Safety-Related Work Stoppages Hurts Metal Producers in South Africa Safety-Related Work Stoppages Hurts Metal Producers in South Africa

Orlando, FL 2/15/12 (StreetBeat) -- On Monday, the world’s biggest platinum producer, Anglo American Platinum, said that output would probably be flat in 2012 as safety stoppages hamstringed production that fell short of targets last year. The company said that it plans to refine and sell between 2.5 and 2.6 million ounces of platinum in 2012 after selling 2.6 million ounces in 2011 – just shy of its estimate of 2.7 million ounces for the year.

The South African government is on a mission to thwart the death toll in mines and halted Anglo’s production on 81 occasions, more than twice as many as the year prior. On average, 10 workers in South African die each month in the world's deepest and most dangerous underground mines.

"While we agree with the need for the regulator to stop operations for non-compliance, the key issue is the nature of stoppages and their effectiveness in addressing real risks," the company said in a statement. The company estimates that it lost 138,215 ounces of platinum because of the halts in 2011.

Anglo American has also raised caution about expected earnings not only because of the safety halts that are shutting down entire shafts and mines, but also as an outcome of associated costs related to South Africa’s BEE (Black Economic Empowerment) initiative. As part of the deal, South African miners are mandated to be a minimum of 26 percent black-owned by 2014.

Lonmin PLC (PinkSheets: LNMIF) reported last week that it has lost about $13 million a month in platinum production in the past four months because of safety stoppages.

Today, AngloGold Ashanti Ltd. (NYSE: AU), the world’s third largest gold producer, joined the growing list of those disgruntled by safety halts imposed by the South African Department of Mineral Resources. The Australian-traded miner said that it lost 73,000 troy ounces of gold production (worth about $126 million at current prices) in the last year. The company derives about 40 percent of its global annual production from operations in South Africa. The safety halts present "a significant risk to forecasting production,” warned the company today as it reported a sharp fall in fourth-quarter earnings.

AngloGold Chief Executive Mark Cutifani is concerned that the safety stoppages actually create a more dangerous situation than the hazard they are trying to fix in some cases. He stated, "It is now an industry issue. We have as an industry come together with a view to again engaging with the department of mineral resources in a conversation that gets us all to the right outcome."

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