Lonmin PLC says it may restructure operations after violent strike reduced output

JOHANNESBURG – Lonmin Platinum said it must restructure its operations after violent strikes that caused the deaths of more than 40 people and reduced the company's output.

The world's third largest platinum producer employs about 28,000 people in South Africa, and the latest move may see a reduction in its employment. The company said Thursday that it released a statement to unions saying that it is contemplating the restructuring. The company said it does not know at this stage the number of employees who might be affected by any changes.

Lonmin, in a rights issue on Tuesday, said "a number of measures are in place, or are expected to be implemented during the 2013 financial year, both to address the pressures of gross cost increases and also to improve the effectiveness of the company's expenditure," including a review of the company's operating model and management structure.

In the same statement, the company also asked shareholders for $800 million.

Strikes at Lonmin's Marikana mines, northwest of Johannesburg, started in August and continued for nearly six weeks before a deal was reached with the miners. Violence during the strikes led to the deaths of 46 people, including 34 miners who were shot dead by police. South Africa has begun an inquiry into the deaths and the company is being investigated, along with police and unions.

"These events have increased operating costs for Lonmin and other companies," in the industry, "while at the same time creating supply constraints which have contributed to an increase" in prices.

The strike negotiations resulted in workers getting pay raises of up to 22 percent and a once-off payment of 2,000 rand ($240).

Lonmin said the wage increases raise employment costs for 2013 by 11 percent, and the business has not achieved full production in the early stages of ramping up production after the strike. It said that operations produced 1.63 million tons during the fourth quarter of 2012, a decrease of 1.65 million tons or 50.4 percent from the fourth quarter of 2011.

"The fall in production is primarily as a direct consequence of the events at Marikana," it said.

The trade union Solidarity, which represents mainly white mine workers, told the South Africa Press Association that it was notified by Lonmin on a firing and restructure process.

"Solidarity will do everything in its power to prevent retrenchments from taking place, because it is unfair for employees that did not participate or instigate the unprotected strike and unlawful protest action, to become the victims of the five weeks of workplace anarchy," spokesman Gideon du Plessis said to SAPA, adding that the target of the restructuring is mostly management.