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South African Platinum Miners Struggle As Strikes Intensify

Platinum bars

More warning signs emerging this week in the world’s top-producing platinum nation, South Africa. Where it appears the depressed state of industry is endangering the future of several critical mines.

The biggest setback came for major producer Lonmin. Which announced Thursday that its platinum production for the three months to December fell by a full 20%, to 137,000 ounces.

The most surprising thing was the reason Lonmin gave for the production hit.

Mine workers aren’t showing up.

Lonmin’s management said the biggest factor affecting production was absenteeism at its Marakana operations. Particularly affecting the company’s largest production shaft, K3. You have to read the company’s words to believe it:

“The relationship between operational management and unions at this shaft is not working as effectively as we expected, and the yielding of results from the implementation of business improvement initiatives at this shaft is taking longer than we would have liked to see.”

That shows just how strained relations are between workers and miners in South Africa. With those labor problems now directly translating into financial hardship — prompting Lonmin to suggest it will likely cut back on capital projects due to its shrinking cash flows.

And tensions between unions and miners are going to rise over the coming weeks. After major platinum producer Sibanye Gold said it’s planning a major round of layoffs.

Sibanye said Thursday it is looking to cut 330 jobs at platinum operations recently acquired from Anglo American Platinum and Aquarius Platinum. In an effort to streamline overhead costs and improve efficiency. Related: Robots Over Roughnecks: Next Drilling Boom Might Not Add Many Jobs

That makes a lot of sense from a business perspective — with Sibanye already having staff and expertise in-house, eliminating the need for some workers that came along with the purchased mines.

But the move is sure to be unpopular with unions. And given the scale of potential layoffs could even trigger full-out action against the company.

This is going to be one of the first big tests for platinum miners as they try to rightsize operations for the current economic environment. It’s not going to be easy — watch to see if companies like Sibanye can pull off cost saving measures such as layoffs, or if they’ll be stymied by unions and government.

Here’s to keeping it real.

By Dave Forest

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