Two London-listed mining groups are poised to slash up to 12,000 jobs as commodity prices slump to levels last seen during the global recession of 2008-09.
Platinum producer Lonmin plans to shut or mothball several mine shafts, putting 6,000 South African jobs at risk. Platinum prices have hit a six-and-a-half-year low while power and labour costs in South Africa have increased sharply.
Anglo American is also cutting 6,000 jobs and stepping up a cost-cutting programme, after slumping to a first-half loss due to the rout in metal prices.
Platinum has fallen to less than $1,000 (£645) an ounce – having been nearly $2,000 in 2011 – while copper has reached 2009 lows and the price of spot gold hit a five-year low overnight of $1,077. Commodity prices are under pressure because of concerns over the health of the Chinese economy – and the worldwide knock-on effects – as well as expectations of an increase in US interest rates which has driven up the dollar and reduced gold’s attraction as a safe haven for investors.
Mark Cutifani, Anglo’s chief executive, said the FTSE 100 company has been cutting platinum, diamond and coal production. He said the iron ore market is clearly oversupplied, with industrial production in China slowing.
He told Bloomberg TV: “It is a tough market, prices are falling away, but we expect to show progress by the end of the year. It will probably get tougher in the second half, but we will get through it.”
Lonmin shares were down 7% to a record low of 70p, while Anglo American shares, despite rising on Friday, were close to a 12-year low of 820p.
The latest data from China shows activity across its factories declined in July at the fastest pace since April 2014. The flash Caixin/Markit China Purchasing Managers’ Index dropped to 48.2 in July. It marks the fifth month in a row that activity has been below the 50-point mark that divides contraction from expansion.
Expectations of a Federal Reserve rate hike in coming months are putting people off investing in high-yielding but risky emerging-market assets, alongside China’s economic slowdown and stock market collapse and falling commodity prices.
Chris Weston, chief market strategist at IG Group, said: “The issue of falling commodities has replaced Greece and Chinese equity volatility as the centrepiece of the capital markets. This seems to be premised on a toxic mix of increasing future surplus figures, but Chinese growth and concern of a September move from the Federal Reserve are also in play. I am personally sceptical as to whether we will start seeing downgrades to global growth forecasts of 3.5%. However, there are signs inflation expectations are starting to move lower.”
The first of the big global miners to report results for the six months to June, Anglo reported a loss of $1.9bn (£1.2bn) for the six months to June, against a profit of $2.9bn a year earlier, partly reflecting asset writedowns.
Anglo is looking to slash 6,000 “overhead and other indirect roles” out of a total workforce of 151,200 worldwide, a 35% reduction. It is also cutting back at its London office. The group has been selling off assets in its battle to restore profitability.
Lonmin said its planned closures could affect up to 6,000 employees including contractors. In a letter to a labour union seen by Reuters, the company had talked of 4,500 jobs being at risk, about 15% of its workforce.
The unemployment rate in South Africa is more than 25% and there have been bloody clashes with Lonmin workers.
“Lonmin is highly geared to platinum group metal prices. At current metal price levels, the company is EBITDA negative [ie loss making] and our cost minimisation plans are designed to improve this position as much as possible,” the group said.
This article was written by Julia Kollewe, for theguardian.com on Friday 24th July 2015 09.36 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010