Industrial relations at Lonmin, one of South Africa’s largest platinum producers, have improved significantly allowing negotiations with unions that would have been “unthinkable” a year ago, according to chief executive Ben Magara.
Magara made the statement at the announcement of the platinum producer’s interim results on Monday, which have taken a beating, predominantly off the back of persistently low metals prices.
The company reported an underlying operating loss of $70-million, down from earnings of $34-million during the same period last year.
The tough climate has meant the company is seeking to restructure and cut labour costs, and it is in talks with unions to possibly shed 3 500 jobs.
It was announced on Friday that Lonmin has approached unions to reduce labour costs by 10%, through voluntary separation packages and early retirements.
Early days
Magara stressed that, although it was early days, talks were progressing well considering the fraught labour relations environment that saw protracted strikes on the platinum belt last year.
“As we seek to reduce head count, we have had constructive, transparent and progressive talks with unions, including Amcu [the Association of Mineworkers and Construction Union],” Magara said.
Amcu is currently the majority union at Lonmin.
Its willingness to recognise the need to act to save the highest number of jobs and to engage the company in the process is something that would have been unthinkable a year ago, Magara said.
“It is early days, but I am encouraged by our employees’ appreciation of where the business is today. We are having to take these tough decisions to protect the majority of jobs.”
Labour numbers in decline
In terms of employees who would benefit from taking voluntary packages, the company was also looking at workers in nonproduction areas and those who had exceeded their statutory leave days, Magara noted.
Since March last year, labour numbers have declined by 1 128, according to the company.
The restructuring is expected to cost around R400-million in the current financial year and result in subsequent yearly savings of around R840-million, it said in its results.
Despite Magara’s confidence, the outcome of talks remains to be seen.
The National Union of Mineworkers said in a statement on Friday that it would fight against any job losses.
The company expected the platinum price would remain depressed for a further two years, which has impacted on its capital expenditure plans.
The firm will reduce capital expenditure for 2015 from $185-million to $160-million.
New markets opening up
Despite the depressed outlook Magara said the mining house did not have plans to close any shafts at present.
“The long-term fundamentals [for platinum group metals] remain intact,” he said.
New markets were opening up, such as the market for platinum fuel cells, he noted.
In addition demand for platinum in the automotives sector was expected to grow 3.7% in 2015, according to the company, and jewellery demand was expected to remain at 38% of total demand.
There was a likelihood that more jobs would arise in the future as market conditions improved, Magara said, but the business had to remain resilient to reach that point.
The current cost-savings initiatives should be sufficient to ensure the company could weather the “storm”, he said.
Lonmin’s net debt reached $282-million because of the disruption caused by the shutdown of its smelters. These have subsequently returned to normal operating levels.
Magara said that as the company processed the 200 000 ounces of platinum stock it had accumulated above ground, revenues are expected to drive its debt down by $170-million.