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Mining Strikes Could Spread to Anglo American

Matt Clinch, special to CNBC.com
Thursday, 23 Aug 2012 | 9:28 AM ET

One of the world’s largest mining groups, Anglo American, could see its platinum production also affected by striking workers, according to trading company Vincom Commodities.

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Group president Anil Kumar told CNBC Thursday that contagion could spread to other mines after a strike last week after clashes and firing by police on striking workers at the Lonmin mine in South Africa left 44 people dead.

“It is a strike that we think will have a contagion effect, so Anglo [American], which does almost 45 percent of the world’s platinum, is next in the queue,” Kumar said.

“Can you imagine 45 percent of the world’s production and then suddenly you cannot deliver?”

On Thursday platinum gained another 1.1 percent, rising for a sixth day to a three-and-a-half month high.

Kumar accepts the platinum price rise is temporary, due to the ongoing tensions, and says there aren’t any fundamental reasons for the increase.

“If Anglo [American] gets sucked into this problem then the price could shoot up further,” he said.

Vincom Commodities said in a research note that it estimates the loss of production at the Marikana facility to be around 8,000 ounces so far.

Based on information it has received, Vincom believe that it will take a further four weeks to resolve the issue thus bringing a maximum production loss of 40-50,000 ounces to Lonmin's yearly stock.

Kumar wasn't sure that the current surplus in the system could handle the halt in production.

Platinum Could Sky Rocket on Miner Unrest
Anil Kumar, group president at Vincom Commodities, told CNBC, if Anglo American gets sucked up into this problem and 40 percent of the world's production suddenly can't deliver, then the price of platinum could shoot up.

“We have 250,000 [ounces], but 250,000 [ounces] is only about a month’s production. So if the major mines shut down it will be a huge problem,” he said.

Kumar said that if the mining industry conceded to the demands of the workers then the average wage for mine workers would rise to $1500 (12,500 rand) a month from $482 (4000 rand).

Kumar foresees a problem for the sector because the wage rises would have to be introduced industry-wide and platinum has typically been trading below its cost price before the recent increase.

London-based company Lonmin accounts for 12 percent of global platinum output. Just over a quarter of their workers returned to the mine on Monday with the firm threatening to sackworkers if they didn’t show.

According to Reuters, Lonmin officials said the clashes last week were between the National Union of Mineworkers (NUM) and the Association of Mineworkers and Construction Union (AMCU).

The rival unions had also caused the closure of the world's largest Impala platinum mine for six weeks earlier this year.

A day of mourning was held on Thursday in South Africa. The Lonmin mine ceased operation for the day as workers were expected to gather to remember their colleagues who were killed.

Lonmin told CNBC that the situation is currently peaceful and no incidents occurred overnight.

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