Skip to main content
Complete Olympic Games coverage at your fingertips
Your inside track on the Olympic Games
Enjoy unlimited digital access
$1.99
per week for 24 weeks
Complete Olympic Games coverage at your fingertips
Your inside track onthe Olympics Games
$1.99
per week
for 24 weeks
// //

Striking miners dance and cheer after they were informed of a 22 per cent wage increase offer outside Lonmin's Marikana mine, 100 km northwest of Johannesburg, Sept. 18, 2012.

SIPHIWE SIBEKO/Reuters

South Africa's platinum crisis isn't over yet. A pay deal struck by Lonmin will, if it holds, end a violent six-week strike that has claimed 45 lives. That's good for the work force. And it solves an immediate, potentially existential problem for the world's third-biggest platinum producer. But it sets up other big challenges for Lonmin and the industry. The big wage hike will hurt already weak margins. And the response may only encourage further strikes.

The pay deal was a surprise. Lonmin's shares opened 9 per cent higher in Johannesburg on Wednesday. Earlier this week, the two sides seemed far apart. But several weeks of shut production and no wages, along with police raids on mining villages at the weekend, seem to have forced the issue. The miners have agreed to go back on the clock in return for a pay rise of up to 22 per cent, plus a signing bonus.

The next few days should tell whether the agreement sticks. Lonmin's employees are due to return to work on Thursday, though in reality it will probably take longer to know whether the deal has support.

Story continues below advertisement

Even if the settlement holds, the consequences for Lonmin and the industry may still be painful. Lonmin's higher-cost operations meant it was only just breaking even on its mines before the labour unrest began. Worker pay is 60 per cent of the company's cost base, according to Nomura.

Six weeks of disruption will force the company to spread its fixed costs over fewer ounces of mined material, hurting mining margins further. If platinum's recent price rally fades as concerns over supply ease, that will also challenge the industry's economics.

Lonmin may have had no choice but to agree to a big wage bump. What started as a local labour dispute turned into a national emergency after 34 workers were killed by South African police in August. Nevertheless, Lonmin has publicly blinked in the face of pressures that started well outside the standard labour relations channels. By Wednesday's close Lonmin's shares had given up most of their gains. That seems a fair reflection of the extent to which the benefits of resolving this tragic situation may come at a significant cost.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies