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Lonmin miners return after violent strike

Police keep watch during the arrival of some of the 250 mine workers who were arrested last Thursday when they had a shootout with police, at a Garankuwa court outside Pretoria August 20, 2012.

STRINGER/REUTERS

Employees are trickling back to work under heavy security at South Africa's Marikana platinum mine, where clashes with police left 34 dead and more than twice as many injured last week amid strife between striking workers and Lonmin PLC, the world's third-largest platinum miner.

The London-based company said a third of Marikana's 28,000-strong work force reported for duty on Tuesday, allowing a partial resumption of some operations but no return to production, and warned it may not meet debt covenants as a result of losses.

Tensions have built for months between platinum miners and workers in South Africa, where politics – at the union, local and national level – mix with high unemployment, sinking metals prices and booming costs to create a tinderbox for labour unrest.

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"I think everyone is on tenterhooks in the platinum area," said Bruce Dickinson, a partner with Webber Wentzel law firm in Johannesburg who specializes in the mining. "I don't think people are viewing this as isolated; where it hasn't hit yet, people are waiting to see if it does," he said from Johannesburg.

South Africa President Jacob Zuma declared a week of mourning after the violence that occurred five days ago, 70 kilometres northwest of Johannesburg. Lonmin, meanwhile, backed off earlier threats to dismiss striking workers who didn't return to work this week.

"Nothing is being done to risk the continued calm on the ground," Lonmin said. "Given the traumatic events of the last 10 days this is a delicate process and it will take time for people to come to terms with what has happened."

Rock drill workers went on strike at Marikana on Aug. 10, freezing production as they demanded that their wages be doubled.

Sinking prices for platinum – best known for its use in jewellery, but most commonly used in catalytic converters for automobiles – are pressuring South African miners as they struggle to contain ballooning costs.

Platinum traded at about $1,505 (U.S.) an ounce on Tuesday, 22 per cent off year ago levels of $1,919.

Price outlook concerns saw the world's fourth-largest platinum miner, Aquarius Platinum, shutter two mines in as many weeks in June, including a mine in South Africa where three people were killed during a confrontation with what were believed to have been former workers.

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All the turmoil "is not good news for South Africa, it just adds to the challenges of doing business there," said Darryl Levitt, counsel for Norton Rose Canada and who grew up in South Africa.

Violent confrontations between rival unions also hampered output earlier this year at Impala Platinum, the world's second-largest producer.

Similar rivalry may be at the root of violence at Marikana, where an upstart union is poaching members from the more established union, challenging salary agreements at key mines. Management may also be at fault for failing to engage worker demands.

"Relationships between workers, unions, management, police and government are likely to remain tense for some time to come," Credit Suisse said in an Aug. 17 report after a week of violence at Marikana intensified.

Observers say the conflict is too complex to pin on any one cause, however, pointing to a mounting undertone of resource nationalism, tensions between communities around mines, and migrant workers straining the capacity of social services and infrastructure.

Lonmin has not produced an ounce of platinum out of Marikana since the strike began. On Aug. 16, it said it had already lost 15,000 platinum equivalent ounces of output and that it would not likely meet full-year guidance of 750,000 salable ounces of the metal.

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On Tuesday, it said it was reviewing all options as it fortifies bruised balance sheets, including issuing new shares, and predicted debt covenants may be breached as early as September.

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About the Author
Mining Reporter

Pav Jordan is a mining reporter for the Report on Business. More

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