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Amplats to cut 7,000 South African jobs, union 'shocked'

Chris Ratcliffe | Bloomberg | Getty Images

Anglo American Platinum (Amplats) said it planned almost 7,000 job cuts at its South African operations including thousands of compulsory lay-offs, drawing an angry response from a labor union and raising the risk of renewed unrest at its mines.

Amplats, the world's top platinum producer and a unit of Anglo American, had aimed for 14,000 job cuts after posting its first loss last year, but lowered the target after a backlash from the government and the unions, which organised a series of strikes.

After months of consultations with government officials and worker representatives, the company said 6,000 mining jobs would go and that "approximately 900 corporate and overhead employees will also be affected".

The addition of white-collar job cuts might alleviate some criticism of the lay-off plan, since not only blue-collar workers would be affected.

(Read more: Anglo American's $4 Billion Hit Clears Decks for New CEO)

But at least one union saw the decision by Amplats as a betrayal, saying the company had committed only last week to avoiding forced lay-offs.

"We are shocked. Our agreement with Amplats was to cut 3,000 jobs and those jobs would not be forced retrenchments but voluntary severance packages. This agreement was reached a week ago," said National Union of Mineworkers spokesman Lesiba Seshoka.

A source familiar with the talks said about a third of the 6,000 cuts would be made via voluntary redundancy, retirement and redeployment. That means around 4,000 are likely to be laid off.

The job cuts will lower production and may lend support to prices of platinum, used in emissions-capping catalytic converters in automobiles. The white metal's price has been depressed by poor global demand.

"We are at a critical stage of the process and this restructuring will be a crucial step to enable us to return to profitability," said Amplats Chief Executive Chris Griffith.

(Read more: Mining Strikes Could Spread to Anglo American)

A month's notice period for the targeted employees will commence on Sept. 1, said Griffith.

Amplats has a high rate of employee turnover in its South African mines and the company may shed some jobs by not replacing departing miners.

The issue of mining jobs is sensitive in South Africa ahead of elections next year and comes as companies and unions lock horns in the toughest ever talks over wages.

Mining companies are struggling to cut costs to deal with a drop in metal prices, while an increasingly militant union movement is pushing hard for better pay and working conditions for miners.

Officials from NUM's arch-rival, the Association of Mineworkers and Construction Union (AMCU), whose activists staged the strikes at Amplats mines this year, were not reachable for comment on the job cut plans.

Labor unrest

More than 60 people have died in violent strikes in South Africa's platinum belt and gold regions since a bitter turf war between NUM and AMCU was taken from the shafts to the streets.

NUM is a key ally of President Jacob Zuma's ruling African National Congress and the defection of tens of thousands of members to AMCU has meant a potential loss of votes, helping explain why the government has been keen to see a reduction in the number of job cuts at Amplats.

Job losses may also be in the offing in the gold sector, where about half of the shafts are estimated to be losing money.

(Read more: Anglo American Earnings Tumble; Writedowns, Costs Bite)

Unions and boardrooms in the bullion industry are in wage talks and remain poles apart, with the NUM demanding pay hikes as large as 60 percent. A strike notice could be issued as early as this week if talks remain deadlocked.

South Africa's black mine labour force is mostly semi-literate and drawn from rural, peasant areas far from the mine shafts. Those laid off will struggle to find a new livelihood in a country with an official jobless rate of around 25 percent, but which many analysts believe is over 40 percent.

The process of cutting jobs at Amplats has dragged on for months and Monday's announcement looked like the company's final decision.

But the unions are likely to resist, raising the prospect of more strikes and possible unrest.

Amplats is aiming for annual production of 2.2 to 2.4 million ounces. Last year, the company produced 2.379 million ounces but output may well have been higher if not for strikes.

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