Lonmin profit plunges on South Africa platinum strike
- 12 May 2014
- From the section Business
The world's third-largest platinum producer, Lonmin, has seen its earnings plunge because of a month-long strike at its mines in South Africa.
Underlying operating profits fell to $34m (£20m) for the six months to March, down from $93m a year earlier.
Its workers have been demanding higher pay in what has become South Africa's longest and most costly labour stoppage.
However, they are expected to return to work on Wednesday.
"This has been a challenging first half of the year, latterly dominated by protracted industrial action," said Lonmin chief executive Ben Magara
"Whilst we continue to work to resolve this dispute we have also taken decisive and early action to reduce cash burn, to safeguard our great assets and protect our balance sheet integrity ahead of a safe and successful ramp-up when the strike ends."
The firm reported a pre-tax loss of $278m for the six-month period, down from a profit of $54m a year earlier.
Lonmin's results were released amid reports two workers were killed at its mines on Monday, which may complicate the company's efforts to end the long-running strike.
South Africa's National Union of Mineworkers (NUM) said two of its members were killed as they reported for work at Lonmin's platinum mine.
Lonmin reportedly confirmed one employee was killed.
The Solidarity union, which mainly represents skilled workers, also claimed its members at Lonmin were being intimidated.
The strike action has arisen from growing discontent among the country's miners, who feel they are being excluded from the benefits of the country's resource riches.
As a result, miners have asked for their pay to be doubled, but the mining companies have said they cannot afford to meet the workers' demands.
Lonmin was forced to scrap its annual sales guidance in March because of the industrial action in South Africa.
Its larger rivals Anglo American Platinum and Impala Platinum have also been affected by the dispute and have presented new wage offers.
The strike has caused a 40% drop in global platinum production and affected South Africa's economy, which depends heavily on mineral exports.
"Industrial relations remain an increasing challenge and risk in South Africa's mining industry with the platinum sector losing billions of rand in revenue to wage strikes since 2011," Mr Magara said.
"The strike has also eroded the health and financial position of our employees, with many workers in an unstable financial situation."
Africa's most advanced economy has already been struggling with sluggish growth. One in four people in its population are unemployed.
Mining communities have also been affected, with local businesses closing and large numbers of migrant workers returning home.