Around 80% of platinum mines in South Africa are under water and earnings negative at current spot prices.
In the past five years 70000 jobs have been lost in the industry as companies grappled to stay afloat, and another 20000 mine workers face the prospects of losing their jobs as AngloGold Ashanti, Bokoni Platinum Mine and Sibanye Gold flagged that they would mothball shafts.
Since 2012 Lonmin once valued in billions, has lost most of its market capitalisation and is now South Africa’s worst performing platinum stock on the JSE. On August 14, 2012, its market cap was £18.32bn (R317.38bn) and yesterday it was only at £307.85 million.
Lonmin’s share price has plummeted 98% mainly as result of a R5.7bn discounted rights issue to keep afloat in 2015 after being battered by protracted wage strikes, rising input costs, a weak platinum price and slowing demand for the metal in tandem with its peers.
Rene Hochreiter, a mining at Noah Capital Markets said yesterday that the platinum price had plummeted from around $1300 an ounce in August 2012 to the current $980 an ounce level.
“In that time, the best performing share has been Northam Platinum with a 33% rise in its share price, and the worst performer has been Lonmin with a 98% drop in its share price. Anglo American Platinum, Royal Bafokeng Platinum and Impala Platinum are down between 45% and 68% in that time,” he said.
Hochreiter also said that capital market financing for South African platinum mines had dried up. “Banks realise they are not going to get it back,” he said, adding that there was not much that mines could do about the state of affairs.
“They (mines) are struggling to keep costs at zero. The only thing that can help them is for the government to drop taxes, and royalties, and maybe give a tax break for new investments, and maybe drop the empowerment requirement,” he said.
“With the latest mining charter proposing to add 1% on revenue as a cost is a killer,” he added.
The charter, which was gazetted in June, requires that mining companies pay 1% of their annual turnover towards the Mining Transformation and Development Agency which is yet to be established.
The Chamber of Mines, which represents 90% of mining, approached the court to have Mining Charter III reviewed and set aside.
It blamed Mineral Resources Minister, Mosebenzi Zwane, for not consulting the chamber and that the targets contained in the charter threatened the viability of the industry.
There have been several calls by organised labour for Zwane to step down, following the gazetting of the charter.
The Association of Mineworkers and Construction Union (Amcu) said last week that Zwane had not given much direction since he was appointed.
Amcu’s archival, the National Union of Mineworkers president Piet Matosa said last month that the union was planning talks with President Jacob Zuma about the removal of Zwane as the minister.
Lonmin’s share price yesterday slid 6.23% to close at R13.55 on the JSE.