ANGLO AMERICAN's Mogalakwena mine on the Bushveld's Northern Limb. Photograph: Anglo Platinum

ANGLO AMERICAN's Mogalakwena mine on the Bushveld's Northern Limb. Photograph: Anglo Platinum

Mechanised Platinum:
A Widening Divide

Issue 113, January 2015

Continued from Page 3 ➤

...freeing Mogalakwena from its high-cost underground assets. Like Brad Mills, it is also trying to exit its Pandora joint-venture with Lonmin.

Natural Brakes

Dandelions do not grow to the sky, Chesterton observed. A number of powerful brakes could slow shaft closures and any more sudden shift to mechanised production from the Northern Limb, including the powerful influence of unions within South Africa's ruling party, the ANC.

One analyst with a sell rating on Lonmin's stock says the company is in “drastic” need of restructure, but cautions that the industry's transition to mechanised mining will be a “multi-year process of gradual attrition”, slowed by political opposition to closures and limited smelting capacity.

Whilst there is surplus platinum smelting capacity on the Bushveld, low costs on the Northern Limb depend on copper and nickel byproduct, which suffers a smelting shortage.

Ivanhoe plans to use excess smelting capacity in the region to process its ore, though any surplus at Mogalakwena is likely to be filled by Anglo's internal ambitions. “In keeping with our own Northern Limb expansion plans," a representative for Anglo told Global Mining Observer, "it is highly unlikely that we would process concentrate from Ivanhoe."

Tellingly, whilst Anglo is trying to dispose of Union and Rustenburg, it plans to retain the refining and smelting capacity of both mines.

Transition

A transition to the Northern Limb nonetheless appears to be a question of timing, rather than industrial logic. It is “the greatest productivity improvement story in mining today,” according to Bernstein analyst Paul Gait, who likens the shift to the unlocking of copper porpheries in the US in the 1920s.

A clean exit for Anglo from its high cost underground mines is therefore of group-wide importance, rather than a detail for its platinum division, promising to convert platinum from an erratic drag on cash flow to a major contributer to earnings. Smelting capacity is meanwhile all-important and may be freed up by closures, but currently sits firmly in the hands of existing producers.

Lonmin, having already passed through a phase of failed mechanisation, may find the transition toughest. Driven by a short-term focus on tonnage, the company's decision to de-mechanise arguably set it on an inescapable path of high labour intensity, exposure to wage inflation and inevitable clashes with workers; the company now lacks either the capital or the market support to consider advancing Akanani.

Investors were quick to dismiss Brad Mills, but history has not taken long to vindicate his thinking.

Infographic

RELATED NEWS

Glasenberg Slams Simandou in Chase
for Rio Tinto

Simandou emerging as valuable currency in Glencore's bid to swallow Rio Tinto

............................................

Royalty & Streaming
Deal Flow Exceeds
$13bn

Sector enjoying almost secular growth; threshold tripped by Franco deal in Chile

............................................

Atrum Capitalises on Flight from High
Grade Coal

Atrum buying and developing assets as peers move to sell them or close them down

............................................

............................................

Thiam: Guinea's
$200m Technocrat
from UBS

Mining minister on UBS & the $200m bribe he's accused of accepting by Rio Tinto

Brian Gilbertson:
The Industry's Godfather

BHP Billiton's founder gives widest ranging interview of his career, tips "Ivan" for industry leadership