Lonmin on Precipice of Labor Strike as Union Ruling Looms

Lonmin Plc, the world’s third-largest platinum producer, may face a strike by its biggest union, depending on a ruling tomorrow over the labor group’s recognition rights, according to analysts.

There’s “a 50-50 chance” of labor action should the Association of Mineworkers and Construction Union be dissatisfied with the outcome of arbitration, Peter Major, a mining analyst at Cadiz Corporate Solutions, said by phone from Cape Town yesterday. “It’s really on the precipice.”

The AMCU has unseated the National Union of Mineworkers as the dominant union at the three biggest platinum producers in South Africa, which has the largest known reserves of the metal. The change isn’t yet formally recognized by Lonmin, which favors allowing its workers to belong to a choice of unions.

Rivalry among mine unions has contributed to some of the worst labor violence South Africa has witnessed since the end of apartheid in 1994. In August, police killed 34 protesters at Lonmin’s Marikana platinum mine during a strike that formed part of a wave of labor disruptions for the industry.

The Commission for Conciliation, Mediation and Arbitration in Johannesburg will rule tomorrow on what recognition rights the AMCU is entitled to at Lonmin. The union speaks for more than 70 percent of the lower-skilled workers at the company and also wants to lead negotiations for higher-skilled employees, where it has fewer followers.

Too Much

“AMCU are asking for a bit too much representation,” said Michael Kavanagh, a Cape Town-based metals and mining analyst for Noah Capital Markets. “My base-case assumption is that the representation agreement will end up looking similar to that which Lonmin had with the NUM previously,” he said, with AMCU’s recognition limited to the lower-skilled segment.

The NUM and two other unions, Solidarity and UASA, hold recognition agreements for skilled workers at Lonmin, and each has membership of more than 20 percent of employees in that segment.

Members of both the AMCU and the NUM unions have been shot near Lonmin operations in the last few months, an AMCU member while he watched soccer in a tavern, according to local reports, and an NUM official at an office. Last week vehicles bearing the logo of Protea Coin Group Ltd., a closely held Centurion, South Africa-based security and surveillance company, patrolled a housing area at Marikana.

Lonmin wouldn’t speculate on the likelihood of further conflict over union recognition.

Remain Committed

“Lonmin is fully committed to concluding a recognition agreement with AMCU as the majority union,” Abey Kgotle, Lonmin executive manager of human capital, said in a statement. “Lonmin cannot pre-empt the outcome of the process, which may take some time, and will respect the outcome of this process,” he said, referring to the arbitration.

Mining strikes last year caused almost 15 billion rand ($1.5 billion) in lost output and shaved about 0.5 percentage point off gross domestic product, according to the National Treasury.

Lonmin shares rose 2 percent to 261.50 pence in London.

The NUM has until July 16 to regain its majority among the Lonmin workforce or lose its office and associated rights, a Johannesburg labor court has ruled.

While the union has started a recruitment drive at Lonmin shafts to regain support, its primary goal is to hear worker concerns, Luphert Chilwane, an NUM spokesman involved in the campaign, said by mobile phone. “The majority of them are expressing that they’re tired of the violence and they want it to end,” he said.

AMCU said June 13 it was postponing a threatened strike over recognition rights to give the government time to “understand the challenges” the group faces, particularly at Lonmin. “For us the arbitration is just a matter of time wasting on the part of the company, but we’ll attend the arbitration,” Jimmy Gama, AMCU treasurer, said by phone yesterday. “We have our own way of approaching this matter.”