NUM to challenge Lonmin job cuts

Lonmin Chief Executive Ben Magara said the 6 000 jobs would include over 1 300 voluntary redundancies and early retirements already in the pipeline plus an additional 4 500 jobs. File photo: Supplied

Lonmin Chief Executive Ben Magara said the 6 000 jobs would include over 1 300 voluntary redundancies and early retirements already in the pipeline plus an additional 4 500 jobs. File photo: Supplied

Published Jul 24, 2015

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Johannesburg - South Africa's National Union of Mineworkers (NUM) said on Friday it was “shocked” by platinum producer Lonmin's plan to cut 6 000 jobs and would challenge the retrenchments.

“As the NUM, we are going to fight against any job losses. It is very painful to see that these mining companies take the decisions of cutting jobs easy,” the union said in a statement.

Earlier on Friday, Lonmin said it is planning to close or mothball several mine shafts in a bid to survive plunging prices, putting 6 000 South African jobs at risk and sending its shares to a historic low.

The platinum sector has been under huge stress, with the spot price at six-year lows below $1 000 an ounce, while power and labour costs in South Africa have risen sharply.

Lonmin has taken a worse beating than its peers amid concerns about its viability, after an independent probe slammed its handling of a violent strike at its Marikana mine three years ago in which 44 people were killed, 34 by police.

As of Thursday, its market value according to Thomson Reuters data was R8.6 billion ($690 million), less than half of rival Northam Platinum, which produces roughly half of Lonmin's output.

Lonmin shares in London fell on Friday more than 7 percent to an all-time low. In Johannesburg they were down more than 8 percent, bringing their losses on the year to 57 percent.

“You have to wonder whether the cuts are going to be enough and if more drastic action is inevitable,” said analyst Marc Elliott at Investec Securities.

Voluntary redundancies, early retirements

Lonmin Chief Executive Ben Magara said the 6 000 jobs would include over 1 300 voluntary redundancies and early retirements already in the pipeline plus an additional 4 500 jobs.

“Lonmin is highly geared to platinum group metal prices. At current metal price levels, the company is EBITDA negative (loss making) and our cost minimisation plans are designed to improve this position as much as possible,” the company said in a letter to unions.

“No dividends have been declared by Lonmin since 2011. Lonmin shareholders have paid out significantly more into the business in the last five years than has been received by them through dividend payments,” the letter added.

The biggest operation earmarked for closure is the Hossy shaft, which accounts for about 8 percent of annual production of over 700 000 ounces. Lonmin said it was not profitable at current metal prices.

On a conference call, Magara said the proposed restructuring would take about 100 000 ounces out of production and would bring in savings of 15 to 20 percent.

Job cuts

Lonmin employs more than 28 000 staff and has around 10 000 contractors, so the redundancies would be about 15 percent of its workforce.

That may be a hard sell in South Africa's political and labour environment, where the jobless rate is over 25 percent and union militancy has been on the boil.

Joseph Mathunjwa, president of the Association of Mineworkers and Construction Union (Amcu), which lead a five-month strike on the platinum belt last year, told Reuters he had not been notified yet of any job cut plans by Lonmin.

Amcu in the past has reacted to proposed lay-offs with wildcat strikes. It was at the forefront of the deadly stoppage in August 2012, after which a probe found Lonmin had “created an environment conducive to the creation of tension” by failing in its legal requirements to build housing for migrant workers.

Specifically, it found the company had built only three of the 5 500 houses it was required to erect, leading to speculation could lose its mining licence.

Magara said on Friday that he did “not foresee any risk to our mining licence”.

Reuters

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