MEMO
TO: All Anglo American Platinum Employees
FROM: Chris Griffith
DATE: 15 January 2013
SUBJECT: Platinum review
I am writing to you today with some very important news about the future of Anglo American Platinum. This follows the thorough review of the business that we announced in February last year, and which we have now completed.
I have been CEO of Platinum for just over four months, but my career in mining began here 23 years ago, and so I have a long relationship with this business and a deep appreciation and understanding of the work that you do. I want to stress that I firmly believe that the proposals we are announcing today will enable us to create a sustainable, competitive and profitable platinum business that will deliver long-term benefits for all our stakeholders.
However, I understand that today's news will be the start of a difficult time for many of you, our employees. I would like to assure you that we take our social responsibilities very seriously, particularly to our employees and host communities. We will therefore endeavour to significantly minimise the impacts of this restructuring on affected employees and communities through the implementation of a comprehensive social plan which I will tell you more about later.
Background
Let me begin by saying a little about the environment in which we are operating, since this is essential to understand why our proposals are necessary.
We undertook the review of the business because several factors impacted our profitability in recent years. These include capital intensity, increasing mine depths and decreasing ore grades, higher than inflation unit cost increases, and the increase in recycling of platinum. We also expect that demand for platinum will grow significantly slower over the next decade than we previously thought.
We have previously stated that a number of our mines have been under considerable economic pressure and making losses for some time.
Clearly this is not sustainable and we need to take action to ensure the long term sustainability of our business for the benefit of all our stakeholders which include our employees and our host communities.
We have had to face some tough decisions, so that we can change in line with demand for our products, tackle the issues that have impacted our profitability and take action to ensure that we have a stable, competitive and profitable and sustainable future.
Our proposals
Our proposals are built around stopping loss making operations and focusing on our higher quality and lower cost operations.
The review has taken place across the entire business - from the operations to corporate offices, with input from Exco, Functional Heads of Department and many individual employees - and as a result of the review we are making the following specific proposals.
- We are proposing to reconfigure our Rustenburg operations across three operating mines. Four high-cost shafts - Khuseleka 1 and 2 and Khomanani 1 and 2 - will be put on long-term care and maintenance.
- Our processing operations at Rustenburg will also be reconfigured to align with the revised mining footprint. This may include closing the Waterval UG2 Concentrator and No. 2 Smelting Furnace.
- Mining activities will be stopped at the Union North Declines and the Mortimer Merensky Concentrator put on long-term care and maintenance. Union North and South will be combined into one operation.
- We also propose that the Union mines be sold when the time is right since they are likely to be of greater value under different ownership.
This proposed restructuring of operations will enable us to ensure that we allocate capital to our mines that are best placed to sustain and create employment over the long term.
We clearly cannot continue to maintain our current overhead structure if our mining and processing footprint is getting smaller. We are therefore proposing to redesign our overhead cost base to fit the new mining and processing footprint and have identified potential annual savings of R390 million by 2014. These savings extend beyond our operations to the corporate centre and include creating new centres of excellence and expertise to bring services together, share skills, and help us save time, effort and money.
We have also looked at opportunities to further reduce costs and improve efficiencies in direct and indirect costs and have identified R3.5 billion per annum of potential by 2015. This will bring the potential annual value creation of R3.8 billion per annum.
Our people
Regrettably, these proposed changes will have an impact on roles. We estimate that a total of 14,000 roles may need to be restructured or be at risk of retrenchment. From today, we will be notifying any employees affected by these proposed changes as soon as possible as part of a formal, collective consultation process.
As I said at the outset, today is a very difficult day and I understand that many of you will be concerned about the implications of these proposals. For that reason, I assure you that we will communicate with you as quickly and as regularly as we can, and provide as much support to you as possible. That support will extend to our host communities as well. This business has a very proud history of making a contribution to South Africa. We will continue to take our responsibility to our employees seriously and treat them with care and respect.
Social plan
Where labour restructuring may be necessary, we will implement the required retrenchment support and assistance packages. Over and above the regulated packages, we have designed a comprehensive social plan to ensure that we can compensate for any jobs that may be impacted. The social plan will be focused on our employees and their dependants in the Rustenburg area and the labour sending areas. We propose to:
redeploy a significant number of affected employees to other Anglo American operations in South Africa and to other employers
re-skill affected employees to assist them to find alternative employment
assist dependants of employees including dependants in the labour sending areas with bursary programmes, portable skills training and small business development (potential of 4 000 jobs in five years)
create further jobs through the housing development project which has the potential to create over 6 000 jobs and more that 15 000 new homes with associated infrastructure over a five year period
Platinum beneficiation through fuel cell technology in the home energy sector that has the potential to generate 1 000 new jobs in five years
expand our Zimele small business development initiatives in Rustenburg and the labour sending areas to create in the region of 3,000 jobs in five years
As you can see we have designed a proposed comprehensive social plan that will generate more than 14 000 new jobs to compensate for jobs that may be impacted by the restructuring.
The health and safety of our employees continues to be a priority. The company has therefore undertaken to provide affected employees with interim health cover and to continue with Anti-Retroviral Treatment (ART) to those who require it.
Next steps
So what happens next?
Today's announcement marks the start of the formal consultation process for those affected by our proposals. That process is expected to be completed by the end of March. We will share more details with you via Human Resources, your line manager or supervisor in meetings over the next few days and through Platinum's page on theSource.
What we have announced today are clearly significant proposals that we believe will secure the long term sustainability of Anglo American Platinum and provide more secure and stable employment to over 45 000 employees, continue substantial investment and benefit our customers, suppliers, shareholders - which include our employees, host communities and labour sending areas - and the South African economy as a whole.
I encourage you to engage with the process and to utilise the support centres that will be set up in key areas. We thank you for your support and commitment.
Yours sincerely
Chris Griffith
CEO
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