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NEWS - Interview-Lonmin Tempers Pay Hopes Ahead Of Union Talks

Interview-Lonmin Tempers Pay Hopes Ahead Of Union Talks

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Platinum miner Lonmin, at the centre of violent South African strikes last year, will tell unions to curb expectations of forthcoming wage talks, warning that it remains under pressure despite reporting forecast-beating first-half earnings.

Platinum miner Lonmin, at the centre of violent South African strikes last year, will tell unions to curb expectations of forthcoming wage talks, warning that it remains under pressure despite reporting forecast-beating first-half earnings.

The world's third-largest platinum miner is still recovering from strikes in 2012 that left dozens dead, devastated production and forced Lonmin to tap shareholders for cash. Tensions remain high: on Tuesday, a wildcat strike apparently triggered by union disputes again paralysed Lonmin operations.

On Monday the miner posted a jump in profit for the six months to March thanks to a smaller than forecast increase in costs and a fast production ramp-up. It also improved full year guidance - raising hopes of a recovery just as the South African sector prepares for months of wage negotiations.

But acting chief executive Simon Scott told Reuters: "While the results are a significant improvement over last year, this is still not an industry that is making a lot of money. This is still not an industry that is giving shareholders a huge return."

"We refinanced the company in November last year, (investors) put an extra $767 million into the company and shareholders need to get a return on that," he said in an interview late on Monday.

A jump in the cost of labour - already a major contributor to soaring inflation - could sidetrack the recovery of miners like Lonmin, which was lauded on Monday for cutting expected full-year cost increases to less than 8 percent from 10 percent.

Against a backdrop of job cuts, tensions with unions and approaching elections, South Africa's mining sector is embarking on one of its toughest periods of wage talks and analysts are warning it may see a repeat of the 2012 wildcat action that cost billions in lost revenue.

Anglo American Platinum, battling to return to profit, plans to cut 6,000 jobs - a number brought down after government pressure from an initially planned 14,000 cuts.

Militant union AMCU said over the weekend one of its organisers had been shot dead in the platinum belt city of Rustenburg, while activists reported ransacked homes. This was followed by strikes that brought Lonmin to a halt on Tuesday.

Yet Scott - who will return to his role as chief financial officer in July, when a new chief executive is appointed - said violence was not inevitable.

"The law provides for a process where if there is a dispute between unions and companies you can embark on legal strikes... By the same token, from our perspective we need to balance out what we can afford, how much we can pay and still give our shareholders a decent return - that is our obligation," he said.

"What we all need to avoid is a situation where violence breaks out... There may be a situation where illegal strikes take place, but I would hope not."

Last year, Lonmin attracted criticism from its industry peers for ending its six-week strike with a bumper 22 percent pay increase. That wage deal runs out in October. (Editing by Sophie Walker)


 

 

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