Platinum stocks fall on fear of glut

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BR  Back To Work15 [2] Independent Newspapers Lonmin mineworkers queue outside a shaft as they report for work on Wednesday following the end of a five-month long wage strike on the platinum belt. Photo: Phill Magakoe

Johannesburg - The stocks of the three major platinum producers slid on the JSE yesterday as the possibility of metal prices falling was factored into the share prices. Platinum was fixed at $1 459 an ounce yesterday afternoon in London, down $10 from Tuesday’s second fix.

Lonmin’s share price is down more than 21 percent since January 22, the eve of the five-month strike. Impala Platinum (Implats) has shed about 11 percent while Anglo American Platinum (Amplats) is up around 9 percent over the same period. Amplats fell 6.2 percent yesterday, Implats lost 4 percent and Lonmin declined 3.8 percent.

Tens of thousands of workers returned to work after the producers signed a three-year wage deal with the Association of Mineworkers and Construction Union (Amcu) on Tuesday.

Production is expected to stabilise only in the fourth quarter the safety of underground workings must first be ensured. Employees are expected to undergo medical and fitness tests as well as safety inductions before work restarts.

Amplats spokeswoman Mpumi Sithole said employees had started returning yesterday morning. “We have seen a huge number of workers arriving but cannot confirm attendance numbers at the moment.

“Our primary focus today is to welcome our employees back, ensure they receive a briefing so that we can commence with programme which addresses health and safety protocols and refresher training on general mine operations,” she said.

Sithole said employees had also received food parcels.

“We have made an undertaking to assist returning employees in the first month with the provision of food parcels, health supplements, transport relief and the cash payment of back pay. We have started with provision of food parcels from the company, health supplements, and transport relief.”

She said the company expected to reach steady state production in the fourth quarter.

Lonmin spokeswoman Sue Vey said the returning workers would have to undergo medical checks and retraining before they could resume their jobs.

“We also check all work areas, to ensure that they are safe, but we have been doing that throughout the strike. We will be ready in a couple of weeks,” she said.

Sharief Pansarey, the mining analyst at Old Mutual Investment Group’s Electus boutique, said the main concern was how the deal would affect the ability of companies to restructure.

“In terms of the restructuring, the mining companies explicitly told Amcu that they would not sign a deal that agreed to no retrenchments, as they need to assess the economic viability of the operations. Amcu pursued the inclusion of this condition in the deal, but it was not agreed on in the end.”

Lonmin has said that restructuring was “inevitable” especially while industrial demand for platinum in vehicle catalytic converters remained subdued.

Around 1.2 million ounces of production have been lost, according to Reuters calculations based on the companies’ estimated loss of 10 000 ounces a day. The industry usually works for 11 days out of 14.

The companies will find the wage increases difficult to absorb. Around half the platinum shafts were losing money even before the strike began.

Investec said in a note about Lonmin: “We await more detail on a recovery plan but clearly the company isn’t out of the woods yet, with the health of employees, damage underground from prolonged inactivity, retraining, and so on, all issues to overcome.” - Business Report

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