Feb. 16 (Bloomberg) -- South Africa sent troops to end rioting at the world’s largest platinum mine after owner Impala Platinum Holdings Ltd. asked for government help to stop violence stemming from an illegal strike that has halted output.
Protesters set fire to cars overnight, barricading the main road to Sun City, a resort within the platinum-producing region near Rustenburg, Impala Chief Executive Officer David Brown said today. The police presence at the mine has been inadequate, failing to end attacks and intimidation and prompting a request to the Security Minister to intervene, he said.
While strikes aren’t rare in South Africa, and can be violent at times, it’s unusual for the military to be involved, Wayne McCurrie, a fund manager at Johannesburg-based RMB Asset Management, said by phone today. “That’s reminiscent of the 1980s” when the apartheid system imposed by the then minority white government was still in place, he said.
Impala last week fired 17,200 workers at the mine, which accounts for about 12 percent of global production of platinum, used in jewelry and cars. The disruption has caused lost output of 60,000 ounces worth about 1.2 billion rand ($153 million) as of Feb. 14, Brown told reporters on a conference call. The mine came to a halt Jan. 30 and it may take a further three or four weeks to restore operations, curbing global supplies, he said.
Impala fell 4 percent to 158.15 rand by the close in Johannesburg, the lowest in more than two years. The six-member FTSE/JSE Africa Platinum Mining Index dropped 3.1 percent.
South African National Defence force members arrived at the mine today, National Union of Mineworkers’ regional manager Vuyani Sydwell Dolokwana said from the site. The military joined police outside the Impala mine to try and stop protesters looting, blocking roads and intimidating those who want to return to work, Dolokwana said.
Impala will continue talks with the NUM, the only union recognized at the mine, to try to resolve the dispute, Brown said. An illegal strike by about 5,000 rock-drill operators over pay last month prompted a wider stoppage.
The situation has “political undertones” and also stems from inter-union rivalry, Brown said. The Association of Mineworkers and Construction Union is trying to gain members at the site, he said.
The AMCU didn’t cause the violence, General Secretary Jeff Mphahlele said in an interview today. While AMCU didn’t call the strike, it has recruited a “large percentage” of Impala workers in Rustenburg, he said. “People are sick and tired of NUM,” he said.
NUM is the country’s largest labor grouping and represents most of South Africa’s mineworkers. It’s an affiliate of the Congress of South African Trade Unions, a member of the African National Congress-led ruling alliance since 1994. The ANC is due to hold leadership elections in December.
The mine, which accounts for half of Impala’s total production and about two-thirds of its profit, probably won’t make its target of producing 915,000 to 920,000 ounces this year, Brown said. Impala produces about 25 percent of global platinum output, mostly in South Africa, the nation with the world’s largest reserves.
Impala has rehired 6,000 workers, allowing operations to “tentatively restart” in certain areas, Brown said. “I’d say another three to four weeks would probably give us an indication of trying to get everyone back to work and getting people up and running,” he said.
Impala’s first-half production fell 21 percent to 356,000 ounces of refined platinum after volumes from third parties declined 48 percent, the company said today in a statement. Large producers such as Impala buy concentrate from other companies to add to smelters. The company also smelts the material on behalf of other operators for a fee.
Impala also lost about 33,000 ounces through an increase in government-ordered safety stops.
Still, adjusted earnings climbed 67 percent to 5.73 rand a share in the six months through December, the company said. The mean estimate of five analysts surveyed by Bloomberg was for adjusted earnings of 5.35 rand a share.
While the average dollar platinum price increased 1.7 percent to $1,654.33 an ounce in the six-month period, the rand price of the metal advanced 8.5 percent as the local currency depreciated.
Platinum may trade at $1,450 to $1,800 an ounce in the next year while palladium may trade at $600 to $850 an ounce, Marketing Executive Derek Engelbrecht said in Johannesburg today. There may be a 335,000-ounce platinum deficit and a 980,000-ounce palladium shortage this year, he said.
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