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Platinum Markets Rocked After South Africa Mining Strike, Shootings

Striking platinum miners are seen gathered at Lonmin's Marikana mine in South Africa August 29, 2012.
Striking platinum miners are seen gathered at Lonmin's Marikana mine in South Africa August 29, 2012.
MARIKANA, South Africa — The world’s frenetic, slick commodities exchanges have little in common with the dusty hilltop outside South Africa’s Lonmin platinum mine, where police shot dead 34 striking workers last month. But what happened on that hilltop has had a direct effect on the platinum market and thousands of South African workers.

Platinum is a heavy, hard, extremely rare silvery-white metal used to make auto parts and jewelry.

It is often called “the rich man’s gold” and at more than $1,500 an ounce it has serious cache. Rings made of platinum, often cradling diamonds, sparkle in display cases of the finest jewelers and glitter on the fingers of celebrities.

But it also now has a tarnished reputation, after platinum miners in South Africa held a wildcat strike for higher wages at the Lonmin mine and 34 of them were shot dead by police. Most of the dead were buried Saturday in the rural Eastern Cape province.

It is hard to see the link between the lustrous metal and the dusty, craggy, trash-strewn fields outside the Lonmin mine in Marikana. But the two are intimately entwined.
South Africa, locating Marikana, North West Province
South Africa, locating Marikana, North West Province

The August 16 shootings had an immediate effect on platinum prices, sending them shooting up in anticipation of lower future supply. It also sent shares of Lonmin to their lowest point since 2008.

Lonmin says the strikers negatively affected its production this year. The company is still negotiating with the miners.

Investors worried

Johannesburg-based analyst Sinethemba Zonke of the firm Africa Practice says the events have troubled investors.

“There have been worries over the supply of platinum. Now you need to consider the fact that South Africa has about [an] 80 percent share of the world’s platinum resources, it is a major player within the platinum market. So now, if there is a slowdown in production within South Africa, this will have an effect in the world market, so these are the fears that are actually raising the platinum prices.”

Zonke notes that there have been rising costs in platinum mining, so the increased cost of platinum will not necessarily mean more income for workers.

He also says platinum’s luster will not immediately fade, though foreign investors may seek unexplored African nations with fresher, more accessible mining prospects.

“It is still a valuable resource that will retain its value within the world markets for some time ... South Africa has been mining for many years so it is a bit harder to extract those resources. [Other] African countries are only starting to exploit their own resources, so the investment cost of actually extracting those minerals are much lower.”

An image issue

A spokesman for the government inter-ministerial committee investigating the killings, Harold Maloka, says officials are working hard to resolve the labor impasse. But he said South Africa would like to reassure the world the problem is isolated. There have been threats of strikes at other platinum mines, but those have mostly been resolved.

“It has affected the platinum industry, but we are indeed concerned about the South African image abroad, but it is of utmost importance for all of the citizens of the world to know that this labor dispute is only in one area, which is Marikana. The number of mining towns and mines across the country where work continues, where there is no labor dispute, and as is South African tradition, we resolve our issues through dialogue, and that dialogue must continue. As we are saying right now, we still continue the dialogue through the minister of labor and the unions and the management of Lonmin mine,” says Maloka.

Global analysts Johnson Matthey says in South Africa it can take between 10 and 25 tons of platinum ore to yield just one ounce of the metal.

Backbreaking work

It is backbreaking, boring work, says miner Gilbert Temo, especially for the rock-drill operators (RDOs) who are at the forefront of the wage dispute.

“Those guys are working hard, especially the RDOs. If you see them working, you will feel ashamed. Because Lonmin is not giving them enough money, each and every year, when they get increased, the money is not increasing the way they want it.... I think they have to get that money they want, because without those RDOs, Lonmin is not going to get anything. They are the people who are producing the product.”

Temo works underground for eight hours a day and watches his colleagues drill and haul ore up to the surface.

One day, he says, he would like to see what the finished product looks like.