Lonmin, one of South Africa’s major PGM producers, is in consultations with unions and employees over efforts to reduce costs aimed at protecting the company and its employees against persistent low PGM prices.
The company hopes to complete this process without needing to make forced retrenchments, which it regards as a last resort. Proposals under discussion would lead to 10% reduction in labour cost and equates to around 3 500 people. This reduction should hopefully be achieved through a voluntary process.
“The mining industry is going through another challenging economic cycle and we need to make difficult decisions to maintain the resilience of our business and protect employment,” says Lonmin CEO Ben Magara.
“Our cost controls so far have been encouraging but the price of our metals is beyond our control and we need to make further savings, including seeking voluntary reductions in our labour force which represents around 60% of our total costs.”
Magara continues: “These are tough conversations but I am encouraged by our employees’ appreciation of the situation. That is a reflection of the huge effort all parties have made to understand one another better in recent months and we are all seeing the benefit of that now.”
The efficiencies and savings needed are being implemented from top to bottom such that the Executive Committee headcount has been reduced by 22%.
Ben Magara concludes: “Nobody wants this, but we all have to protect the future of the business for as many employees as possible. I hope that we can do this together, for the benefit of the majority. Better times are ahead, but we need to get from here to there.”