Platinum Australia faces tough situation

[] — PLATINUM Australia (PLA) has confirmed the death of mining contractor Kobus Jansen Van Rensburg who was assaulted by a crowd of ex-employees near the Smokey Hills platinum mine on Thursday.

This is the latest – and by far the worst – incident of labour unrest at the mine which began in December last year when a new mining contractor – JIC – was appointed to replace previous contractor Redpath Mining.

JIC is controlled by the Gupta family through Oakbay Investments which holds a 61% stake in the operation.

The unrest at Smokey Hills comes at a difficult time for PLA in particular and the mining sector in general which is about to engage in a new round of wage negotiations.

According to a PLA statement, ” the incident occurred approximately five kms from the mine when the mini-bus transporting nine JIC workers was attacked by a crowd of people which reportedly included a number of ex-employees of JIC who had been terminated in February following illegal strike action.

“When the bus stopped it was stoned by the crowd, turned on its side and set on fire.

“A 39 year old employee of JIC, Kobus Jansen Van Rensburg , was fatally assaulted when he climbed out of the bus. The other JIC employees were also assaulted when they got out of the bus requiring five of the employees to be hospitalized.’

PLA added that, “following the incident senior management from PLA and JIC met with senior Limpopo government officials including the Office of the Premier and a task team was established to address the situation and ensure the safety and security of the mine and its personnel, the majority of whom are from the Limpopo province.’

PLA suspended operations at Smokey Hills on Thursday after the incident but the mine was scheduled to resume normal operations on Monday.

The trouble in February resulted from most of the workforce refusing to go underground on January 31 and February 1 because of “on going issues arising out of the transfer of employees from Redpath Mining to JIC.’

JIC subsequently obtained an interdict requiring employees to return to work but 575 out of a total of 600 did not and were dismissed.

JIC then re-employed about 25% of the previous workforce and hired a number of other workers locally but also transferred 300 workers to Smokey Hills from their other operations.

In early March PLA said that JIC planned to recruit up to another 150 workers from the local community over the next two months.

The initial trouble broke out in December when JIC took over from previous contractor Redpath. JIC dismissed about 85% of the workforce after they refused to return to work.

JIC did not rehire “a significant number’ of the dismissed employees because it had taken over more workers than it needed from Redpath.

Profit margins on many platinum producers in particular are being squeezed by weak platinum group metals (pgm) prices which are being made worse by the impact of the strong rand.

Despite this labour unions are in the process of making pay demands way in excess of ruling South African inflation levels which are currently running at around 4%.

The NUM recently lodged opening demands with the Chamber of Mines for pay increases ranging between 14% and 25% on the gold mines combined with a 45% increase in the worker living out allowance.

Impala Platinum last week announced that it would be retrenching workers from its underperforming Marula mine near Steelpoort which is also in Limpopo Province.

The company will not specify numbers at this stage but it’s understood that up to 1,300 jobs may be at risk on the mine.

PLA cannot afford on-going labour strife at Smokey Hills because of the dire financial consequences this would trigger for the company because of lower-than-planned production at the mine.

According to RBC Capital Markets analyst Leon Esterhuizen the Smokey Hills mine has to deliver positive cash flows in the June and September quarters to avoid a financial crunch looming by the end of August.

In November PLA raised A$40m at a share price of A$0.59 a share. A significant amount of the offer had to be taken up by the underwriters and the company’s share price has plunged since then to current levels around A$0.39.