The South African billionaire Patrice Motsepe controlled company, African Rainbow Minerals (ARM) has said the company might be forced to cut jobs to balance with the economic change and that it might request for financial aid from its shareholders following the huge loss which the company has experienced in the past months.
The Johannesburg based company explained that aside its steel-making unit, the company’s earning for the six months which ended December 31 fell 51 percent to R507 million ($33 million) from a year before and this was aided by a R599 million profit from its ferrous unit that includes iron ore, manganese and chrome.
The company further reported that all the African Rainbow’s other divisions including platinum, coal and copper experienced losses for the period. Its first-half profit was cut short due to sharply softer commodity prices, leading to layoffs and costs cuts to stay afloat.
ARM, which has interests in platinum, iron ore, coal, copper, and gold said it saw lower prices in all of its commodities except for chrome. The company responded proactively to the commodity price downturn and has implemented operating and capital cost reduction initiatives at all its operations to salvage the situation.
However, this sudden economic slop is not peculiar to ARM alone but to the mining companies globally who have seen their margins eroded by a slump in commodity prices, caused by supply gluts and a slowdown in economic growth in China, the largest consumer.
To address this, the company has announced its decision to cut down its spending for the first half of 2016 by 15 percent to R1.4 billion ($92 million) mainly by curtailing the ferrous metals Black Rock Project, which is its most capital-intensive venture.
“African Rainbow is critically reviewing non-performing operations and assessing whether these have potential to achieve improved results in the future,” the company stated adding that it would cut costs and improve mines.
The company’s worker in platinum mines Modikwa and Nkomati, Beeshoek iron ore mine and Khumani chrome mines would be affected by the major cuts but the company did not say how many positions were on the line.
The unfortunate thing is that these mines are located in South Africa, where job cuts are a thorny political issue especially with the current 25% rise of the country’s unemployment.