Weak platinum price hampers Amplats' drive to shed assets

* Platinum price hits 6 year low, complicating divestment

* CEO says IPO most likely, but still talking to buyers

* Says mines losing money with platinum below $1,000/oz

* Amplats shares fall over 4 percent, near 10-year low (Adds CEO, analyst quotes, details, background, shares)

By Ed Stoddard and Zandi Shabalala

JOHANNESBURG, July 20 (Reuters) - Tumbling metals prices are delaying Anglo American Platinum's (Amplats) plan to divest its labour-intensive Rustenburg and Union operations, with the South African miner yet to decide between a sale or flotation, it said on Monday.

Amplats, the world's biggest platinum producer, wants to rid itself of the mines -- the epicentre of an often violent five-month strike last year -- to improve profitability and focus more on mechanised mining.

But its attempts have been hindered by a drop in precious metals prices, with platinum dropping as much as 5 percent on Monday to $942.49 an ounce, its weakest since February 2009. A rising dollar has hit precious metals hard.

Amplats' chief executive Chris Griffith said an initial public offering was the most likely option for Rustenburg and Union, probably in early 2017, but the company was still talking to potential buyers.

"We had hoped by now we'd be able to be more definitive ... But the process is largely dominated by the difficult market environment," he told Reuters.

Griffith said the two operations made progress in the first half of the year.

"Rustenburg generated operating free cash flow of 261 million rand ($21 million) and Union generated 72 million rand. So both of these mines have turned positive," he said.

But platinum's fresh fall has pulled them back into the red.

"At a $1,000 an ounce the company can still make money but Rustenburg and Union will not be profitable under those conditions," Griffith said.

Shares (Frankfurt: DI6.F - news) in Amplats, a unit of global mining group Anglo American, were down 4.4 percent at 257.20 rand by 1030 GMT, close to 10-year lows struck earlier this month.

ALL TALK, NO ACTION?

Analysts were not impressed by the delay.

"Rustenburg and Union -- all talk, no action," Citi said in a note to clients. "The poor quality of these assets and current market conditions will make it difficult for Amplats to rid itself of these assets."

Rustenburg employs over 16,000 workers and Union around 6,800, between them about half of the workforce of Amplats,

The volatile labour situation on South Africa's restive platinum belt, which sits on about 70 percent of known global reserves, is bound to give potential investors pause.

Wage talks with the hardline Association of Mineworkers and Construction Union, which led last year's stoppage, will take place again next year when the current deal expires.

Sibanye Gold, which also operates labour-intensive and deep mines in South Africa and so knows the terrain well, is one of only a handful of companies bidding for the assets.

Amplats' first-half headline earnings came in at 2.47 billion rand ($200 million), in line with what the company previously flagged and up 15-fold, largely reflecting the impact of last year's strike.

Griffith said the company's strategy for remaining profitable included "delaying very substantial amounts of capital." The company's previous guidance for capital spending this year was between 5.5-6.5 billion rand; it now plans to spend 4-4.5 billion rand.

($1 = 12.3998 rand) (Additional reporting by Tiisetso Motsoeneng in Johannesburg and Silvia Antonioli in London; Editing by Mark Potter)