Lonmin surfaces after five hard years

ENTERING its fifth year since the Marikana tragedy, South Africa’s third-largest platinum miner, Lonmin, still finds itself operating in difficult conditions as metal prices continue to be dogged by oversupply.

Its operating costs are also among the highest in the industry.

“The current prices are unsustainable, the current prices are really damaging the industry and the extent of underinvestment in the industry is such that some of that damage will end up irreparable,” Ben Magara, Lonmin’s CEO, said in an interview with Business Times.

Magara was roped in months after the 2012 pay dispute in which 34 mineworkers were killed on the company’s doorstep. Over the past four years, the company has undertaken three rights issues and weathered another, five-month, wage strike.

Bloodied, it has seen its stock plunge more than 96% in value over the period. Over the same time, the price of platinum — mainly used by the motor vehicle industry — has dropped 42%.

Magara said the platinum industry was still challenging. He hoped that the current prices would eventually be a thing of the past, after the negative sentiment of underinvestment in the sector turned around.

Despite its woes, Lonmin managed to report a profit of $7-million (about R95-million) for the year.

Costs, however, remain cause for concern. “We have to work hard to maintain the position we are at, we need to work hard with productivity, because of these platinum prices — I cannot rule out any cost-reduction opportunities that we may have but retrenchments will always be the last resort,” said Magara.

As part of its restructuring drive, the company has shed some 6 000 jobs already. Cost-cutting was still needed across all mining companies, Magara said, adding that Lonmin was not safe from further restructuring.

The biggest slice of Lonmin’s cash — more than half — is earmarked for staff, Magara said, and suppliers also took a major slice. After taxes and loan repayments, only a “minuscule” amount was left for shareholders.

With about 30% of Lonmin’s shares, the Public Investment Corporation is its biggest shareholder. Dan Matjila, CEO of the state-owned corporation, was not immediately available to answer questions.

The mining industry, once the bedrock of the South African economy, saw its share shrink to 7.7% in 2015.

Lonmin projects such as the K4 vertical shaft were put on care and maintenance in September 2012 and the Akanani greenfields project, intended to be a highly mechanised mine, was also on hold until market conditions changed and long-term prices show positivity and demand improved, Magara said.

With regard to the contentious revised Mining Charter, Magara said he expected a compromise between the sector and the government.

This week, Mineral Resources Minister Mosebenzi Zwane said the muchanticipated review of the charter would be ready by the end of March.

Should the “once empowered, always empowered” rule espoused by the Chamber of Mines prevail in the review, Lonmin will meet its BEE requirements.

Given the hard knocks Lonmin and the industry as a whole have had over the past four years, what has Lonmin done since Marikana to remedy labour relations?

Magara said miners, who had been striking for a R12 500 minimum wage, would by the end of 2019 be earning a basic salary of R12 296 excluding rock drill allowances.

Hostel accommodation has been changed into proper rental accommodation.

President Jacob Zuma threatened to revoke Lonmin’s mining licence late last year for not complying with its housing targets.

Magara said the 143 children of the mineworkers who had lost their lives were all in school and had all their fees and transport paid by Lonmin. He said the company would financially support the children through university.