Market shrugs off battle of wills as AMCU gold strike nears four-month mark

Neal Froneman, CEO, Sibanye-Stillwater

SHARES in Sibanye-Stillwater are nearly 72% higher since the Association of Mineworkers & Construction Union (AMCU) started its strike at the company’s South African gold mines on November 25 last year.

In addition to discounting the impact of the strike – which implies for this year a continuation of the R20m per day in cash burn at the gold mines – investors also seem sanguine about a delay in Sibanye-Stillwater’s proposed takeover of Lonmin, the South African platinum group metal (PGM) producer.

The reason is the improvement in the palladium price, as well as rhodium, that Sibanye-Stillwater produces in relatively high proportion to platinum at its US-based PGM producer, Stillwater. Given that capital expenditure at the Stillwater Blitz expansion is largely sunk, it’s reasonable to assume Sibanye-Stillwater is able to withstand the strike at the gold premises in fair economic comfort.

According to Goldman Sachs and RBC Capital Markets, Sibanye-Stillwater is also expected to address the high level of debt on its balance sheet, a factor deemed the single largest risk to the company last year.

There’s also less concern regarding the chances of a secondary strike, if it is approved by the Labour Court, occurring at Sibanye-Stillwater’s platinum operations. And with national elections due on May 8, the rand is likely to be kept in check, until at least President Cyril Ramaphosa is re-elected, which seems likely.

In this scenario, there’s much less for Neal Froneman, CEO of Sibanye-Stillwater, to lose than Joseph Mathunjwa, the president of AMCU. The popular thought is that the strike has become personal between the two. That may be a factor, but cold economics will decide the ultimate outcome of the strike.

Already, Sibanye-Stillwater has plans in place to cut employment at its Driefontein and Beatrix gold mines by 6,700. The writing is on the wall: South Africa’s gold sector is in its final throes, yet AMCU is making a Colonel Custer of a last stand at the operations, hastening their closure.

Why then is AMCU persisting, recently turning down Sibanye-Stillwater’s most recent proposal aimed at ending the strike?

One view is that it’s become personal. First viewed as an effort to win more gold industry membership, then considered a stall-setting tactic ahead of Sibanye-Stillwater taking over Lonmin where AMCU is traditionally strong, the strike now seems major folly.

Mathunjwa has bet the farm. To back down now with platinum industry wage negotiations around the corner could end a reputation.

7 COMMENTS

  1. Over estimating the strength of the hand you were dealt with, and the poor is suffering the consequences. I would like to see how AMCU is going to get out of this one. I can only see the demise of a Union in my crystal ball.
    It would actually be nice to know how much Unions cost SA’s GDP growth (or lack there-of) over the last 25 years.
    Between corruption, state capture and silly strike seasons, it cost this country a lot, which can be seen in the GDP growth.
    There is 6,700 jobs on the line and I would thought it was time to take hands and work together to avoid this, and believe me there are options outside laying off people.
    BUT, will Mr Mathunjwa’s ego permit this?

  2. Yes, Mathunjwa is the head of AMCU, but the workers need to accept responsibility for the situation they find themselves in.

  3. It is impossible to cut 6700 employees, its only that they want the strike to come to the end,but however let them give them what they want ,”A LIVING WAGE”that’s all…..

  4. Mathunjwa is too proud to accept his mistake, how can a sane leader enjoy seeing his followers suffer on his watch, as long as his pocket is full and his bank account is loaded he doesn’t care about others, and I m telling you after strike he will be one of the many who will be blaming the SA government for lack of employment opportunities but he can’t see his contribution to that now…watch this space…!!!

  5. I would like to see this strike to end, I think NUM did wrong for joining unions that belongs to officials and leave Amcu out side,which one can understand that there is coraption played by num and employer

  6. Can Joseph let us all know how much he is paid every month? I can’t imagine it’s something he’s happy to share with his members for fear they would realise why he runs AMCU!!!!

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