September 20, 2012 / 7:08 PM / 5 years ago

Lonmin says South Africa pay deal to add 14 percent to wage bill

2 Min Read

JOHANNESBURG (Reuters) - The world's No. 3 platinum producer Lonmin (LMI.L) (LONJ.J) said on Thursday its wage bill would rise 14 percent from October 1 because of a pay deal reached this week to end a violent 6-week strike.

Lonmin, faced with soaring costs, did not give precise numbers, so it was not clear what the wage increases would ultimately cost the company. Lonmin had an $18 million profit in the first half of 2012.

The company said a one-time bonus of 2,000 rand ($240) would be paid on or before October 1 to each worker for returning to duty.

Forty-five people were killed last month in violence unleashed by the illegal strike, including 34 shot dead by police in a single incident on August 16 near Lonmin's Marikana mine 100 kms (60 miles) northwest of Johannesburg.

Analysts expect the company to go to the market with a rights issue to inject cash into its operations after the loss of production.

Lonmin made the announcement after markets had closed in London and Johannesburg, but its share price fell over 6 percent on Thursday as concerns mounted about the costs and thousands of its employees returned to work.

Much of the platinum sector in South Africa, which is home to about 80 percent of known reserves of the precious metal, is struggling with thin margins because of low demand and rising costs for things like power and wages.

Wildcat strike action has also spread to the world's top producer Anglo American Platinum (AMSJ.J).

There are concerns that the Lonmin deal, which will provide pay hikes of 11 percent to 21 percent, will encourage other workers in a country marked by glaring income disparities almost two decades after the end of apartheid.

($1 = 8.3260 South African rand)

Reporting by Ed Stoddard

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