Lonmin Still Struggling To Resolve The Strikes At Marikana

on Sep 21, 2012
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The violent strike at Lonmin’s Marikana mine in South Africa continues, as the platinum mining company and the protesting workers still can’t come to an agreement over the scale of payments, The Times reported on September 18. Lonmin (LON: LMI) received a lot of criticism for the way it distributes spoils to the different hierarchy levels in the company, and for the huge difference between the lush remuneration packages of its top executives and the salaries of the miners in particular. The Congress of South African Trade Unions (Cosatu) was extremely critical. At the national congress of the organisation, its President Sidumo Dlamini talked on the subject, slating Lonmin’s payment practices. He revealed that some of the top executives at the company, namely its financial officer Alan Ferguson, earn “152 times higher than the salary of a rock-drill operator”, and explained that the miners cannot be expected to tolerate the current status quo.

The miners gathered in a stadium in Wonderkop, a township near Marikana, to discuss Lonmin’s latest wage offer. The meeting didn’t go without problems, as the police intervened to prevent an attempt by radical political activist Julius Malema to attend the meeting. The five-week stand-off has seen appalling violence, claiming 75 lives and leaving many more wounded.

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!m[](/uploads/story/428/thumbs/pic1_inline.png)At the moment there is still a significant gap between the two parties. The miners want a three-fold increase in salaries, claiming that the current division of spoils is unfair. Many of the workers live poor conditions, often lacking basic utilities such as electricity and water supplies. Lonmin claims that it can’t meet the demands, pointing out platinum’s low price and its unstable financial position as the primary reasons for why.

The company estimates that the demands would put additional weight of £172 million on its wage bill.
Lonmin announced cuts of some of the long term bonuses of its five senior executives, who won’t receive 99,125 shares offered as performance-related incentives in 2009. 57,152 would’ve gone to the company’s CEO Ian Farmer, who is on a sick leave.

Cuts in production forecasts for this year have also had to be made as a result of the strike. Lonmin had forecast 750,000 tonnes of platinum ore to be produced by September 30, but now expectations are significantly lower – at somewhere between 685,000 and 700,000 tonnes. This will result in an 8.5 percent increase of per-unit cost and will put the company in a difficult situation. There is a possibility of Lonmin launching an emergency issue of new shares, since the company is expected to breach the terms of its bank loans this month.
Simon Scott, the acting chief executive, commented on the crisis, stating that because of the delays in production caused by the strike, jobs might be jeopardized. “There will be consequences to jobs if there is a continuing delay in returning to production,” he said.

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