Platinum Wage Dispute Goes to Mediation: Joburg Mining Update

(Bloomberg) -- South African mining executives, investors and officials gather in the nation’s economic hub for the Joburg Indaba conference to discuss the industry’s investment prospects after years of regulatory uncertainty.

Overall, it’s been a good year for South African miners as the rally in iron ore, gold and platinum-group metal prices boosted earnings and put dividends back on the agenda. Still, looming labor disputes, a reliance on a weak currency and the slow demise of gold mining leave the industry with plenty of challenges.

Here are the latest developments, updated throughout the day. (Time-stamps are local time in Johannesburg.)

Key Developments:

• Anglo American Plc Chief Executive Officer Mark Cutifani says mining could lead South African economic renewal, but investors need reassurance their money is secure
• Anglo American Platinum Ltd. CEO Chris Griffith said the outlook for PGMs will be good for years, but added that South Africa’s labor disruptions, crime and xenophobia are deterring investors
• Harmony Gold Mining Co. CEO Peter Steenkamp said his company is searching for new gold frontiers beyond South Africa, where the only opportunities are in consolidation
• South32 Chief Operating Officer Mike Fraser said power cuts by South Africa’s electricity utility is hurting the company’s Hillside and Mozal aluminum smelters
• Association of Mineworkers and Construction Union President Joseph Mathunjwa said a dispute over wages with three biggest platinum miners will be referred to South Africa’s official mediator

Implats Won’t Invest in Greenfield Projects (2:40 p.m.)

Impala Platinum Holdings Ltd. isn’t planning to invest in new development projects and building a new mine wouldn’t likely get support from the board, according to CEO Nico Muller. He said investors are favoring lower risk operations that can quickly generate cash. The CEO added that the company has some lower cost investments in mechanized projects on its radar screen.

Platinum Wage Dispute Goes to Mediator (1:22 p.m.)

AMCU’s Mathunjwa said the labor union’s members have rejected a pay offer from Impala Platinum Holdings Ltd. As a consequence, the wage dispute with South Africa’s three biggest platinum miners will be referred to the country’s Commission for Conciliation, Mediation and Arbitration.

The offer from Sibanye Gold Ltd. remains substantially lower than those from Amplats and Implats, the union president said. The mining companies must show flexibility as AMCU won’t move from its revised demand for a monthly wage increase of at least 1,500 rand ($98), he said.

Anglo Won’t Invest in New Thermal Coal Mines (12:05 p.m.)

Anglo American probably won’t invest in new thermal coal mines in South Africa as energy transition leads to more volatile prices, CEO Cutifani said in interview on the sidelines of the conference. At same time, the company will extend the life of the existing thermal assets it holds and won’t just walk away, he said. Those assets have attracted interest from potential buyers in the past, and CEO expects that to continue.

Cutifani is enthusiastic about opportunities in PGMs, and Anglo is undertaking a full feasibility study on the Mogalakwena concentrator. The company is committed to investing in the Venetia diamond mine, although the project has to do better, he said.

Anglo CEO Says Investors Need Stability (10:35 a.m.)

Anglo’s Cutifani said there is no shortage of geological opportunities in South Africa, but to attract mining investment requires political stability and regulatory clarity. While encouraged by positive improvements in the political arena, the “parlous state” of public finances remains a challenge, according to Cutifani. The CEO said companies must work with the government to tackle “unresolved issues” in the nation’s Mining Charter, which seeks to address inequalities resulting from apartheid.

The multiplier effect of growing the mining industry – which currently supports about 4.5 million people – could drive a “wholesale economic renewal of South Africa.” Still, Cutifani cautioned that abundant and high grade deposits won’t guarantee investment. “There are many other factors besides mineral endowment that influence where investors decide to put their money, all of which drive reassurance to investors about the security of their investment over time,” he said.

Amplats CEO Sees Good PGM Fundamentals (10:02 a.m.)

Amplats CEO Griffith said fundamentals for platinum-group metals will remain good for a “number of years.” The improving market has enabled producers to increase their profitable supply and has drawn greater interest in platinum stocks from international investors, he said. The company known as Amplats is studying a number of projects for its “next wave of growth,” according to the CEO.

The regulatory environment in South Africa has improved, but the government needs to resolve the issue of community disruptions around mines, which is leading to huge losses for producers, Griffith said. Labor disruptions, crime and xenophobia are deterring investors, while policy differences between government and ruling African National Congress are also a concern, he said.

Read More:

Platinum Is a Cash Cow for Miners, But Dividends Remain Elusive

Platinum Rally Leaves Investors Waiting for Next Pay Day: Chart

South Africa’s No. 1 Platinum Union Seeks Dispute Mediation

Palladium’s Big Rally May Have Room to Run, These Charts Show

To contact the reporter on this story: Felix Njini in Johannesburg at fnjini@bloomberg.net

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net, Dylan Griffiths, Nicholas Larkin

©2019 Bloomberg L.P.