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Platinum Soars on Strikes and and Violent Deaths at South Africa Minesites
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(August 18, 2012) Platinum prices Friday hit a six-month high, rising 5.5% last week as strikes at South Africa’s mines turned violent. Conflicts feuled by political strife between two miners’ unions, set in an environment of high unemployment, have left some 50 people dead.
South Africa, the producer of over 75% of world platinum supplies, has for decades been a leader in precious metals production, chiefly gold, platinum, and palladium.

None of this has come easy. Mining in South Africa is mostly accomplished thousands of feet underground. This makes for a grueling and unpleasant workplace for the miners, and a capital- and electricity-intensive cost center for the large corporations that own the mines.

Politics and socio-economic factors also come into play. The mines are surrounded by make-shift, tin-house communities which house both the miners and a host of unemployed hangers-on. Few who work in the deep mines are educated, most having come straight from Africa’s farming communities in search of better pay. And many gold mines have closed over the past decades, as have a few platinum mines in the past year during which platinum prices have sunk from over $2,200 per ounce in 2009, to less than $1400 early last week. This has put many miners out of work.

Rival unions seem to be at the heart of the latest trouble at the Lonmin platinum mine, where on Friday 8/17 at least 34 strikers were killed during a two-minute shooting barrage by police, facing a crowd wielding machetes and spears. The National Union of Mineworkers, which has traditionally been aligned with the African National Congress and South Africa’s president, Jacob Zuma, has been challenged by the Association of Mineworkers and Construction Union.

On August 10th, some 3,000 mineworkers walked off the Lonmin mine, seeking a raise from their current salary which averages about $550 per month. Two days later, some nine were dead and more injured in strike melees.

Platinum markets reacted to the violence, the shut-downs, and the atmosphere of unrest which threatens further production. It’s hard to predict an outcome, especially when the situations’s biggest moving part is political.

In a Reuters article of August 18th, by Jon Herzkovitz:

“Peter Major, mining consultant at Cadiz Corporate Solutions in Cape Town, said the Lonmin unrest was an ugly reminder of the social instabilities that still persist, but are often hidden by the ANC's electoral dominance.” "These people aren't just going on strike for better wages. There are power plays and rogue elements involved as well. And remember: these mines are surrounded by townships of thousands of unemployed people, tens of thousands often, of volatile, unemployed, uneducated people," he said.

The 3,000 rock-drill operators that went on strike from the Lonmin mine have been told by a spokesperson from Lonmin LLC to return to work Monday 8/20, or risk the loss of their jobs.

 

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