[miningmx.com] – ONE suspects Nick Holland, Gold Fields CEO, has
sensed what seems to be the growing view regarding the wildcat strike contagion:
that the militant elements behind it are on the backfoot, or at least, sitting at the
negotiating table.
The Associated Mineworkers & Construction Union (Amcu) is a member of the Lonmin
wage talks process which, it can now be confirmed, has reached conclusion with a
22% increase. The union’s participation was only peripheral; quite how it plays an
outcome which is below the R12,500/month it promised to its constituency will be a
fascinating aspect of the strike aftermath.
For now, however, it’s interesting to see Gold Fields’ Holland acting in bolder terms
that we’ve come to expect from employers lately, so brow-beaten are they. Here’s
what Holland had to say about the ongoing strike at the company’s KDC West mine on
the West Rand, which employs about 15,000 people: “We could go on for quite some
time. We are a very strong company financially.’
In effect, he’s saying that Gold Fields is not a Lonmin, threatened by the breaking of
debt covenants. Weeks of illegal strike action make for hungry stomachs, emptier
bank balances; the garnishee orders start to stack up. In short, strike action hurts
everyone. Even the South African government has realised that its losing piles of
money in tax-take.
A signature on a wage agreement hardly ameliorates the fundamental problems that
led to the strikes, but the tide has turned decisively towards negotiation; the pangas
have been swapped for the pen. Emboldened by the government’s new efforts to
ensure security, and the gagging (rightly or wrongly) of Julius Malema, Anglo
American Platinum (Amplats) is returning its workers to the shaft.
This is not to say that there’s a cost to pay. Lonmin is expected to report a loss for its
current financial year and it’s almost inevitable that its rand-denominated bank
covenants will be broken. A refinancing by share issue is looming, although by no
means a dead certainty. If a rights issue is the way to refinance the balance sheet,
some analysts think it will be a lighter $500m than the $1bn to $1.5bn that’s been
suggested to date.
For all this, the hedge funds are often a good indication of the way in which the wind
is blowing regarding the investment play. Here’s one, speaking anonymously, on
taking a position in platinum shares: “We are long the metal and have no major short
positions on any platinum counters.
“One signature on a piece of paper and you could get hurt significantly from the
backlash,’ he said.
Some 250,000oz of platinum has been removed from the supply surplus estimated to
total 500,000oz so far this year. Lonmin has lowered its production guidance and
Amplats is yet to unveil its restructuring, likely to fall squarely on some
200,000oz/year of Rustenburg production at the shafts where it suspended production
last week.
As for the R12,500/month demands for entry-level miners, they have been proven to
be hopeful when set against the economic pressure of keeping a mine open. “Not even
R11,000/month,’ says a source close to the negotiations at Lonmin of demands that
entry-level miners’ salaries be heavily ratcheted up. “Not even R10,000/month,’ he
adds
