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ANALYSIS-South Africa's platinum strike will hasten restructuring

* Strike is biggest in S.Africa's mines in decades

* Costs industry $1 bln in lost revenue

* Mine closures look increasingly inevitable

* Some companies still interested in buying mines

JOHANNESBURG/LONDON, April 8 (Reuters) - As a strike by South African platinum miners enters its eleventh week, the likelihood that employers will bow to demands for better pay is receding and a drastic overhaul of the loss-making industry is looking more inevitable.

Faced with the tough bargaining stance of the Association of Mineworkers and Construction Union (AMCU), the companies appear increasingly likely to close or sell mines that are bleeding cash while they lie idle.

Before the strike began, around half of the country's platinum shafts were losing money because of rising energy and labour costs and waning demand for the metal, used mainly in jewellery and in catalytic converters for cars.

To pacify AMCU, Anglo American Platinum, Impala Platinum and Lonmin would have to double entry-level pay over the next three years to 12,500 rand ($1,200) a month - a demand they flatly refuse.

The industry has idled some production to shore up margins, but held back from tougher cuts for fear of a political backlash that could compromise its wider interests.

But the miners' strike, the longest and most damaging in South Africa in decades, has now cost the industry over $1 billion in lost revenue and there is a growing sense that the companies have little to lose.

Anglo American Platinum (Amplats) already reconfigured the five mines it operates near the platinum belt town of Rustenburg into three, but they were still losing money.

Mark Cutifani, the chief executive of Amplats parent company Anglo American, told Reuters last week it could divest some of its South African platinum operations.

Asked if Rustenburg faced a bigger risk of closure or potential sale than other Amplats mines, Cutifani said "Absolutely." Their closure could see around 22,000 or more jobs lost.

Amplats made a first attempt at restructuring last year, with planned cuts of up to 14,000 jobs, but it largely foundered on fierce resistance from AMCU and the government.

Selling many mines to new owners could give the industry more leeway to cut the costs that make much of South Africa's platinum unprofitable to extract.

"The strike has the potential to have beneficial long-term consequences for the platinum industry as a whole," Credit Suisse analyst Tom Kendall said.

"It is steadily resulting in a drawing down of refined inventories and has the potential to lead, eventually, to a more settled labour environment and a supply base that is 'right-sized' to fit demand growth."

HARDSHIP

Platinum may follow the gold industry, which used a three-week strike in 1987 involving 340,000 workers as the pretext to initiate a painful restructuring that resulted in tens of thousands of job cuts over the next two decades.

In 1970, South Africa accounted for almost 80 percent of world gold production and on the eve of the 1987 strike it employed over 500,000 miners. In 2013, the country produced less than 6 percent, according to Thomson Reuters GFMS, and the sector now only employs around 140,000 workers.

Platinum's decline will not be as dramatic. The ore is not as deep and costly to reach and South Africa still sits on around 80 percent of known reserves of the white metal.

But prospects for the sector's mostly semi-literate migrant labour force look grim.

The companies have offered pay increases of up to 9 percent, above inflation at 5.9 percent, and say they cannot afford more. The average miner has eight dependents, meaning even above-inflation wage increases often do little to end hardship.

The workers are drawn mostly from rural, subsistence farming backgrounds with low skills that also hamper efforts to improve productivity in the mines.

The strike has already led to 600,000 ounces of production losses. But platinum prices have remained depressed because of poor demand in Europe, where diesel engines which require a high platinum content in their converters are widely used.

Prices of the metal are currently 1.3 percent lower than on the eve of the walk-out on Jan. 23.

This is in part because producers built up stockpiles in advance, while end-users were well prepared after learning the hard way about South Africa's vulnerability to supply outages.

"It's been a notable feature of the stoppage so far that automotive and industrial users have been apparently little troubled. We have seen no evidence of 'panic buying' so far," said Credit Suisse's Kendall.

Most major European car companies have platinum supplies locked in until at least the end of 2015, industry sources say.

BUYING OPPORTUNITIES

Analysts forecast a smaller market platinum deficit this year than last, due to an expected drop in investment demand, which soared in 2013 with the launch of Absa Capital's platinum-backed exchange-traded fund, NewPlat ETF.

The platinum mining industry is already shrinking. Amplats, Implats and Lonmin collectively saw their labour forces fall to 134,000 at the end of 2013 from 145,000 two years earlier. Output fell over that period by 15 percent to 4.12 million ounces, according to refiner Johnson Matthey.

But some in the industry are focusing on the longer term prospect of growth in platinum demand and see an opportunity for decent profits if costs can be reined in.

Sibanye Gold has signalled it might be interested in buying some mines.

"Amplats has signalled its intention to sell some assets and we might be interested," said Sibanye spokesman James Wellsted.

Trying new methods such as mechanisation will still be difficult because of geology and the massive capital required.

Implats also says it may have to close some sections of shafts that have been shuttered by the strike. The full extent of such closures will only emerge after the mines are reopened.

"When you reopen the mine you start with the most profitable areas, and then you go down the line to the more problematic shafts," said Implats' spokesman Johan Theron. "That is where you will have to make some very difficult decisions."

(Additional reporting by Silvia Antonioli; editing by Tom Pfeiffer)