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UPDATE 2-Platinum firm Lonmin says "bleeding" from S.Africa strike
May 19, 2014 / 2:06 PM / 3 years ago

UPDATE 2-Platinum firm Lonmin says "bleeding" from S.Africa strike

* CEO says Lonmin has lost a third of annual production

* Informal talks with union remain behind the scenes

* Platinum producers have lost $1.8 bln in revenue (Adds CEO interview, details)

By Ed Stoddard and Silvia Antonioli

JOHANNESBURG/LONDON, May 19 (Reuters) - South African platinum miner Lonmin has lost a third of its annual production due to an industry strike over wages which its chief executive described as a “bleeding” that might lead to the company’s death if not stopped in time.

South Africa’s longest and costliest mining strike turned violent this month, with four miners killed as more employees tried to report for work at the world’s top platinum producers.

Lonmin had anticipated a mass return of its employees to work last week, but striking members of the main Association of Mineworkers and Construction Union (AMCU) prevented many other workers from going back to the mines.

The strike has also hit the South African operations of Anglo American Platinum and Impala Platinum, taking out 40 percent of global production of the precious metal used for emissions-capping catalytic converters in automobiles.

“The strike has now entered its 17th week and we have now lost a third of our production for the whole year,” Lonmin chief executive Ben Magara said on Monday during a briefing with journalists in Johannesburg.

“The company has been bleeding and there will come a point when that bleeding means death,” he later said in an interview with Reuters TV.

According to Reuters’ calculations the strike has cut around 900,000 ounces of industry production to date. In Lonmin’s case, it had been targeting year sales of over 750,000 ounces before the strike began, so it has lost around 250,000 ounces so far.

Last week Lonmin said it might go to court in a bid to stop the strike because of its increasingly violent nature and Magara said: “We’ll examine all our legal options in this regard.”

Magara added there was now a “more visible” police presence around its operations.

Talks with AMCU collapsed in late April and the companies have been taking their latest offer directly to employees via SMS text messages and other means.

AMCU is trying to prevent them from doing this and the matter will be heard in the country’s labour court on Tuesday.

Magara clarified comments made by the company last week which had raised questions whether it would continue contacting workers directly. While the SMS campaign had raised “security risks,” Lonmin was still communicating to its striking employees in that manner, he said.


Magara told Reuters TV that while official talks with AMCU had broken down, informal channels remained opened and he had spoken to the union’s president Joseph Mathunjwa at the weekend.

He also reiterated that the strike was making restructuring and job losses “inevitable”.

Lonmin has been burning cash of around $60 million a month since the strike began on Jan. 23, though that number was now coming down, Magara added.

The companies have offered pay hikes of up to 10 percent that would raise the overall minimum pay package to 12,500 rand ($1,200) a month by July 2017, including the basic wage plus cash allowances for things like housing.

They say they can afford no more, squeezed on one side by soaring costs and the other by low prices.

AMCU, whose battle cry has been for “a living wage”, has said that is not enough and has focused the attention of its members on the basic wage which excludes allowances.

The union initially demanded an immediate increase to 12,500 rand ($1,200) in just the basic wage, but softened that in March to staggered increases that would amount to 12,500 rand within three or four years.

The industry’s problems have been underscored by the platinum price, which is currently up only slightly from its levels on the eve of the strike despite the loss of output. Magara said he was surprised by the market’s muted reaction.

To date the strike has cost the companies 18.6 billion rand ($1.8 billion) in lost revenue and employees over 8 billion rand in wages, according to an industry web site that constantly updates the tally. (here).

$1 = 10.3508 South African Rand Additional reporting by Zandi Shabalala; Editing by Mark Potter

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