Before the outbreak of strikes on the platinum belt, miners were considering the very real prospect of restructurings, retrenchments and cut backs with years of above inflation cost creep eating into margins and in some cases bypassing revenues.
The pressures in the sector were so great that the world's biggest producer, Anglo Platinum, saw its head, Neville Nicolau, exit the business shortly before the announcement of its ‘bloodbath' interim results and announce an internal review of its business.
This from the producer with the most capability of cross subsidisation between its plethora of mines.
The suspension of operations at Amplat's Rustenburg mines during the latest protest action involved five mines: Khuseleka, Thembelani, Khomanani, Siphumelele and Bathopele.
Four of these, excluding Bathopele, fall in the bottom half of the miner's list of earners in terms of operating profits with Thembelani reporting a loss of R12 million for the six months ending 30 June 2012.
Without giving numbers, Amplats has reported that ‘many' mining employees did not return to work today as hoped and urged those that have stayed away to report for their next shift by no later than Wednesday otherwise the company will initiate ‘appropriate employee relations' procedures.
Smaller producer, Aquarius Platinum put its Everest and Marikana operations on care and maintenance and Eastplats announced cut backs in expansion plans earlier in the year.
Lonmin, ironically, was the least likely miner to have been deploying cut back tactics before the strikes broke out in that it was looking to increase volumes in order to lower unit costs and recover from the failure of a mechanisation attempt at some of its shafts.
The size of the third largest producer also did not afford it the same scope of cross subsidisation that its competitor Anglo Platinum had at its disposal.
In any event, I am sure that you can see where this is going and apart from sketching the pre-strike environment it also says what no-one else, least of all employers, will say aloud or admit to given the tensions and loss of life that has accompanied these events.
The perversity is that the strikes have, unwittingly or not, provided the means for employers to dismiss illegally striking workers and close marginal shafts without having to incur the usual compensation that accompanies retrenchments.
The perversity doesn't end there.
It has also contributed to a much needed platinum price increase of 21% between 10 August's spot price of $1414 per ounce and Monday's spot price of $1710/oz. With the strike action at Lonmin starting on 10 August many analysts believe that there is a fear premium built into the current price.
If this is true however, once the strikes abate and business returns to normal with no permanent reduction in production and no sign of an increase in demand for the shiny metal from the likes of the European autocatalytic market or elsewhere, a metal surplus will in all likelihood start accumulating again thus driving prices back to where they came from.
Despite attempts to keep worker demands or offers during the Lonmin negotiations out of the media, the reality is that post-negotiation the implications of a wage settlement at Lonmin will have widespread ramifications.
The details of the final wage will be known to participating unions and workers will discuss it amongst themselves in the close knit communities of the platinum belt and competing employers will be forced to keep pace with the demands for higher wages.
If some sort of collective bargaining forum is eventually established in order to prevent workers from playing off employers against each other it will likely only happen after the Lonmin negotiations end once an increase and a new benchmark wage has been agreed upon.
And hence if metal prices decline and wages increase substantially the destructive cycle will restart with margin squeeze and losses driving once again the need for retrenchments and cut-backs in what could fire up more protests amongst the growing unemployed masses for the politically disenfranchised to feed upon.
This article appeared courtesy of mineweb. Read more South African mining news click here.