[miningmx.com] – THERE’S a risk Northam Platinum won’t produce any more platinum this year if it fails to broker an eleventh hour entente over wages with the National Union of Mineworkers (NUM). The outcome then would be a revenue loss of between R600m and R700m.
Northam doesn’t produce platinum for up to 10-days over the seasonal holidays, but assuming a revenue loss of about R14m a day (based on November’s platinum group metal basket price), the company stands to lose R672m in revenue, equal to 28 days in November (the strike started on November 4) and 21 days in December.
That roughly accounts for the R600m rights issue the company raised through the claw-back arrangement with Coronation Asset Management – an astonishing frustration for shareholders who are really funding the strike; bad money after good.
However, there’s no expectation Northam will have to return the market for more funds, not yet anyway.
The word is that Northam proactively raised that cash because it recognised the seeds of a strike over wages earlier this year, a moment of prescience based on the presumption it didn’t experience a strike in 2012, and that it was its turn.
There are attempts to resume negotiations through the Commission for Conciliation, Mediation and Arbitration (CCMA) either later this working week, or over the weekend, and perhaps something will come of that.
After all, the loss in income for Northam’s workers is mounting too.
Losses to income could near R100m by the end of the year, only 16% of revenue because the loss excludes benefits and bonuses. That must be putting them under tremendous pressure as well as the NUM.
If there isn’t a meeting next week, it’s likely that the 10-day mourning period for former South African president, Nelson Mandela, will morph into the year-end break. Even if there’s a meeting of minds on wage increases between Northam and the NUM, it will be difficult to orchestrate a meaningful return to work after December 16.
The upshot is a potential eight-week downtime at Northam making the strike one of the most protracted of recent times. Worryingly, the stakes are rising all the time. Management surrender to NUM’s demands will only raise the bar for the Association of Mineworkers and Construction Union (AMCU) and provide it with succour: that long strikes eventually work.
That’s the last thing the rest of the platinum sector needs with some 75% of total production labouring under a dispute with AMCU which has said it won’t call a strike until the new year, cognisant perhaps it will be worth the wait to see how the Northam strike turns out.
Perhaps one can also recognise in this why Northam shareholders were reticent to follow their rights in the recent R600m clawback; in fact, only 44% were buyers, the rest happy for the dilution given the tests to come for the firm in 2014 when more shares could be offered at a better discount.
