Lonmin says sacking miners could lead to more violence

Aug 21, 2012, 12:36 PM EDT


* Not enough workers at posts to resume ore production

* Deadly precedent set in previous sackings

* Company may issue new shares to shore up finances

By Sherilee Lakmidas

JOHANNESBURG, Aug 21 (Reuters) - The world's third-biggest platinum producer, South Africa's Lonmin, on Tuesday backed down from its threat to sack 3,000 striking mine workers, fearing the move could provoke more violence after police last week shot dead 34 miners in scenes reminiscent of apartheid bloodshed.

Most of the strikers, who faced a Tuesday ultimatum to return, stayed off the job as police helicopters hovered over Lonmin's Marikana mine, about 100 km (60 miles) northwest ofJohannesburg.

Hit by lost production and revenues, the company said it may issue new shares "to strengthen its financial structure".

Analysts have speculated the company may turn to shareholders to raise new capital as it will reach its borrowing limits at the end of next month.

Lonmin said about a third of its 28,000 workers at the Marikana mine had returned to work. It had previously threatened employees with immediate dismissal for ignoring its ultimatum.

The 3,000 strikers are mostly rock drill operators, who say they should be paid more for their arduous underground work.

"Working underground is like making a fire in a room and closing all the windows and doors," said Isaac, a striking rock drill operator.


Thousands more employees had not returned to work because of worries about security and uncertainty whether there would be anything for them to do while most drilling remains shut down.

"It won't help anyone if Lonmin goes out and dismisses a whole lot of people for not coming to work today. It will set us back significantly in terms of violence, in terms of building trust," Mark Munroe, Lonmin executive vice-president for mining, told a local radio station.

Crowds of miners, watched closely by police, gathered near the site where police last week opened fire on armed protesters running in their direction.

The violence was part of pattern at South Africa's mines. In February, three workers were killed inn unrest after Impala Platinum, the world's second-largest producer of the metal, dismissed 17,200 workers who went on an illegal strike.



Parliamentarians, many with tears in their eyes, held a church service to remember those who died when police opened fire on the crowd at Marikana in the worst killing by the security forces since the end of apartheid in 1994.

Their unity turned into acrimony when opposition leaders questioned the ANC government's policing policies. On average, between 3 and 4 people a day are killed in South Africa by police, according to government data.

"This tragedy could have and should have been prevented," said Lindiwe Mazibuko, the parliamentary leader of the opposition Democratic Alliance.

Police Minister Nathi Mthethwa said police "did all in their power to avert such a situation".

For investors, the Lonmin tragedy is a reminder that betting on South Africa includes considerable risks and they may need to demand a bigger discount before putting money in local assets.

The powerful National Union of Mineworkers has said its feud with the militant and upstart AMCU union, seen as behind the Lonmin strike, could spread.

This could in turn feed into lower levels of investment, lower growth, and deteriorating public finances in Africa's biggest economy.

Lonmin, which accounts for 12 percent of global platinum output, was forced last week to suspend mining as a result of the clashes.

Investors have hammered Lonmin shares on concerns about lost earnings from the strike, sending its stock down nearly 13 percent last week. But the shares rose for the first time in 9 trading sessions on Tuesday, rising 3.6 percent in Johannesburg.