Lonmin’s wage deal fuels more unrest in South Africa

While Lonmin (LMI-L) has ended a bloody labour dispute at its Marikana platinum mine near Rustenburg in South Africa that left 46 dead, other miners in the country are demanding higher wages.

The world’s third largest platinum producer said 80% of its employees returned to work on Sept. 20. That’s two days after it reached an agreement with trade unions and the miners’ representatives to settle a six-week wildcat strike by giving workers as much as a 22% pay hike.

Under the deal, starting October miners will receive a raise of between 11% and 22% if they fall within the category 3-8 bargaining units, plus a one-time 2,000 rand ($236) signing bonus. This also includes the previously agreed upon 9% to 10% pay bump for these employees.

While the firm said it would update the market on the wider implications of the deal, including the financial impact, it so far notes the bigger pay cheques, which will be handed out to 85% of its 28,000 workers, will add 14% or roughly 192 million rand ($23 million) a year to its labour bill.

It stated earlier that it expects platinum sales for the year ending Sept. 30, 2012, to range between 685,000 and 700,000 oz., and unit costs to be up at least 8.5%.

To save costs elsewhere, the producer said it would put the mine’s K4 shaft on care and maintenance and lay off 1,200 contractors in mid-October.

BMO Capital Markets analyst Edward Sterck estimates the output lost to date at Marikana to be around 85,000 oz. platinum.

It could take several weeks for Lonmin to kick the mine back into full gear, writes Sterck in a Sept. 19 note, adding it may take longer depending on the timely return of employees and if the properties have been damaged in the unrest.

In a prepared statement, Lonmin’s acting chief executive Simon Scott said the wage deal and the return to work is only the first step down a “long and difficult” road ahead for everyone who has been affected by the tragedies at Marikana.

Disturbance at the mine started on Aug. 10, after 3,000 workers went on a wildcat strike. During violent clashes between police and protesting miners, eight Lonmin employees and two police officers were killed over three days. On Aug. 16, the conflict escalated, rocking the nation as police opened fire on protesters, killing 34 Lonmin workers. This marked the bloodiest labour dispute in South Africa since the apartheid era ended in 1994. Two others were killed in marches in the ensuing days.

While the dust at Marikana may be settling, conflicts at nearby operations are stirring with employees looking for their own prize. A day after the Lonmin wage deal, Reuters reported police used gas and rubber bullets to disperse demonstrators near Anglo American Platinum’s Rustenburg operations that were temporarily suspended on Sept. 12 owing to security concerns.

After authorities deemed it was safe for employees to return to work, the world’s top platinum producer, said only less than 20% of its staff showed up on Sept.20, warning it will pursue legal action if others don’t return to work.

Global miner Gold Fields (GFI-N) is also in the midst of an unlawful strike at its KDC gold operations in the West Rand. It suspended all production at the KDC West mine on Sept. 10, after 15,000 workers seeking more pay walked out of their jobs.

Gold miner Gold One and platinum producer Implats have also reported recent strikes at their South African operations.

President Jacob Zuma said the mining strikes this year will cost the nation 4.5 billion rand in lost output.