[miningmx.com] – SOUTH Africa’s three largest platinum producers raised the prospect of further job cuts as a strike over wages by the Association of Mineworkers & Construction Union (AMCU) entered its fifth week resulting in an industry revenue loss of R4.4bn.
“It won’t be too much longer before losses are irrevocable,” said Chris Griffith, CEO of Anglo American Platinum (Amplats). “And all the time, confidence is decreasing in the South African mining industry and in narrow reef mining,” he said.
Terence Goodlace, CEO of Impala Platinum (Implats), said about 10% of the company’s workings had been “irreversibly lost” and would require re-development and rehabilitation. “The longer we stand the more irreversible” damage to the mining assets were sustained, he said, adding that the company’s mines would have to operate at between one to three months before they would be profitable again.
The risk to the platinum sector is primarily to their net debt levels which climb in the absence of cash flow, threatening covenants with financial institutions, and therefore requiring pre-emptive cash-saving restructuring.
Employee numbers in the South African platinum sector had shrunk to less than 134,000 souls by December 2013 from 145,000 in December 2011. A prolonged strike could “exacerbate this reduction and may result in more restructuring and possible closures,” said Goodlace in a prepared statement.
Ben Magara, CEO of Lonmin, said there was a technical risk to the company’s processing facilities as smelters were idled which led to contraction. Lonmin has a history of furnace break-outs at its operations.
AMCU has stood by its initial demand of a R12,500/month salary for entry-level workers, a demand that would result in a mean increase of up to 150%, the platinum producers said.
AMCU’s demand has been met by an industry offer, adjusted several times, for a three-year wage increase of between 7% to 9%. The last offer, which was put on table on January 29, was a position that Griffith said was already unaffordable and would see the companies “return to the drawing board” in an effort to accommodate the cost increase. South Africa’s inflation rate was about 5.4%.
“The union (AMCU) refuses to accept the economic circumstances facing the industry or the cost structures of these companies,” said Griffith. “It has no or little interest in preserving jobs through economic means and has displayed widespread disregard for collective bargaining,” he said.
He, however, stood by comments articulated on February 14 at the results presentation of Amplats’ parent company Anglo American in which he said a second month of no wages for employees would presage a change in AMCU’s stance.
“Pay day is when the pain will be felt,” he said. “The real impact of the strike will be felt at that point.” At the time of writing, employee wage losses amounted to R1.94bn.
Responding to a question, Griffith said that the three producers were considering having AMCU’s strike declared unprotected on the basis that the union’s actions had been unlawful. “There could there be a scenario where we consider declaring it illegal; it is something we are considering,” he said.
AMCU had been responsible for overt and covert intimidation and an application to have AMCU in contempt of court, having broken pre-agreed picketing rules, goes to court on Friday (February 21), said Griffith. Efforts to extract up to R600m in damages from the union by Amplats would take longer, he said.
