Amplats prepares for possible surge in community disruption as SA economy worsens

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Amplats prepares for possible surge in community disruption as SA economy worsens

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Natascha Viljoen, CEO Anglo American Platinum Before her appointment as Anglo American Platinum’s (Amplats’) new CEO in April, Natascha Viljoen (49)

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Natascha Viljoen, CEO Anglo American Platinum

Before her appointment as Anglo American Platinum’s (Amplats’) new CEO in April, Natascha Viljoen (49) was head of processing at Anglo American. Prior to that, she was at Lonmin where her management of the firm’s processing for a six-year period from 2008 was paired with several other executive responsibilities – including sustainability and stakeholder relations.

That places her, therefore, at Lonmin during August 2012 when security services shot dead 34 protesting mine workers and injured 78 others at the Marikana mine near Rustenburg. It was a period of considerable foment: mine violence, largely a function of union rivalry, had already unsettled Lonmin, as well as the rest of the platinum industry.

People tend to forget there was violence at Impala Platinum and elsewhere at the same time as the newly emergent Association of Mineworkers and Construction Union vied with the National Union of Mineworkers for members. Nationally, South Africans had taken to the streets; tyres were aflame, rocks and other debris blocked main roads as people railed against the government’s lack of service delivery.

“Marikana could probably have happened in many places in the mining industry,” said Viljoen in an interview in late June. “It did happen at Lonmin for various reasons; it’s a boiling over of a society that’s frustrated with their current circumstances.” The obvious question is whether with the economic pressures posed by COVID-19, a similar circumstance could arise again.

Mark Cutifani, CEO of Anglo American, acknowledges the risk. Marikana was a moment in time, but he also said: ” … we haven’t removed the issue that created Marikana and I’m talking about poverty and inequality (in South Africa). So I’m still worried, but I also hope we’re all a lot wiser: government, unions and businesses, and we’ll talk and we’ll all try to make sure we don’t have that again.”

Said Viljoen: “Are we going to see something like Marikana? I honestly hope we don’t go there again. I trust that we’ve learnt out of those processes and that we’ll keep that top of mind if we experience any kinds of similar upset conditions again.”

It seems no accident, therefore, that Amplats’ response to the economic hardships of COVID-19 – as with the majority of the mining sector – has been resoundingly proactive. Amplats paid R1bn in salaries to employees who couldn’t attend work, owing to the South African government’s lockdown regime.

Speaking at a roundtable with journalists, Viljoen said that money wouldn’t be recovered, but then it wasn’t the in any way a typical capital allocation against which tangible return was set. It’s more duty: “We need to acknowledge we’re paying that in support of our employees,” said Viljoen.

“There’s a number of things that we can learn from Marikana. The one thing is how do we truly engage with our employees and our community members? Because I think there was a total breakdown in communication, and I’m not going to talk about Lonmin because it was broader than just Lonmin,” she told Miningmx.

Are we going to see something like Marikana? I honestly hope we don’t go there again. I trust that we’ve learnt out of those processes and that we’ll keep that top of mind if we experience any kinds of similar upset conditions again

Coupled with future risk is the present danger of COVID-19 infections. Amplats employs about 24,500 people. It’s expecting a 7% to 10% infection rate, somewhat in line with national averages, but it also acknowledges it may have to shut mining sections or an entire mine if infections get to 20% of total. It has 1,000 beds and quarantine facilities on-mine, especially for employees who can’t quarantine at home, and what happens at home is very much a mining question.

But as part of its measures, Amplats is finding, as with others in the sector, that more than ever it has to reach into the community in a collaborative way, not as “… this big Father Christmas,” as Cutifani described it, paternally dispensing favours. “Those days are over,” he said.

“We’re part of an ecosystem,” said Yvonne Mfolo, head of Amplats’ corporate affairs. “I recall someone saying your communities will remember you for how you supported them through a crisis, and this is another way of us buying goodwill, both from government and from the communities where we operate as well”.

Said Viljoen: “I think the economic recovery in our communities is going to be tough, and we are certainly preparing ourselves for a high level of unhappiness in our communities that could show itself in many ways.

“It could show itself in protests that we are in any case seeing all the time; we could see that in increasing violence – we are already seeing to a large extent the increase in gender-based violence. There’s an underlying frustration with many of our community members.”

