Bloomberg News

Platinum Mines Face Biggest Strike Since Deadly ‘12 Clash

January 20, 2014

Mine workers in Marikana

Co-workers of miners shot dead by South African police during a violent wage strike attend a ceremony to mark the first anniversary of their deaths in Marikana, South Africa, on Aug. 16, 2013. Photographer: Stephane De Sakutin/AFP/Getty Images

The world’s largest platinum miners are bracing for the most severe labor turmoil since 44 people died during a strike at Lonmin Plc (LMI) in August 2012.

At least 70,000 members of the Association of Mineworkers and Construction Union plan to walk out over pay on Jan. 23 at mines in South Africa’s platinum belt run by Anglo American Platinum Ltd. (AMS), Impala Platinum Ltd. and Lonmin. The area accounts for about 70 percent of global output of the precious metal, whose price advanced to the highest level in more than two months today amid concern a strike will hobble supplies.

The deadly clash 17 months ago at Lonmin’s Marikana mine came after workers declared “enough is enough,” AMCU President Joseph Mathunjwa said last week as he addressed thousands of his members. “We also want the wealth, we want to support and raise our children.”

Speaking at the Wonderkop stadium about 100 kilometers (62 miles) northwest of Johannesburg and near where police killed 34 Marikana workers in a single day on Aug. 16, 2012, Mathunjwa told members: “We are here reminding the employer that their blood was not shed for nothing.”

The union also served strike notices at gold producers AngloGold Ashanti Ltd., Sibanye Gold Ltd. and Harmony Gold Mining Co., the Chamber of Mines said in a statement today.

Strike Vote

Platinum producers have been preparing for months for a stoppage, building up weeks of supplies of the metal to ship to customers if their shafts are halted. While the AMCU has spent the past days renewing a mandate received from members before their end-of-year break for a paralyzing strike, the companies have said they are open to last-minute talks to try and avert a walkout.

Platinum Labor Fight Mines South Africa's Deep Divide

Thousands of AMCU members at Anglo American Platinum, or Amplats, yesterday voted in a show of hands at a mass meeting in the town of Rustenburg in favor of a walkout.

Amplats, a unit of Anglo American Plc (AAL) and the world’s largest platinum producer, has received notice that AMCU intends to strike starting Jan,. 23, spokeswoman Mpumi Sithole said today by phone. Lonmin got a similar letter, spokeswoman Sue Vey said. Impala confirmed the strike in a stock exchange filing.

The AMCU emerged as an alternative force among South African mining employees during a strike at Impala in early 2012, growing to displace the National Union of Mineworkers as the largest among platinum employees. Staging a walkout at mines now gives the union an opportunity to assert its authority as it seeks to fend off competition for numbers from the rival NUM and the National Union of Metalworkers of South Africa.

Consolidate Power

“AMCU needs to take bold action to consolidate its power in the platinum belt,” Mark Rosenberg, an Africa analyst at New York-based Eurasia Group, said in e-mailed comments yesterday. “As we anticipated, the timing was not right before the holidays, but now it is do-or-die time for union leadership, particularly with the prospect of further competition for members from Numsa.”

Mathunjwa’s union is demanding that the basic monthly pay for some workers be more than doubled to 12,500 rand ($1,149). The lowest-paid underground workers currently get about 5,500 rand, excluding some benefits.

Amplats, where the AMCU represents 60 percent of workers, Impala and Lonmin have made wage-increase offers of as much as 8.5 percent of basic pay, 3.2 percentage points more than the inflation rate of 5.3 percent in Africa’s largest economy. All three companies have in the last 15 months either turned to investors for funds, set plans to shut mines or cut output.

Price Slump

Platinum producers are scaling back on capital spending as they confront a slump in the price of platinum, which is down 16 percent from its highest point in 2013.

The three were disrupted by strikes that lasted six weeks or longer in 2012, collectively losing in excess of 480,000 ounces of production.

“All of them are in a very difficult position cost wise,” Neill Young, an analyst at Cape Town-based Coronation Asset Management Ltd., said by phone on Jan. 15. “They need to control the cost base and they need to take a firm stand on the wage bill, which is 50 percent, 60 percent of their businesses.”

The spot price of platinum, used in jewelry and catalytic converters that reduce harmful emissions from passenger cars, has climbed 7.2 percent since Dec. 31. It rose as much as 1.1 percent to $1,470.25 an ounce today, the highest intraday level since Nov. 7, and was at $1,469.50 at 3:23 p.m. in Johannesburg.

Northam Platinum

Northam Platinum Ltd. (NHM), a smaller producer, late last week settled with the NUM for wage increases of as much as 9.5 percent in addition to a continuing monthly bonus of 125 rand to end a strike that lasted more than two months. The company offered an 8 percent raise for the lowest-paid workers before the strike began on Nov. 2.

The AMCU won’t want to settle for a smaller increase at the big three producers than the deal achieved by the rival NUM, said Hanre Rossouw, head of commodities for frontier and emerging markets at Investec Asset Management, which owns Amplats, Impala and Lonmin shares.

“The bar is set at double-digit levels,” Rossouw said from Cape Town on Jan. 17. “AMCU is not going to settle for less than that. It sets the scene for a big stand-off.”

Even so, platinum producers are “much better prepared” than in previous years, he said. “There’s better coordination between the CEOs and the companies have been building stockpiles.”

Meeting Intended

Amplats intends to meet the AMCU for further talks, spokeswoman Sithole said Jan. 17.

“It’s within AMCU’s right to call a strike, but we hope they first give us opportunity to negotiate further,” Impala spokesman Johan Theron said last week.

The AMCU won’t settle for less than a basic monthly wage of 12,500 rand, Mathunjwa told the union’s Lonmin members.

“Do you remember how the government answered our cries with bullets?” Mathunjwa said when he spoke at the stadium near Marikana. “Many men were killed on that hill. Their blood, our brothers’ blood wasn’t spilled for nothing.”

To contact the reporters on this story: Paul Burkhardt in Johannesburg at pburkhardt@bloomberg.net; Andre Janse van Vuuren in Johannesburg at ajansevanvuu@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net


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