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AAL’s Amplats Ends 2012 At A Loss

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Mining giant Anglo American plc (LSE:AAL) is to post an underlying loss of US$225 million for the 2012 financial year for its platinum business after its 80%-owned Anglo American Platinum Ltd ended the previous year in a 180-degree turn from profit to loss, following a challenging trading environment.

In a statement, the Johannesburg Stock Exchange-listed subsidiary said illegal and violent industrial action in the mining industry, inflation, and “subdued macroeconomic environment” particularly in Europe crunched the mining firm’s margin that ended in a loss of 6.334 billion South African Rand (£451 million), a far cry from the SAR7.965 billion (£567 million) profit it made in 2011.

The company will not provide dividend for the year as a result of the loss, it said, as a result of the loss.

Rise and Fall of Platinum

Back in October 2012, the company had already lowered its annual target production and finished the year with 2.2 million ounces of the white metal produced, an 8% decrease compared to the previous and in line with lower target the company set.

“The year was characterised by lower prices, illegal industrial action which impacted production, unit cost, labour productivity and, of course, profitability and earnings,” Chris Griffith, Chief Executive of Anglo American Platinum or Amplats, said in a statement.

Platinum price has seen rises and falls last year as industrial unrest in South Africa’s mining sector, particularly in the Bushveld Complex where majority of the world’s global supply of platinum are mined, falling as low as US$1,300 an ounce from over US$1,700 per ounce and back, in a dynamic play of uncertainty in supply and demand of the metal.

Continued troubles in the Eurozone that saw decline in production of automobiles that use platinum in catalytic converters to reduce carbon emission has also hurt sales of platinum-mining companies, including Amplats.

Labour unrest, which resulted in deaths and injuries last year, also increased costs as companies re-negotiated their compensation packages to end strikes.

Less Optimism

As a result, Amplats announced on 15th January 2013 it will close down four shafts in three mines at its Rustenburg operations, which may lead to a loss of 14,000 jobs that the company, in turn, will commit to restore elsewhere in its operations.

The restructuring proposal, however, was met with resistance from the South African government and led to a consultation process between Amplats and South Africa’s Ministry of Mineral Resources.

Meanwhile, the firm is still “less than optimistic” in their outlook for the current year, while pinning its hopes in tighter emission legislations in Europe and increase production of vehicles in China and India that will boost demand for platinum.

Shares of Amplats were down, trading on the JSE, and so were shares of the parent firm, Anglo American plc, on the London Stock Exchange, by 24 pence, or -1.2%, to £19.305 at 14:40 GMT.

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