Union throws spanner in works with Sibanye-Lonmin deal

JOHANNESBURG — South Africa’s Lonmin mine seems to be intertwined with tragic drama in South Africa. The tragic Marikana Killings in 2012 shook the nation. And years later, Lonmin continues to struggle as a business. As a result, amid an acquisition bid by Sibanye, Lonmin will have to cut thousands of jobs just to keep its head above water. – Gareth van Zyl

By Felix Njini

(Bloomberg) — Lonmin Plc’s biggest labour union has asked antitrust authorities to stop Sibanye Gold Ltd.’s purchase of the struggling platinum miner should the new company intend to press ahead with more than 10,000 job cuts.

Lonmin has proposed 12,459 job cuts at mines that will run out of commercial deposits in the next three years. That’s an “inflated” target, the Association of Mineworkers and Construction Union told the South African Competition Tribunal, which is hearing public comments on the deal. Lonmin has already cut about 2,000 jobs to weather a rout in platinum prices.

Lonmin, Rustenburg
File Photo: A mine worker returns from the Lonmin mine at the end of his shift, outside Rustenburg. REUTERS/Siphiwe Sibeko

The magnitude of the planned cuts “warrant that the transaction be prohibited,” AMCU said in submissions to the tribunal. The union also said that the outlook for platinum-group metals has improved and a weaker rand means Lonmin could operate profitably.

If the merger doesn’t take place, Lonmin would require $450 million to $500 million to remain in operation, Chief Financial Officer Barrie van der Merwe said at the tribunal hearing Monday. The company isn’t in a position to return to the market to raise more capital, he said.

South Africa’s Competition Commission has recommended the acquisition, clearing a key hurdle for the deal, on condition that Sibanye tries to save about 3,700 jobs if prices improve and the company can maintain production costs at some shafts. The tribunal is expected to give its final ruling on the matter once public submissions are concluded.

Sibanye’s acquisition of Lonmin is the latest in a series of deals by Chief Executive Officer Neal Froneman, who has transformed the gold miner by expanding into platinum-group metals. For Lonmin, the deal comes after the company struggled through years of losses and was forced to seek debt-covenant waivers from lenders. Sibanye shareholders may vote on the deal in January if the tribunal grants final approval of the transaction this year, Froneman said Oct. 26.

AMCU said that Lonmin’s $200 million metals-purchase agreement with Pangaea Investments Management Ltd. improved the company’s liquidity, and that Lonmin is “in no danger of exiting the market in the immediate future.”