April 24, 2014 11:20 am

Amplats’ production drops nearly 40% as strike drags on

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A picture taken on January 16, 2013 shows Anglo American Platinum mine in Rustenburg, northwest of Johannesburg. Amplats announced yesterday it would close four shafts and sell a mine in sweeping restructuring, saying operations had become unsustainable. The vast majority of job cuts -- 13,000 in all -- would be made around Rustenburg. Last year's protests lead to the deaths of over 50 people, the majority strikers shot by police in one day of bloodshed at the Marikana platinum mine. AFP PHOTO / STEPHANE DE SAKUTIN (Photo credit should read STEPHANE DE SAKUTIN/AFP/Getty Images)©AFP

Anglo American Platinum said on Thursday that its production plummeted by more than a third in the first quarter as an unprecedented three-month strike in South Africa cripples the industry.

Amplats, the world’s top producer of the precious metal, said it had lost 185,000 ounces of platinum production as a result of the industrial action, with its output falling to 357,000 ounces in the first three months of the year, down 39 per cent compared with the same period in 2013.

The devastating wage strike, described as the longest and costliest in South Africa’s mining history, was called by the Association of Mineworkers and Construction Union (Amcu) on January 23. It has severely disrupted operations at Amplats, Impala Platinum and Lonmin, and has already cost them a combined total of R14.5bn in lost production. A further R6.5bn has been lost in wages to employees as tens of thousands of workers have downed tools, the companies say.

The companies and Amcu, an upstart organisation that has grown rapidly since unrest in 2012 to become the dominant union in platinum, have resumed talks after the producers put in a revised offer last week. But it is unclear if they have made any progress, with both sides playing hardball so far.

The companies have said they would increase the employees “cash remuneration”, which includes benefits and bonuses, by between 7.5 per cent and 10 per cent. This would mean an entry level underground miners’ overall salary package increasing to R12,500 per month by 2017.

But this falls short of what Amcu has been demanding. It is pushing for the basic minimum monthly wage, excluding benefits and bonuses, to be increased to R12,500, more than double its current level. The union, which is involved in formal negotiations for the first time, did concede that this could be done over four years.

But the companies rejected it saying it was still unaffordable, as they warned that the strike threatened to hasten the closure of marginal mines and lead to greater job losses in the sector.

The producers insist that nearly half of platinum operations in South Africa were failing to break even before the industrial action began. The union argues that miners are poorly paid and deserve a “living wage” to address the legacies of apartheid, during which the industry benefited from cheap black labour.

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The R12,500-a-month demand is highly symbolic for the workers as it was the rallying cry during weeks of violent wildcat strikes in 2012 when about 50 people lost their lives, including 34 miners shot by police.

South Africa is the world’s top producer of the precious metal and home to about 80 per cent of the proven reserves of platinum. But the industry has been struggling with rising costs, labour unrest and a subdued price outlook. In spite of the strike, the price of platinum has remained stable at around $1,400 an ounce, indicating an oversupply of the metal in the market.

The strike has hit about 40 per cent of Amplats’ total production and a fifth of Impala’s, which said last week it had lost about 180,000 ounces of production to the industrial action.

However, Lonmin is the worst affected as it has had to halt its entire operations.

Amplats reduced its annual production forecast from 2.3m/2.4m ounces to 2.1m ounces, saying further downward revisions were possible depending on the duration of the strike.

It said its sales expectations were unchanged. All the companies have previously said they would be willing to buy metal on the open market to meet customers’ requirements rather than give in to what they deem unreasonable demands from the union.

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