Platinum producers take strike pain for cost-control gain
Platinum's three biggest producers are accepting crippling output disruptions and lost sales from a South African strike rather than yielding to union demands and higher wage costs, according to Stanlib Asset Management.
Keeping expenses under control is more important than reviving production by giving up ground on a wage settlement for Anglo American Platinum, Impala Platinum and Lonmin, said Kobus Nell, an analyst at Johannesburg-based Stanlib, which manages about $50-billion in assets.
"This is short-term pain," Nell said by phone on Monday. "Should this pain bring about more viable and solid businesses, it will be better for everyone."
Shares in the three producers have all advanced since the Association of Mineworkers and Construction Union (Amcu) called more than 70 000 workers out on strike on January 23.
Mediators were due to resume talks with the union on Monday in a bid to resolve the standoff that is costing the companies almost $18-million a day in combined sales. Amplats, as the world's largest producer is known, lost more than 60 000 ounces valued at R1.5-billion in the first three weeks of the walkout, chief executive Chris Griffith said February 14.
South Africa accounts for about 70% of global production of the metal used in jewellery and catalytic converters for vehicles.
Amcu is demanding that monthly wages for some workers be more than doubled to R12 500. The union is meeting with the Commission for Conciliation, Arbitration and Mediation on Monday for the first time since it rejected a pay-increase offer from employers of as much as 9%.
Amplats was 0.2% lower at R460.91 in Johannesburg trading by 1.10pm on Monday, paring to 14% its gains since January 17, the last day before Amcu gave notice of its strike. Impala, the second-largest producer, was 0.2% higher at R124.12, up 3.4% since January 17. Lonmin has gained 4.5% in the same period and was 1.2% higher at 3 301 pence in London. The stocks are supported by better prospects for platinum demand and a slide in the value of the South African currency, Stanlib’s Nell said.
Producers pay their costs in the rand, which is down 22% since the start of last year against the dollar, the currency in which platinum is priced.
Strike-disrupted mines run by Amplats near Rustenburg in the North West province are unlikely to be part of the company's core operations in future, Business Day reported on Monday, citing Mark Cutifani, chief executive of parent Anglo American.
“Those assets that are highly labour intensive, where we are very exposed to the sort of things happening at the moment, are the assets that we are going to have to be very careful with," Cutifani was quoted by the Johannesburg-based newspaper as saying.
Amplats is suing Amcu for R591-million, claiming compensation for damage to property, increased security costs and production losses caused by non-striking employees being prevented from going to work, company spokeswoman Mpumi Sithole said by email on February 14.
Some roads leading toward Amplats's mines were blocked on Monday, making it difficult for non-striking employees to report for work, Sithole said. Incidents of violence have subsided since an Amcu official was killed in a clash with police on February 7, she said.
The situation around Lonmin's mines is calm, spokeswoman Sue Vey said by phone, after the company won a court order February 14 compelling the Amcu to keep to picketing rules. Four Lonmin employees had been violently intimidated during the strike, she said.
Impala was preparing for the strike to last until May, Johan Theron, a spokesman for the company, said on Feb. 14. – Bloomberg