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TABLE OF CONTENTS Oct 1 - 7, 2012 Volume 98 Number 33 - 0 comments

Lonmin's wage deal fuels more unrest in South Africa

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While Lonmin (LMI-L) has ended a bloody labour dispute at its Marikana platinum mine near Rustenburg in South Africa that left 46 dead, other miners in the country are demanding higher wages.

Lonmin, the world’s third-largest platinum producer, says 80% of its employees returned to work on Sept. 20, two days after it reached an agreement with trade unions and miners to settle the six-week strike by giving workers as much as a 22% pay hike.

Under the deal, starting October miners will receive an 11% to 22% raise if they fall within the category three to eight bargaining units, plus a one-time, 2,000 rand ($236) signing bonus. This also includes the previously agreed upon 9% to 10% pay bump for these employees.

The firm says it would update the market on the wider implications of the deal, including its financial impact. So far it reveals that the bigger pay cheques — which will be handed out to 85% of its 28,000 workers — will add 14%, or roughly 192 million rand ($23 million) a year to its labour bill.

Lonmin expects platinum sales for the year ending Sept. 30, 2012, to range between 685,000 and 700,000 oz., and unit costs to be up at least 8.5%.

To lower costs, the producer says it will put the mine’s K4 shaft on care and maintenance and lay off 1,200 contractors in mid-October.

BMO Capital Markets analyst Edward Sterck estimates the output lost to date at Marikana to be around 85,000 oz. platinum.

It could take several weeks for Lonmin to shift the mine back into full gear, Sterck writes in a Sept. 19 note, adding it could take longer depending on the timely return of employees, and whether the properties have been damaged in the unrest.

In a prepared statement, Lonmin’s acting chief executive Simon Scott said the wage deal and the return to work are only the first steps down a "long and difficult" road ahead for everyone who has been affected by the tragedies at Marikana.

Disturbance at the mine started on Aug. 10, after 3,000 workers went on a wildcat strike. During violent clashes between police and protesting miners, eight Lonmin employees and two police officers were killed over three days.

On Aug. 16, the conflict escalated, as police opened fire on protesters, killing 34 Lonmin workers and rocking the nation. This marked the bloodiest labour dispute in South Africa since the apartheid era ended in 1994. Two more were killed in marches in the ensuing days.

With the dust settling at Marikana, conflicts at nearby operations are stirring up with employees looking for their own prize. A day after the Lonmin wage deal, Reuters reported that police shot gas and rubber bullets to scatter demonstrators near Anglo American’s (AAL-L) Rustenburg operations that were temporarily suspended on Sept. 12, owing to security concerns.

After authorities deemed it was safe for employees to return to work, the world’s top platinum producer said only less than 20% of its staff showed up on Sept. 20, warning it would pursue legal action if others didn’t return to work.

Gold major Gold Fields (GFI-N) is also in the midst of an unlawful strike at its KDC gold operations in the West Rand. It suspended all production at the KDC West mine on Sept. 10, after 15,000 workers seeking more pay walked out of their jobs.

Gold miners AngloGold Ashanti (AU-N), Gold One and platinum producer Implats have also reported recent strikes at their South African operations.

The country’s president Jacob Zuma says the mining strikes this year will cost the nation 4.5 billion rand in lost output.

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