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It’s one thing to say that a company is in trouble. It’s quite another to say that people are being killed. Nine people have died since 10 August at a mine operated by Lonmin (LSE:LMI) in South Africa. Lonmin’s share price was down 35.00 pence to 706.00, a decline of 4.72%. Lonmin’s share price has declined almost 40% in the past 12 months.
The Headlines
Reports coming out of Johannesburg are mixed as to the current situation at Lonmin’s Markana mine. Some sources are calling the situation stable, whilst most are saying that it is still volatile. The best information is that about 3,000 rock drill operators initiated an illegal work stoppage on 10 August and formed a protest march. It appears that the violence stems out of a surge in “union militancy” that has emerged over the past year in South Africa. Although there have been similar uprisings at other mining operations in the country this year, police officials are call this one the worst so far. The other incidents had occurred at operations run by Impala, Implats, and Aquarius, and at Lonmin’s Karee mine.
A work stoppage is always a concern from a production and investment standpoint, but one with this magnitude of violence raises those concerns to a much higher level. This is not just about lost production. This is about lost lives. Two security guards were hacked to death over the weekend. A NUM member was killed trying to report to work. Another employee was died from several GSWs. In a clash with police, three protesters were killed in a shootout after killing two police officers with machetes. Another man died in hospital after being hacked with a panga after leaving work at the end of the evening shift. An unspecified number of other employees have been injured, some severely. At least eight vehicles have been destroyed.
The Underlying Reasons
The illegal work stoppages and the ensuing violence seem to be rooted in dissention between multiple unions working in the mines as they seek to increase membership. There are at least three unions with members in the mine: the established National Union of Mine Workers (NUM), the more recent-formed Association of Mineworkers and Construction Union (AMCU), and Solidarity. AMCU’s aggressive recruitment tactics are not being well received by some of the members of NUM. Several other sources have indicated that the real underlying reason is low wages.
Solidarity has said that it will instruct its members to stay home until the situation is under control. This, of course, extends the work stoppage, but it also saves lives.
Salient Comments
Lonmin CEO Ian Farmer said, “Whilst our first thoughts must be with the families of those killed and injured in these criminal clashes, our operational priority is to see the violence stop.”
NUM General Secretary Fans Baleni said, “We are alarmed that the escalating violence has been allowed to continue unabated by the law enforcement agencies in that area. We call for the deployment of a special task force or the SANDF to deal decisively with the criminal elements.”
Company Spotlight
Lonmin is the third largest producer of platinum group metals in the world. Two of the widest applications of their products are the manufacture of jewelry and catalytic converters. Lonmin’s mining operations are all in South Africa. The company had some 2.9 million square metres of ore reserves under its control at the end of FY2011.
Ironically, Lonmin’s website says that, “We are successful when our employees live and work safely.” A list of company values leads off with, “Zero Harm. We are committed to zero harm to people and the environment,” and “Respect for Each Other.”
Violence had continued through Monday night, but there are reports that some negotiations may be underway between the company and the unions. The extent of involvement in those discussions by police or government officials is unknown at this point. For a company already struggling to deal with shrinking demand and margins, this ugly chapter is not going to help the situation.
