail bottlenecks.

Anglo Platinum is expected by a group of 11 analysts to account for 12% of the group’s net earnings at $1.3bn this year, down from 30%, or $4.4bn, in 2022.

The plans come as Anglo CEO Duncan Wanblad seeks to develop a $9bn Woodsmith fertiliser project in Britain, on which the company announced a $1.7bn writedown in February.

“Higher-cost assets have been under pressure for some time now, particularly at older, labour-intensive mines. As the industry transitions to newer, mechanised mines, older, higher cost mines will be rationalised,” said BofA Securities analysts.

Palladium prices have plunged to a five-year low ,while rhodium, which soared to record highs of almost $30,000 an ounce in 2021, has since fallen to about $4,400/oz. Platinum prices have fallen 16% in 2023.

The sector’s cost-cutting measures, also taken by junior platinum miners, come as Africa’s most industrialised economy grew only 0.3% in the first nine months of this year.

Platinum mines earned the country about R275bn in export receipts in 2022, according to Minerals Council SA data. The mines, some of which are among the world’s deepest, employ about 175,000 workers.

Some of those jobs are now evaporating. Sibanye, the biggest mining employer in SA, in October said it plans to cut about 4,000 jobs and close some shafts. Rival Implats has a voluntary job cut process up to the end of the year, a spokesperson said.

“If the numbers are low then we may need to do more capital rationalisation. More cost savings could include deeper labour initiatives such as consulting with the unions [on section 189 process] or extending the voluntary separation process,” the spokesperson said.

The sector’s woes may get even worse as penetration of EVs increases in coming years.

“There will be significant demand destruction for PGMs [platinum group metals], especially palladium and rhodium, though limited for platinum, starting 2028 due to battery electric vehicle penetration, and as PGM demand for autocatalysts decline,” said Citigroup analysts.

Reuters