JOHANNESBURG (miningweekly.com) – Improvements are under way at Lonmin, the London- and Johannesburg-listed platinum company that was at the epicentre of last-year’s 44-death Marikana tragedy.
“It’s business unusual,” according to Lonmin executive VP mining Mark Munroe.
“We don’t have all the answers yet, but we’re making good strides forward, as can be seen in the delivery of our first-quarter results and our industry-leading safety performance,” Munroe tells Mining Weekly Online in an interview.
While the perfect storm of radically changing worker fundamentals and market weakness confronts the South African platinum industry, Lonmin has set about breaking down its hundred-year-old reward stereotypes.
“We are looking at the complete value proposition for employees,” Munroe says.
Lonmin surprised on the upside in producing 185 497 oz of platinum in concentrate during the first quarter of its 2013 financial year – the three months to December 31 – and has achieved an amazingly safe restart to its operations after the longest and most violent strike in its history.
The employer of 38 000 people, including 10 000 contractors, is currently the South African mining industry’s safest operator, having notched up 16-million fall-of-ground fatality-free shifts and five-million fatality-free shifts.
“We’re the safety leader,” says Munroe, who is also a leading member of the Mine Health and Safety Council, which serves as a safety adviser to Minerals Minister Susan Shabangu.
“It’s far safer underground at Lonmin than it is on the highway just outside Lonmin,” says Munroe, who adds that the crossroads at which South Africa’s platinum-mining industry finds itself is presenting a once-in-a-lifetime opportunity to do things better.
Lonmin is currently in consultation with its unions, the Association of Mineworkers and Construction Union (AMCU), the National Union of Mineworkers (NUM), Solidarity and UASA, on a proposed new operating structure.
The review of the operating model forms part of a renewal plan, which is likely to affect 150 management positions.
The renewal plan’s ramp-up element is progressing ahead of schedule, with financial literacy programmes under way acknowledging the role of employee indebtedness in worker agitation for higher pay.
“We’re working together to uplift one another,” says Munroe, who reports that transformation has progressed to the point of 10 out of every 11 Lonmin mine managers now being black.
Challenges still to be met include the entry of the emerging AMCU union into the formal negotiating framework and the processing of union recognition agreements.
“We have decided to change our approach from the winner-takes-all approach and I believe we’ll start seeing significant progress with union inclusivity in the next two to three months,” Munroe tells Mining Weekly Online.
The Lonmin process is running in parallel to the process of the platinum industry as a whole at Chamber of Mines level.
Lonmin intends adopting a multi-tiered approach and current negotiations centre on the decisions that must be taken at an industry level, those that must be taken at a company level and those that must be taken at mine level.
The timing of wage negotiations, the general direction of the value proposition to employees, the share-incentive schemes and bonuses will be taken in principle at industry level.
It is coming up with new solutions to the employee value proposition, which embraces accommodation, educational assistance to near-mine communities, the migrant labour versus local labour issues, and the outreach to employee families, that company-level negotiations need to address.
The living-out allowance needs to be looked at, as most mineworkers have moved out of the hostels to avail themselves of the living-out allowance, but have chosen not to use it for good-quality accommodation.
Instead, many have chosen to live in squatter camps and use the housing allowance for other purposes.
As “homes” in the far-flung labour-sending areas are often visited only once or twice a year, consideration is now being given to the introduction of new shift cycles that ensure that mineworkers get longer times off to return to their rural families.
“I would not quite go the Australian fly-in, fly-out model, but surely we should learn from best practice, which does give mineworkers longer periods with their families.
“I believe that we must find a solution to the migrant labour challenge. I don’t think it is something we can ignore,” says Munroe.
Many mines are looking to working more than the current 264 days a year and closer to the 365 days of the year, which will provide additional value for all stakeholders.
“We’re looking at better utilisation of the asset, by exploiting the unused days in the calendar,” says Munroe.
While there will continue to be migrant labour, more effort is likely to be made to employ people from near-mine communities.
There will be industry-wide solutions that cascade down and mine-specific solutions that stay within the mine gate.
Lonmin’s current four mining units of Eastern Platinum, Karee incorporating K4, Middelkraal and Western Platinum are likely to be restructured into three operating units.
Karee, made up of 1B, 4B, K3 and K4, represents about 40% of total production. K4, which is on care and maintenance, is the newest with a fully sunk shaft but no production.
The company’s 950 000 oz/y growth profile of three years ago has been cut to 750 000 oz/y, with guidance of 680 000 oz for the 2013 financial year, which ends on September 30, owing to the strike.
Lonmin will spend $175-million capital this financial year, well down on the previously planned $450-million.
Its unit cost guidance of R9 350 a platinum-group-metal (PGM) ounce remains unchanged.
While the need to move away from employing large number of minimally educated people is acknowledged, most of Lonmin’s mines, with the exception of the mechanised Hossy shaft and the opencast operation, are designed and developed to run using a conventional, labour-intensive mining method.
The Saffy shaft, which was formerly a hybrid shaft, is now fully conventionally mined and K4, on which mechanisation was attempted, has also been changed to a conventional shaft.
Lonmin is reluctant to turn its back on the research and development on the extra-low profile equipment in Hossy, and continues to study better use of its extra-low profile equipment, which will not be completely withdrawn.
“Hossy doesn’t have footwall infrastructure. It’s all on-reef infrastructure, making it very difficult to convert to conventional mining,” Munroe explains.
Although it is a narrow-reef mine, Hossy lends itself to mechanisation to a greater extent than K4 and Eastern Platinum in that it has less rolling reef and the machines can move on its flatter reef.
Post-Marikana, many committees are working on many plans, with the latest Budget allocating funds to improve community infrastructure around mines.
“All the parties are lining up to deliver, which is very encouraging,” says Munroe.
Lonmin is looking into the establishment of a community trust to benefit the entire local community, in addition to the Bapo Lonmin Trust and the royalty to the Bapo Ba-Mogale community, which has a direct ownership in Lonmin’s Pandora joint venture.
Ninety per cent of the chrome that Lonmin mines is made available to local ferrochrome producers, 60% of the nickel goes into local stainless steel, 10% of the platinum is delivered for local uses and 50% of the palladium the company mines goes into local manufacture of catalytic converters through an agreement with BASF.
“It’s one of those areas where collaboration is needed and where we can contribute our skills set into a collaborative effort. South Africa as a country needs to develop commercial niches,” Munroe believes.
Lonmin’s mining licence for its core operations runs to 2037 and is renewable to 2067.
It has resources of 175.2-million ounces of PGMs and 41.3-million ounces of reserves.
The company, which mines, refines and markets PGMs, has a vertically integrated operational structure that takes its products from mine to market.