Lonmin deal pressures other South Africa mining firms

Reuters News
Posted: Sep 19, 2012 2:57 AM
Lonmin deal pressures other South Africa mining firms

By Ed Stoddard

JOHANNESBURG (Reuters) - A violent six-week strike at world No. 3 platinum producer Lonmin has come to an end with a hefty wage settlement that could stir more strife in South Africa's restive mining sector.

Lonmin's 11-to-22 percent pay hike deal with striking workers may be a red rag for others in an industry riven by income disparities laid bare by a wave of violent industrial action in which 45 people died last month.

As Lonmin's miners prepare to don their helmets and head back down the shafts, others are eyeing their gains greedily.

"We want management to meet us as well now. We want 9,000 rand ($1,100) a month as a basic wage instead of the roughly 5,000 rand we are getting," an organizer with the militant Association of Mineworkers and Construction Union (AMCU) at Lonmin rival Impala Platinum told Reuters.

He declined to be named for fear company recriminations.

AMCU exploded onto the South African labor scene in January when its turf war for members with the dominant National Union of Mineworkers (NUM) led to the closure of the world's largest platinum mine, run by Implats, for 6 weeks.

The discontent rolling through the platinum belt has found fertile ground in the shanty-towns that ring the mines.

The communities that serve the platinum companies sit side-by-side in the dusty "platinum belt" - proximity that will make the Lonmin deal a source of jealousy for workers from other mines.

Anglo American Platinum, the world's top producer of the metal used for catalytic converters in cars, was last week forced to suspend its Rustenburg operations, 120 kms (70 miles) northwest of Johannesburg, because of the unrest.

Those mines rebooted on Tuesday but its workers will be tempted by the pay hikes achieved just down the road in Marikana, where 34 striking Lonmin workers were shot dead by police last month in the worst such incident since the end of white rule in 1994.

"The ripple effects will continue to be felt. The outcome of the negotiation at Marikana will likely set a new benchmark for mining more generally and wage costs are set to rise substantially," JP Morgan said in a research note.

Wage hikes in the mining sector have been leap-frogging inflation for years, reducing margins in the industry as productivity has struggled to keep pace.

But your typical miner has several dependents to feed and so pay rises that outpace inflation may not go far as the gains evaporate at the kitchen table. Racing food inflation due to soaring global grain prices will only stoke workers' hunger.

The gold sector has also not been spared, with 15,000 miners at the KDC West operation of Gold Fields, the world's fourth largest bullion producer, on an illegal strike.

However, unlike the platinum miners, Gold Fields and its bigger rival, Anglo Gold Ashanti, have both diversified away from their home base and now get half or more of their output from outside South Africa.

Gold Fields' chief executive Nick Holland told Reuters on Monday his company could "go on for quite some time" despite the KDC West disruption.

Platinum producers do not have this choice because 80 percent of the metal lies below South Africa's soil. Lonmin was brought to its knees by the strike because all of its mines were effectively shut.

($1 = 8.2390 South African rand)

(Editing by Ed Cropley)