Lonmin sticks to its guns as strike bitesComment on this story
Johannesburg - Lonmin will continue to negotiate jointly with its South African platinum peers and won’t seek a separate deal with the biggest union even as strikes hit it the hardest.
Talks to end the walkout over wages adjourned February 5 without a settlement.
Lonmin along with Anglo American Platinum and Impala Platinum, the three biggest producers, are for the first time negotiating as a collective.
The companies have lost joint revenue of $180 million (R2 billion) since the strikes started January 23, they said in a statement.
“We are all around the same table going through the same options,” Lonmin chief executive Ben Magara said in an interview on February 4.
“It is important to collaborate” because the demands threaten the profitability of the industry.
The strike by more than 70,000 members of the Association of Mineworkers and Construction Union has shut all the mines of Johannesburg-based Lonmin, the world’s third-largest producer.
Anglo American’s output has been cut in half, chief executive Chris Griffith told reporters on February 3.
Strike-affected mines at Impala Platinum accounted for 45 percent of its output in the year through June 2013.
Lonmin’s balance sheet is strong enough to withstand the strike for as long as other producers even though it is the worst affected, Albert Minassian, an analyst at Investec, said yesterday by phone.
Lonmin raised $817 million in a rights issue in 2012 after a six-week strike halted operations.
“Shareholders will slaughter them” if Lonmin offers higher increases for a quicker settlement with Amcu, Minassian said from Cape Town. “It’s not going to happen.”
Amcu is demanding basic wages be more than doubled to 12,500 rand a month.
Producers offered increases of as much as 9 percent on January 29.
It’s in the interest of all three companies to stick together, Neill Young, an analyst at Coronation Asset Management in Cape Town, said yesterday by phone.
“I think there’s strong solidarity,” he said.
“I don’t think they’re under that much pressure” to pursue individual settlements.
Lonmin may cut capital spending and produce less metal than expected this year due to the labor action, it said January 30.
It had forecast sales above 750,000 ounces for the year through September and budgeted about $210 million for capital spending.
The company may also decide to send non-striking workers on leave, Magara said.
“We will look at every option to ensure the survival of our business,” he said.
The company has built stockpiles to increase output at refineries and smelters once the strike ends, Magara said.
Amcu and the companies will resume talks “perhaps next week” once South Africa’s state-appointed mediator sets a date for new discussions, the union’s President, Joseph Mathunjwa, said today by phone. - Bloomberg News