JOHANNESBURG (Reuters) - World No.2 platinum producer Impala Platinum (IMPJ.J) has warned that industrial action at South Africa’s platinum mines, resulting in the death of workers at Implats and its rival Lonmin (LONJ.J) (LMI.L), could become more widespread.
A violent six-week strike at Implats’ Rustenburg operations early this year sliced 21 percent off its full-year production and, combined with declining metals prices, led to a sharp cut in its dividend, to 195 cents a share from 570 cents last year.
“The platinum industry is experiencing increased levels of industrial action, as witnessed at both Impala Rustenburg at the beginning of this year and more recently at Lonmin, with the associated tragic loss of life. These developments pose a significant risk to the industry,” said Implats’ newly installed chief executive Terence Goodlace.
Describing the labour relations at Implats’ operations as “relatively stable”, Goodlace said the trade union rivalry that sparked the strike at both its operations and Lonmin’s was still “fairly volatile”.
A bitter turf war between the entrenched majority National Union of Mineworkers (NUM) and rival Association of Mineworkers and Construction Union (AMCU) has already spilled over to surrounding mines in the Rustenburg area and analysts are worried about a contagion hitting gold producers.
The platinum price has also jumped to a three-month high on the threat that South Africa, as supplier of 80 percent of the world’s platinum, could be disrupted indefinitely.
Three lives were claimed during the strike at Implats in January and February. This cost the company, which produces 30 percent of the world’s platinum, 120,000 ounces in lost production and translated into 2.8 billion rand ($336.57 million) in lost revenue.
“We are trying to restore production levels. We were hurt by the strike, and the build-up thus far to pre-strike levels has been a lot slower than anticipated,” Goodlace said.
Production for the 2012 financial year came in at 1.45 million ounces and Implats is now unlikely to hit its 2014 target of 2 million ounces.
South Africa’s platinum industry is struggling to survive as input costs, such as electricity and labour, climb and the platinum price falls.
The flaring labour unrest and concerns over South Africa’s declining supply has provided some respite for the metal’s price, which has climbed by about $150 dollars in the past week.
Implats still has a way to go to reassure investors. Apart from labour concerns, it must still finalize the sale of a 31 percent stake in its Zimplats operations to the Zimbabwean government.
Chief financial officer Brenda Berlin told a media conference call that discussions were centered on the value and funding of the stake. She said that other buyers would be engaged only if the funding was not secured by the Zimbabwean government. ($1 = 8.3193 South African rand)
(This story corrects dividend to 195 cents, not 60 cents)
Reporting by Sherilee Lakmidas; Editing by Ed Stoddard and Alison Birrane