JOHANNESBURG/LONDON – Platinum producer Lonmin aims to cut around 5,700 jobs, about 21 percent of its South African workforce, as part of a drive to restore profits after a five-month wage strike this year, sources familiar with the plan said.
The plan would see the closure of four to six of the company’s 11 shafts, the two mining industry sources, one in London and the other in Johannesburg, told Reuters.
Lonmin spokeswoman Sue Vey on Monday said in response to questions from Reuters that she had “no knowledge” of the plan.
The company, the world’s third-largest producer of the precious metal used for emissions-capping catalytic converters in automobiles, said in June that the strike and low prices meant “restructuring of our business has become inevitable”.
Job cuts could trigger more labour unrest, including potential strikes by the hardline Association of Mineworkers and Construction Union (Amcu), whose members have downed tools in the past to protest against planned lay-offs.
“There will be six shafts closed and 5,700 jobs will go. That is the plan,” the Johannesburg source, who declined to be identified, said.
Lonmin has a staff of around 27,000.
The source did not disclose which shafts would go but said Lonmin had decided it “could no longer subsidise the loss-making shafts and had to focus on the profitable ones”.
A key reason behind the restructuring is the wage settlement reached in June with Amcu to end the strike, which will see its members get pay increases of up to around 20 percent annually for the next three years.
“The settlement was a short-term solution to get the mines running again. But the only way Lonmin can afford it is to cut marginal shafts,” said the source, who added he had been provided with an outline of the plan by a top Lonmin official.
The London-based source said at least four shafts would be closed and the board was putting together a plan that should be announced before the end of the year.
The plan may be Lonmin’s best chance at returning to healthy profit margins as it struggles to recover from the strike at a time when platinum prices are depressed.
Lonmin raised $800 million (R8.6 billion) to shore up its balance sheet in 2012 after it was hammered by a violent wildcat strike that killed dozens of people, but analysts say the company would struggle to get more funds from shareholders so soon.
Amcu’s 2014 strike, the longest and costliest in South African history, also affected Lonmin’s bigger rivals Anglo American Platinum and Impala Platinum.
Amplats has since said it plans to sell or spin off a number of the mines that were shut during the 2014 strike.
Implats is expected to update the market on potential restructuring when it reports full-year earnings today. – Reuters