Anglo American (LSE: AAL.L - news) , the FTSE 100 (FTSE: ^FTSE - news) mining giant, is poised to overhaul its platinum business, sending shockwaves through the sector as companies wrestle with problems in South Africa.
Anglo American Platinum (Amplats), which accounts for 40pc of the world’s platinum supply, will announce within the next two weeks how it plans to cut costs and improve its business.
The management has a difficult path to tread in order to satisfy market appetite for the closure of high-cost mines in South Africa, while avoiding igniting the situation in the strike-hit country.
As one of South Africa’s biggest mining employers and the world’s top platinum producer, the changes Amplats makes will be closely watched the industry, which has been struggling with rising costs while prices stagnate.
Platinum is used to make autocatalysts, particularly for diesel cars, and prices have been hit hard by weak demand in Europe. The sector’s costs were already high, given the safety and labour demands of the deep mining involved.
While the strikes in South Africa have abated, Anglo — holder of 80pc of Amplats — is keenly aware of the continuing tensions over pay and work conditions. The Amplats review will be presented as proposals on which it will consult with stakeholders, rather than fixed plans.
Analysts are braced for production cuts of 200,000 to 250,000 ounces of platinum a year, against production of 2.5m ounces last year.