BLOW UP

Working life as Amplats CEO hasn’t started off easily for Viljoen. First off, major failures at the firm’s processing facilities – the Anglo Converter Plant (ACP) – in February under the watch of her predecessor, Chris Griffith, set the ground for a difficult first half to the financial year. Then came COVID-19 in March. Throughout this, Viljoen was in the process of relocating part of her family from Brisbane.

Ironically, the ACP in Rustenburg, where the failures occurred, is her professional forte. According to an article by Business Insider, Viljoen has developed award-winning recovery technology that’s energy and resource efficient: “She’s a brilliant metallurgist,” an acquaintance is quoted as saying.

Where I am positioning as a business is we need to be ready to play in either. We are certainly going to push our role in a green economy

Unfortunately, by the time Viljoen had clocked in at Amplats, the damage had been done. Repairs are underway: one of the reprocessing units has been fixed; another will come back in the fourth quarter, three months earlier than expected. The hit is substantial, however: Amplats reckons 2020 refined production will come in between 3.1 to 3.6 million ounces – the gap in guidance a sure sign of the uncertainty.

Set against this, production will only reach 90% in the second half of Amplats’ financial year as the firm recovers from lockdown. The processing blowout alone was expected to result in an R18bn hit to earnings before interest, tax, depreciation and amortisation (EBITDA), although that’s a moving estimate as prices and the rand have been volatile.

Speaking to journalists, Viljoen said breakdown and lockdown had fast-tracked introductions through the business: more than 200 senior managers had been met and sounded out in less than 12 weeks. Musing on the crisis, she referred passingly to Chaos Theory and its benefits. And as the old saying goes: there’s no point in wasting a crisis.

For instance, the glimpse afforded by COVID-19 of an environmentally cleaner world could result in greater political will for the decarbonisation of the global economy. This would be supportive of certain technologies such as platinum group metals (PGMs) in electric battery vehicles (EBVs), or in the so-called hydrogen economy insofar as platinum is the catalyst in fuel cell electric vehicles (FCEVs).

The jury is still out on the final landing place of the two technologies in terms of industrial application, but Viljoen thinks it’s important to be positioned for PGMs in traditional drive-train technologies (gasoline and diesel combustion engines) as well as the greener route of EVBs and FCEVs.

This article was first published in the Mining Yearbook 2020 which is available here: https://www.miningmx.com/the-mining-yearbook-2020/

“COVID-19 has probably opened people’s minds to a very different potential future,” she said. “There is an argument to be made to ask: can we fast track that green economy; can we break through on how we develop alternative sources of energy and in that way create new economic sectors?”

“We’ll have to wait and see. Where I am positioning as a business is we need to be ready to play in either. We are certainly going to push our role in a green economy.”

MARKET MAKER

Chris Griffith controversially raised the issue at an investment conference last year that PGM producers should spend more time and money marketing their metal, rather than trying to think of new ways of increasing production. It was a view informed by history: a chronic over-production of PGMs around the time of the world financial crisis presaged a painful time of restructuring led by Griffith himself at Amplats.

Viljoen is cautious on the marketing versus production debate. As a listed business, with shareholders, the firm’s focus on margin is paramount. “If we can make healthy margins, it opens up a significant opportunity for us to increase production,” she said. However, there’s also need to develop the market, for margin. “It’s how we do that balance.

“So the short answer is yes, and yes. I don’t think you can do only one. But we first need to make sure that we’ve got a business that’s really stable and really secure before we think we can just drive further throughput, or supply.”

That brings us to the question of platinum in the jewellery market. Even before COVID-19, platinum as a jewellery item was losing ground, especially in China. Viljoen said the industry has lost millions of ounces in the jewellery market.

It’s also an area of the business that responds directly to the amount of effort put into marketing. As mirrored by comments in the diamond jewellery sector, consumers may not be able to travel, so they may divert disposable income to establishing relationships, hence the token that is jewellery, for some.

“It’s a good opportunity for us to step into that market in very similar ways that the Platinum Guild International has developed its Indian market. It’s going to be interesting to see how it recovers. We’re probably going to be surprised on the upside.”

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