South African Platinum Mine Shuts Down After Nine People Are Killed

By: Anton Aleksandrov
Anton Aleksandrov
Anton is a freshly graduated economist from the States with passion for the world of finance. He is one… read more.
on Aug 14, 2012

Violent clashes between rival unions at Marikana Mine force UK-based company Lonmin (LMI:LSE) to shut down its South African mining operations. Markets were quick to respond as share prices fell more than 4 per cent in Johannesburg and 5 per cent in London. Specialists have subsequently been left doubting whether the company will be able to meet its annual production target of 750,000 ounces. Lonmin’s production accounts for 12 per cent of the world supply of platinum and the shutdown led to a 2 per cent increase in the spot price for the precious metal over fears of consequential disruption in supply onto the market.

The protests began last week when workers walked out of the mine in demand of higher wages. About 3,000 rock drill operators held a strike at Lonmin’s Western Platinum mine. The situation quickly escalated from a protest to yet another turf war between the National Union of Mineworkers (NUM) and the Association of Mineworkers and Construction Union (AMCU). The rivalry has already been causing lots of trouble for Lonmin (LMI:LSE) with conflicts spreading to a number of shafts including the Karee mine. Shafts across the South African platinum belt are currently closed while the tensions simmer. “Until the place is safe we don’t want to talk about production,” said Barnard Mokwena, Executive Vice President at Lonmin (LMI:LSE).

!m[](/uploads/story/252/thumbs/pic1_inline.png)South Africa has one of the most unionised workforces in the world and inter-union violence is not unusual. However, to date, the latest conflict at Marikana Mine has been without a doubt the deadliest one with nine people killed including two police officers. Police were forced to open fire on the attackers, shooting three people dead. One NUM members was found bludgeoned to death after he was ambushed while trying to report for duty. To prevent any further violence mounted police units, armoured vehicles and helicopters were mobilised to the Marikana facility. Control checkpoints were set up and police officers entrenched the area with barbed wire.

More than 80 per cent of the world’s proven platinum reserves are in South Africa but the sector has been struggling with declining prices and a noticeable upscale in union militancy. NUM is still the biggest union but small and aggressive competitors steal their members. One of these competitors, the AMCU, has existed for years but only recently became a major player, claiming more than 20 per cent of the NUM’s membership. AMCU is able to take advantage of the workers discontent, many of whom believe they are not getting paid enough in compensation for the inherent dangers in their work. The Congress of South African Trade Unions supports the NUM and claims that miners fall victim to divide-and-rule tactics. COSATU’s spokesman Phindile Kunene believes that violence is used to push workers towards political choices, which they wouldn’t normally make “It is no coincidence that similar incidents of violence engulfed Implats in Rustenburg and that the common factor in both cases is a splinter union which hell-bent to utilise violence to further its political aims” said Kunene.

Lonmin (LMI:LSE) are not the only platinum producers suffering as a result of inter-union violence. Three victims in January led to the closure of the largest platinum mine belonging to Impala Platinum (IPA:JSE). As a result prices jumped 15 per cent and analysts expect a similar effect this month especially if mining operations along the South African platinum shaft do not resume soon.

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