In platinum’s war of attrition, capital has labour out-gunned – by Ed Stoddart (Reuters U.S. – April 25, 2014)

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(Reuters) – Labour brought a machete to a gunfight with management in South Africa’s platinum belt. Small wonder it looks set to lose.

South Africa’s big platinum strike has highlighted issues ranging from cash reserves to changing market dynamics that have curtailed labour’s ability to influence prices. The result has been to expose the weakness of the country’s miners in any confrontation with producers.

As it marked its 13th week, the showdown took a dramatic turn on Thursday when marathon wage talks collapsed. The world’s three top producers now say they will take their latest offer directly to employees.

They are effectively forcing the hand of the hard-line Association of Mineworkers and Construction Union. The AMCU’s leaders were reluctant to take the latest offer back to their members – probably because they feared the rank and file would accept it after three months with no pay.

A typical South African mine worker has eight dependants and often two families, one in his home village and the other near the shafts. That means many of them are now near the breaking point, especially as domestic inflation accelerates.

The companies – Anglo American Platinum, Impala Platinum and Lonmin – are in a far more robust financial situation, even though they have lost close to 15 billion rand ($1.4 billion) to date in revenue and counting. Lonmin, for example, had a net cash position of $201 million at the end of its 2013 financial year.

The 70,000 striking workers have lost 6.5 billion rand in wages so far, according to the industry. Unlike the companies, few will have the savings to weather this storm.

A Reuters analysis last year of the pay package for entry-level mine workers found that it would meet the basic needs of a family of four, but not much else. Many extended households are twice that size or more.

Analysts say the companies may be hurt but can survive and even emerge leaner and more profitable from the wreckage of the strike. A painful restructuring and job cuts are likely, with the focus on Amplest’s Rustenburg operations.

If the Amplest share price is anything to go by, investors agree. It has risen 17 percent since the start of the strike.

“Investors know that if Amplest shuts down everything and just keeps the northern rim of their operations going, they will probably pay a bigger dividend than keeping everything going,” said Peter Major, a fund manager at Cadiz Corporate Solutions.

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