Q&A with Amplats’ Chris Griffith
The FM asked Amplats CEO Chris Griffith if he’s set for a bruising, budget-busting wage showdown
Amplats’s 59% year-to-date rally marks one of its best years since the early 2000s. It coincides with a soaring palladium price and the labour calm of a three-year wage deal — an agreement that is about to expire. The FM asked CEO Chris Griffith if he’s set for a bruising, budget-busting wage showdown.
For the deep-level mines about 60% of all the cost is labour, so you can imagine that embedding in a substantial increase in base salaries would be an unwise thing to do.
A lot of those mines are on very thin margins and being carried by some of the mechanised operations.
What you’ll end up doing is putting a lot of these mines into much earlier closure. There’s no way the company can increase wages by 50%. It’ll put, in our case, Amandelbult completely out of business. But we don’t think there’s huge appetite for a strike, given the labour losses in the industry.
Have you been surprised by palladium’s rally?
No. The market’s been in deficit for a number of years … we’ve been expecting palladium to really ratchet up materially.
Must be tempting to ratchet up production?
There are enough challenges in the industry still for us to not lose our heads and to think everything is sunshine and roses. We’ve been working very hard to focus on value and not volume … [but] I don’t think the industry has weaned itself off that mentality yet; we’re still seeing some producers talking about increasing production.
Amplats had to make a lot of bitter decisions in 2014, partly because of its debt. Is it safe to say you’ll never get into that pickle again?
An absolute level of debt — if we were investing that money into a big project that had the potential for returns — then that is not a problem. The problem was the debt was rising every year because of losses out of the base production. Our focus is to make sure that under any circumstances the company is making money and we’re not having to subsidise some operations with cash flows from others.
You may have to look for growth at some point — will it mean exploration or would you have to buy to grow?
Because we own about 40% of the world’s platinum group metal (PGM) resources we have resources to still grow the company; what we’ve got to be very careful about is watching market demand, as opposed to just growing because we can.
What will determine demand for PGMs?
The palladium market is about 80% on the gasoline auto sector and rhodium piggybacks on palladium. Diesel in Western Europe has run its course, but diesel will continue growing outside Western Europe. We’ve got to make sure that we continue investing in jewellery — we’ve seen substantial growth in India, it’s growing at about 20% per annum but still off a low base.
I think the next big growth is going to be in the green economy. [There is] downside with electrification of the drive train, [but] the potential for fuel cells and the hydrogen economy is really good for PGMs.
Did you ever think Amplats wouldn’t make it out of the hole it found itself in?
When you start big things like that you don’t know how they are going to pan out. We were shutting down mines, we had to retrench more than 15,000 people. That was very tough but it was absolutely necessary.
Does that mean we always thought we were going to get it right? I don’t think we were that confident. That’s also right, because otherwise you become so arrogant that you don’t listen or look for areas where you might make a slight detour to get the same outcome.
Many said we’d never sell Rustenburg [or] Union; we’d never be able to shut down loss-making mines. So the market wasn’t short of detractors. But we had support from Anglo American, and our board was absolutely rock solid behind management.
All those things helped because when you have a wobbly, someone else is standing strong next to you. We were absolutely adamant that we had to do the things we set out to do because there was no way this industry [was] going to come right by itself.