Platinum firm Lonmin halts South Africa output after violence

Reuters News
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Posted: Aug 14, 2012 11:52 AM
Platinum firm Lonmin halts South Africa output after violence

By Sherilee Lakmidas and John Mkhize

MARIKANA, South Africa (Reuters) - The world's no. 3 platinum producer Lonmin shut its South African mining operations and its shares tumbled on Tuesday after violence caused by a feud between rival unions killed at least nine people at its main mine.

Lonmin, already struggling with low prices and weak demand, may miss its annual production target of 750,000 ounces as the quarter to the end of September is typically its best. Its share price fell more than 4 percent in London and Johannesburg.

The London-based company accounts for 12 percent of global platinum output and the shutdown drove the spot price of the precious metal as much as 2 percent higher.

Two policemen and two security guards were among those killed in the clashes from Friday to Monday at the Marikana mine, about 100 km (60 miles) northwest of Johannesburg.

It was the deadliest violence yet in a membership turf war between South Africa's dominant National Union of Mineworkers (NUM) and the newer Association of Mineworkers and Construction Union (AMCU).

Executives at Lonmin said all its shafts across the South African platinum belt were closed down with only essential services such as ventilation operating.

"Until the place is safe we don't want to talk about production," Lonmin Executive Vice President Barnard Mokwena told a press briefing at Marikana.

The company said its ore processing division remained operational, but stockpiles were low.

The AMCU-NUM rivalry, which had already caused friction at Lonmin's Karee mine, has now spread to other shafts at a time when the company is cutting back on investment plans in the face of weak demand and shrinking margins.

ARMOURED VEHICLES

Hundreds of police officers, including units mounted on horseback, backed by armored vehicles, descended on the Marikana facility to prevent any repeat of the violence.

Police helicopters clattered overhead as officers set up control checkpoints and laid down barbed wire. In a nearby township, a group of men, apparently mine workers, gathered on Tuesday carrying sticks and bars.

South Africa's Mines Minister Susan Shabangu, speaking to reporters near Johannesburg, said she was prepared to intervene to try to solve the Marikana dispute but did not say how.

"It's quite clear it's rivalry between the two unions. If this matter continues we are going to be involved in the process of making sure we find peace," she said.

The world's platinum sector is already grappling with declining prices for the precious metal and a surge in union militancy in South Africa, home to 80 percent of known reserves.

Complaints that the NUM, a buttress of electoral support for South Africa's ruling African National Congress, is not defending the interests of its rank and file have put the longstanding labor grouping under siege.

Aggressive smaller unions have been poaching NUM members and Lonmin executives said AMCU now had 21 percent of the company's 28,000-strong South African workforce as members.

WORKERS' DISCONTENT

AMCU has been around for several years but has become a big player only this year as it began poaching NUM members.

The latest violence began on Friday during an illegal strike held by 3,000 rock drill operators at Lonmin's Western Platinum mine. AMCU and NUM members clashed, and police and security guards trying to restore order were caught up in the violence.

"Management, they are in support of NUM, they're sleeping in one bed with NUM," AMCU President Joseph Mathunjwa told a news briefing. AMCU officials deny allegations their members are behind the unrest, but a pattern of illegal strikes followed by violence is emerging in the wake of their recruiting efforts.

AMCU is tapping into a rich vein of workers' discontent with NUM's leadership amid low wages many miners still receive for dark and dangerous work.

"You will see the NUM understanding much more that if companies are to preserve jobs, there is a limit to how far you can push things. I don't think AMCU is experienced enough or sophisticated enough to make those kinds of judgments," said Alison Turner, an analyst at Panmure Gordon in London.

At least three people were killed in a similar round of labor violence in January that led to a six-week closure of the world's largest platinum mine, run by Impala Platinum. That blow-up helped push the platinum price up 15 percent.

"The price rise in February was probably partly due to the Impala disruption, and you could easily see a price rise if the current disruption is sustained," said David Jollie, an analyst at Mitsui Precious Metals.

(Additional reporting by Xola Potelwa in Brakpan, Tshepo Tshabalala in Johannesburg, and Clara Ferreira-Marques and Jan Harvey in London; Writing by Ed Stoddard; Editing by Pascal Fletcher and Pravin Char)