It’s a struggle to pick out anyone who would have benefitted from the fivemonth platinum strike that ended earlier this week ( Wednesday, 23 June). In truth, it was like an air disaster over a metropolis: lots of collateral damage.
“No winners,” said Investec Securities in a note, although looking on the bright side, it observed that there would at least be no industrial action in the platinum sector for two years following the agreement. “With strikes over now, the companies can focus on recovery plans and necessary restructuring where possible that should better position the miners longer term,” it said.
Perhaps South Africa’s new Minister of Mineral Resources Ngoako Ramatlhodi, comes out of it fairly well. Said John Meyer, an analyst at SP Angel, a UK brokerage: “The new Minister comes out of this rather well and will be seen as having inf luenced the end of the strike.”
It was Ramatlhodi who, days after taking office, sought to get the platinum companies and the Association of Mineworkers and Construction Union (Amcu) talking. He stepped aside two weeks later saying he’d achieved his original aim although it was clear he had heeded the opprobrium of ANC general-secretary Gwede Mantashe who said labour law should be allowed to direct the negotiations, not the minister.
For the rest, however, the strike shapes like a tragedy.
It will certainly have a hefty impact on the future earnings of platinum companies at a time when the platinum price was stubbornly unresponsive to the interruption of some 1m ounces of platinum production. Workers, meanwhile, may have to toil two to three years to earn back income lost during the industrial action. The total impact on some 70 000 worker salaries is about R10.6bn.
In terms of the wage offer, platinum firms will have to absorb R1 000 per month cost increases for all A- and B-band employees. According to Kieran Daly, an analyst for Macquarie Research, this increase when combined with middle-management increases will leave the platinum firms scraping a cash breakeven in the 2015 financial year unless there is a significant increase in the rand per ounce price of platinum.
While details of the agreement were not confirmed at the time of writing, Lonmin may generate a loss in the 2014 financial year although its executive team was savvy in drawing down on its debt facilities before the strike took hold and before bankers could object. Impala Platinum (Implats) is likely to seek means of shoring up its balance sheet with a rights offer.
For Amcu, the future is uncertain. At the moment, the union’s president, Joseph Mathunjwa, is triumphant, describing the strike as an act of steadfast boldness. “Platinum will never be the same again,” he told a rally in Rustenburg. “What other unions could not do in more than 20 years, you could do in five months,” he added.
The union certainly surprised the producers. Amplats CEO Chris Griffith thought the pressure of two months of no salary would force the union to the table. “I think they underestimated the ability of the communities to support one another,” one asset manager said. Even when an in-principle deal had been negotiated, Amcu paused to ask for more concessions, some of which it got.
This brings us to the third platinum producer, Anglo American Platinum (Amplats). Owing to its asset diversity and the relatively deep pockets of its majority shareholder, Anglo American,