Consolidation the 'bitter medicine' SA platinum needs
Lonmin is not a failing firm, Amcu tells tribunal hearing on platinum producer's merger with Sibanye
Consolidation is the “bitter medicine” the SA platinum industry needs if it is to be saved, Sibanye-Stillwater CEO Neal Froneman told the Competition Tribunal at the hearing of the company’s proposed merger with Lonmin.
The deal would breathe new life into the financially distressed Lonmin, which has already commenced its restructuring, which will result in 12,459 job losses. Sibanye-Stillwater’s takeover would bring that number to 13,344, the merging parties said.
The Association of Mineworkers and Construction Union (Amcu), however, claims that bad management was the source of Lonmin’s ills and an improving outlook of the platinum price could see it recover very soon.
Amcu, in its submission to the tribunal, said that not only had Sibanye refused to commit any capital investments in Lonmin as part of the merger, but its involvement also caused the number of job cuts at Lonmin to rise, although the merging parties refute this.
The union further submitted that Lonmin was in far better health after it secured $200m in funding through a metal purchase agreement and had also reported improved production over the past year. It also said assumptions about platinum group metal prices were flawed and that prices were set into 2018 and beyond.
“Lonmin will not be exiting the market any time soon and is not a failing firm,” Amcu said in its submission.
But Froneman said the key measure was the company’s cash balance month to month, which was just enough to “wash its face”. As far as management was concerned, he said, he believed Lonmin was well run.
Ultimately the SA platinum sector needed to go the way of the gold sector where taking down farm boundaries and entering into sensible consolidation had saved many jobs, he said.
Sibanye committed to the tribunal panel that it would apply its mind to possible terms for a moratorium on job losses that could be workable and would revert on Wednesday.
Froneman did, however, note that Sibanye’s shareholders are yet to vote on the merger, which had already seen Sibanye taking on risk for a company that had been in bad financial health for years. If a moratorium created uncertainty about the ultimate outcomes of the deal, it was unlikely to be a risk shareholders would want to be exposed to.
Froneman said that if the merger was not approved Sibanye would move on. “We can’t spin our wheels forever and a day trying to achieve something that’s in the national interest.”