6000 jobs at risk

Platinum producer Lonmin said on Friday it was planning to close or mothball several mine shafts, putting 6 000 South African jobs at risk, because of depressed metal prices.

Lonmin said it would shut its Hossy and Newman shafts, which would also decrease normalised annual production by about 100 000 platinum ounces.

The company added that it would put a number of other shafts on care and maintenance, some of which are currently managed by contractors.

Platinum’s spot price is at 6-1/2 year lows less than $1 000 an ounce, while power and labour costs in South Africa have risen sharply.

“Lonmin is highly geared to platinum group metal prices. At current metal price levels, the company is EBITDA negative (loss making) and our cost minimisation plans are designed to improve this position as much as possible,” it said.

Lonmin said the planned closures would likely affect a total of 6 000 employees including contractors. In a letter to a labour union obtained by Reuters, the company had spoken of 4 500 jobs, about 15% of its workforce.

Job cuts are a thorny issue in South Africa, where the unemployment rate is over 25% and union militancy has been on the rise, especially in the mining industry.

“The consequence of these decisions will be that the remaining shafts will allow for a smaller, more sustainable and agile business,” it said. “Our objective is to save the majority of the positions in the company. All costs, not just labour costs, have to be reduced and productivity improved if the business is to be sustainable.”

Lonmin, which employed more than 28 000 people as of September 30, is making a loss before interest, tax, depreciation and amortisation, the company said.

“Our cost-minimsation plans are designed to improve this position as much as possible,” it said.

Lonmin will review its capital structure and will make an announcement by November, it said.

“The mining industry is going through another challenging economic cycle and we need to make difficult decisions to maintain the resilience of our business and protect employment,” Chief Executive Ben Magara said in a statement in May.

“Nobody wants this, but we all have to protect the future of the business for as many employees as possible.”

Lonmin employes about 37 000 people, including contractors, according to Reuters. Like its peers it has been battered by a steep fall in platinum prices in the last year.

– With additional reporting from Bloomberg.