Does AMCU have the stomach for another bruiser with Sibanye-Stillwater?

Joseph Mathunjwa, president, AMCU

DOES the Association of Mineworkers and Construction Union (AMCU) have the stomach for another strike? That’s perhaps the most important question ahead of platinum industry wage talks due to kick off this month.

One view is that there’s every likelihood Joseph Mathunjwa, the increasingly incalculable president of AMCU, having lost some of his normal swagger in the union, will be disposed to winning it back by waging a successful strike.

It’s also thought that as the majority union in the platinum group metal (PGM) sector, AMCU is supported by the courts in potential industrial action as it wasn’t as the minority union in the recent five-month gold strike at Sibanye-Stillwater.

A Citi analyst praised Sibanye-Stillwater for resisting rewarding militancy. The outcome of that strike was a fairly humbling return to work with AMCU accepting the wage offer put to other unions before the strike started in November. Certain employee inducements to get back to work were at the discretion of Sibanye-Stillwater and were not earned by AMCU.

The fear is that Mathunjwa may be disposed to fight back; driven by emotion and concern for his position. If, as it seems likely, the proposed merger of Lonmin with Sibanye-Stillwater goes ahead, there may be even more reason for AMCU to seek a bust-up with Sibanye-Stillwater on a stage where it has considerably more power.

There are, of course, other companies negotiating PGM wages this year including Anglo American Platinum (Amplats) and Impala Platinum (Implats). But since the talks do not fall under the aegis of the Minerals Council each will be left to their own processes.

The view of Amplats CEO, Chris Griffith, is that the company will most likely settle at a percentage above inflation. This was his message when interviewed by Miningmx on April 22 in which he added that Amplats would “always pay above inflation” wage increases. It has the luxury now of mechanised mines having sold the restive Rustenburg shafts.

But if AMCU is weakened following the gold strike at Sibanye-Stillwater then so is Sibanye-Stillwater. The strike wiped out most of the company’s EBITDA in the first quarter forcing it to reduce debt through financial engineering rather than through cash flow as promised. It will also spend most of the second quarter getting the gold mines operating again.

So there’s little space for Sibanye-Stillwater to move.

One view is that Stillwater mine and the Rustenburg platinum operations have not generated the free cash flow as expected. What might be the case at less elevated metal prices, and amid a platinum strike?

So, the stakes are as high as ever: pressure on Sibanye-Stillwater to start generating the cash and reducing debt; pressure on Mathunjwa at AMCU who was suffered a string of bad setbacks this year at the hands of Sibanye-Stillwater.


  1. A concerning situation and well articulated in the article. It seems to highlight the diverse agendas at play. It would appear to me that Amplats retains, to some extent, “the power of life or death” in the sector it has dominated over the decades.

    As for AMCU, this article highlights a disturbing aspect. It appears to me the author is suggesting that Joseph has little choice but to create a confrontation with Sibanye-Stillwater. From the point of view of the lowest cost PGM producers that can offer a generous wage settlement, the prospect of a convoluted strike or an unaffordable wage settlement for others, must be an attractive prospect. Ultimately it may lead to the earlier closure of marginal ounces and, therefore higher PGM prices in the future. A win-win for the lower cost producers, then. Such a scenario may, furthermore, allow Anglo to bring forward its potentially low cost, high quality, Der Brochen project in the Eastern Bushveld. It may also mean the earlier restructuring of its only remaining labour intensive operation, Amandelbult, which does not appear to fit with its strategic intent.

    It looks like the SA platinum industry may be facing a shakeout, then. Meanwhile Sibanye’s offer for Lonmin is falling in money value by the day. Remember when Glencore offered £34 per share for it? Sibanye’s offer is now way under £1 per share. One wonders how the PIC feels about this – I am confident its analysts will be on top of this interesting situation. The PIC has a 30% stake in Lonmin and, on its own, can block the deal whose scheme of arrangement needs 75% of Lonmin shareholders present and voting to wave the 1:1, all share deal through. In my humble view, this offer is inadequate by a country mile.

    I do own some Lonmin shares.

  2. Neal’s best negotiating tool will be retrenchments at Lonmin. The more AMCU ask for unrealistic demands the more jobs they will destroy at Lonmin. Let’s hope Joseph has grown up a bit and does not let his emotions drive his decisions, he will be taught another lesson.

  3. The strike is just another side effect of a larger issue.
    PGM prices that are artificially, determined by the futures market.

    Here is how:
    Contracts are sold in cash, for a delivery of metal at a set date in the future.
    On expiry the contract may be settled in various markets in cash. The JSE confirms as follows:
    In other words, no metal is involved in the majority of the supply and demand.

    Here is why:
    The effect is that true supply and demand is diluted to the point that it does not allow for true price discovery.
    This may be observed in manner by which the mining industry has been consolidating and scaling back operations as well as the notable reduction of investment in new supply, compared to previous decades.

    The very tool that was created with the primary purpose of allowing producers to sell their production in advance, in order to fund capital investment is now their greatest enemy.
    Large financial institutions with excess cash reserves have the last say in where the price will be.
    The extremely tight nature of the industry as a whole is an indication of this.

    The tail is wagging the dog and the mines can do nothing about it but deal with the fallout.

  4. I simply cannot see Lonmin surviving without a bailout and significant restructuring. The PIC has little choice but to support the Sibanye offer without an alternative higher one (unlikely). The only other choice for the PIC is to pump in further funds and probably not follow through with the retrenchments that are required. I guess it might just be a better investment than AYO but still hard to justify.

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