Lonmin Denies Backtracking on Wage Increases

Issue 25, January 2013

Less than four months after an end to violent labour unrest at its Marikana operations in South Africa, platinum miner Lonmin is being accused by local groups of reneging on pay rises and bonus awards instrumental to ending strikes.

Miners were offered pay rises of 11 to 22 per cent and a “return to work” bonus of R2,000 ($232) as part of efforts to resume production last year, following strikes that cost the company 110,000 ounces in lost platinum production, equal to $172m at prevailing prices. The losses forced the company into a rights issue, raising $817m to avoid breaching debt covenants.

In a letter sent to management by the Bench Marks Foundation, a South African church group, the company has been asked to clarify reports that it issued pay rises for one month only, before reverting to lower levels. The return to work bonus has meanwhile been clawed back from employees wages, “as if it were a loan”, according to the non-profit body.

Lonmin refutes the allegations. A spokeswoman for the company told Global Mining Observer that the confusion had been caused by complex payslips, which showed the bonus first as an advance and then as a deduction. The accusations however demonstrate the level of distrust held by Lonmin’s miners towards management and the extent of underlying tensions.

“Lonmin, along with the other platinum producing companies in the area, bear responsibility for the negative impacts of mining on the lives of people in the district,” the Bench Marks Foundation said. A study by the group suggests that the pay policies of Lonmin encourage workers to live off-site in slums. “Unless this situation is turned around, conflicts over wages will continue to erupt.”

Investors will share concerns that without structural improvements to labour relations, strikes may prove a recurrent cost for the company. In 2009, Lonmin tapped shareholders for $457m, again to refinance borrowing.

The company has been nominated as the ‘Worst Company of the Year’ at the Public Eye Awards, a fringe feature of the World Economic Forum’s annual meeting in Davos, due to be hosted later this month. The title was given to AngloGold Ashanti in 2011 for alleged cyanide pollution in Ghana.

“Conflicts over wages will continue to erupt.”
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