SHARES in UK mining giant Lonmin plunged after it announced 6,000 jobs cuts in South Africa as part of a scaling back of its operations due to the falling price of platinum.
In a quarterly production statement, it added it was heading for an annual loss at current platinum prices. The price of platinum has fallen by 14.4% from $1,126 per ounce in March to $964 on Wednesday. Shares in FTSE 250 miner fell 17% to 62.7p following the announcement.
Lonmin said it would mothball several platinum mine shafts to cut costs. It said the closures would result in a ‘smaller more sustainable and agile business’. The miner added it expected normal platinum production over the next two financial years to fall by 100,000 ounces.
‘Our objective is to save the majority of the positions in the company and create a sustainable business by taking urgent action and maximising liquidity to protect the business. All costs, not just labour costs, have to be reduced and productivity improved if the business is to be sustainable,’ Lonmin added.
Lonmin said despite the increase in production the weaker price of the precious metal and the weakness of the South African rand had continued to hurt profits. The platinum US dollar price decreased by 23.2% the same period a year earlier. The mine closures come three years after violent clashes with police left 34 South African miners dead following strikes at the Lonmin-owned Marikana mine.
Joseph Mathunjwa, president of the Association of Mineworkers and Construction Union (AMCU), which lead a five-month strike on the platinum belt last year, said he had not been notified yet of any job cut plans by Lonmin. The union is expected to take a major action as soon as Lonmin informs it officially of the mass sackings plan.
The families of the 34 striking miners, killed by South African police in the country’s biggest massacre since Sharpeville at Marakana are taking legal action against Lonmin, South Africa’s deputy president Cyril Ramaphosa and former police minister Nathi Mthethwa, the Marikana Support Campaign (MSC) confirmed.
The Economic Freedom Fighters, the political party founded by former ANC stalwart Julius Malema, has opened criminal cases against the aforementioned, as well as the former Minister of Mining Susan Shabangu, National Police Commissioner Riah Phiyega and the now-retired North West Provincial Police Commissioner, Zukiswa Mbombo. The charges range from conspiracy to commit murder, to attempted murder and murder.