Platinum Outperforming As Miners Seek To Have Strike Outlawed in South Africa

February 21st, 2014 by

goldmine

Platinum outperformed the other precious metals today, as focus shifts to the strikes in South Africa, which has shut down 40% of world platinum production.

The three big platinum mining companies affected, Anglo American Platinum (Amplats,) Impala Platinum (Implats,) and Lonmin, report that they have lost 4.4 billion rand ($405 million) in revenue so far, and 10,000 oz a day in platinum output. The strikes are about to enter their fifth week, with the main trade union Association of Mineworkers and Construction Union (AMCU) hanging tough with their demands.

Analysts estimate the the mining companies had about eight weeks of above-ground ore supply stocked up when the strike began, allowing them to also stick to their guns. The industry trade group for South African mining companies recently announced that approximately 45% of platinum operations were losing money in the current market conditions. This has prompted the companies to declare a “take it or leave it” approach to their latest offer to the striking workers. This plan is a three-year deal, offering a 9% pay raise the first year, graduating down to a 7.5% pay raise the third year, with increased housing allowances. The current inflation rate in South Africa is 5.8%.

AMCU is sticking by its demands for enter level wages to more than double, with pay raises for higher level workers as well, and increased housing allowances and other bonuses. Declaring that the company negotiators are either members of, or sympathetic to, a rival union, AMCU leaders are demanding the the CEO of Amplats, Implats, and Lonmin personally negotiate with the union.

mine shaftWhile platinum miners already make more than most blue collar workers in South Africa, most are from remote rural villages, and send a large amount of their paycheck home. It is estimated that the average miner is responsible for eight dependents. While morale is high among AMCU members, next week brings the first missed monthly paycheck. Lost wages are put at 1.9 billion rand ($173.6 million.) The struggle seems set to last until the bitter end, when either the companies run out of ore, or the workers with hungry mouths to feed relent in their demands.

While not as bloody as strikes in 2011, violence against people and property has been escalating, in what authorities call a stepped-up campaign of fear and intimidation by AMCU. A man on his way to work at an Amplats mine Tuesday was jumped by four men, beaten, and set on fire. He died of his injuries the next morning, becoming the latest fatality in the strike.

The mining companies are considering appealing to the courts to rule that the strikers have crossed over the line of protected behavior, and to declare the strike illegal. This would give the companies legal recourse to fire striking workers. Amplats has sued AMCU in civil court for $54 million worth of property damage committed by striking workers.

AMCU declares this to be a union-busting ploy, and is threatening to march on government offices and mining headquarters in protest.

Behind the scenes, Chinese investment groups are eying the beaten-down mining companies as acquisition targets, should labor relations improve. Long March Capital Ltd recently bought out Australian gold miner Gold One International. Part of the deal involved a 17% stake in South African miner Sibanye Gold. This has led them to looking at the nation’s platinum operations, as the Big Three companies have seen their stock drop by 60% to 75%, making them attractive takeover targets if expenses can be brought under control. Long March would have a ready market back home for platinum, considering the sometimes life-threatening air pollution choking major Chinese cities.