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"Could Cut" not "Are Cutting"
still a concern though
It's more than "could cut" - Samancor have started a formal process of consultation with the unions about the proposed job losses (that's the law in SA).
Yes, if the chrome price picks up in the next couple of months then Samancor may change their plans. But that's a fairly sizeable "if".
I don't understand to what extent Sylvania could get by on tailings only material if, say, one or more of their host mines are put on care and maintenance. In particular, would there be water supply issues, given most of the water Sylvania use comes from the mine's slurry feed?
Interesting information and a reality check when thinking things can only get better,
there's always the possibility of the success story being derailed.
Of the seven recovery plants run by SLP how many are supplied directly by Samancor?
A bit like any negotiation and knowing how unions always react, you go in way over what you require, in this case say you want to remove 2,500 jobs and really only end up at say 800-1,000 jobs.
Due to the strength of the unions in SA, many operations have lots of fat and unnecessary labour - in tough times it's the perfect political chance to cut all the inefficiencies. If they cut jobs, it would not have an impact on operations by the same % as job cuts - it's Eskom that is the bigger worry for SA as a whole. At these Chrome prices, the only profitable part of Samancor's business will be the hundreds of thousands of free chrome ore they get back from SLP after the treatment process.
The consultation alone will take 2 months, then longer for negotiations etc. By then the cuts as a result of Glencore-Merafe Rustenburg smelter reductions and all the smaller chrome miners already closed that Tharisa alludes too in their Q report will be filtering down. It also comes at a time Eskom is lobbying the Government to be allowed larger hikes. The Chrome producers will lobby for carve outs and reductions.
The Grasvally chrome sale which was conditional may be looking bit shakey though, albeit in terms of share price it wasn't really factored in. However it would have been nice to get a special dividend of $4.2m from the net proceeds and would have provided a little lift to the sp
Hi TBTT, SLP could get by on tailings, there have been countless instances in the past of production being impacted at the entire Eastern or Western operations and SLP needing to rely on tailings (normally due to industrial action).
With the exception of Lesedi, all operations utilises current arisings and old dumps though it's pretty hard to keep track of which mines are operating. For example, in the 2018 H1 presentation SLP had planned to close the Lannex plant and move a secondary flotation to Tweefontein, but production forecasts now include Lannex and I believe they intend to build a new MF2 at Tweefontein when the power issues are resolved. The Echo program would also help mitigate any loss of current arisings by improving the recovery from the dumps.
As Visitor says, probably a bit premature to assume any material loss of production. A 30% reduction in Samancor staff numbers would make their business complete unviable and would impact the market balance. From memory they have around 35% of the market.
It really would have made sense for Samancor to acquire SLP, they are at a significant disadvantage to those chrome producers which have PGM by-product credits from their UG2 production. But thats another story and given the opaque nature of Samancor it's impossible to say why they haven't.
Hi Ragnar!
Thanks for the post. Having thought it through, I've come to the conclusion that the Samancor staff cutbacks (even if they do happen as advertised) will not affect SLP all that substantially.
Yes, there may be some losses of production due to suspension of Samancor mining operations, but these will be more than balanced out by the huge increase in SLP's margins.
p.s. I'd agree that the Grasvally sale must be doubtful now, as well.
But that was always just a nice bonus "extra", not a core reason to hold these shares.
I have been wondering the same as your last paragraph, if Chrome is struggling and pgms are flying which you are supplying the materials just buy them out and use that success in the market to balance out the downturn in other, who knows perhaps Samancor are thinking the same.