Platinum miner Lonmin said on Monday (12/05/2014) restructuring and job cuts were inevitable as it posted a steep fall in six-month earnings, suffering from South Africa’s longest and most costly labour stoppage.
The pay dispute in the world’s top platinum producing country has cut 40% of global production and halted operations at Lonmin’s mines and processing plants.
The labour-intensive platinum industry was already grappling with rising costs and weaker prices for the precious metal, used in emissions-cutting catalytic converters in automobiles.
The strike, which started on Jan. 23, has worsened the situation and made restructuring more urgent, the platinum producer said.
“When the industry went into the strike about 40-60 percent of the shafts were not making money already,” Chief Executive Officer Ben Magara said in a call with reporters.
“The depth of the restructuring will depend clearly on the return to work date and how we will ramp up… But it would appear that this extended strike led by (union) AMCU has made this inevitable.” Lonmin, the world’s third-largest primary platinum producer, saw its underlying earnings before interest and tax (EBIT) shrink to $34 million for the six months to the end of March, from $93 million a year earlier.
The producer said it anticipated a “mass return to work” on Wednesday at its South African operations, according to an internal company memo sent to employees last week and was preparing to restart production.
“In anticipation of finding a solution to the strike we will start the processing operations during May 2014 to process the remaining material in the pipeline,” the company said. “However, if the strike continues, we will fully deplete (inventories in) the pipeline and limit further cash outflow.” Lonmin said a security plan was in place to allow employees to go back to work. Security will be regarded as crucial as mining firms say union AMCU is using violence and intimidation to keep its members in line, allegations the union has denied.
South Africa’s National Union of Mineworkers (NUM) said two of its members were killed on Monday as they reported for work at Lonmin’s platinum mine.
Magara confirmed one employee was killed, but provided no other details.
“It is a very sad incident and a very sad time,” Magara said. “My appeal is: our employees have the right to choose (whether to return to work) in our democratic country and they should be able to exercise that peacefully.” Lonmin said it produced 215,117 ounces of platinum in concentrate in the six-month to the end of March, down 41 percent from a year earlier and sold 263,675 ounces, down 19 percent. Shares in Lonmin were up 2.3% by 0743 GMT. – Reuters