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Amcu, producers haggle over wage offer

Johannesburg - Marathon talks aimed at ending a crippling three-month strike in South Africa's platinum sector resumed on Thursday as the world's top producers and the union haggle over an offer tabled last week by the companies.

The strike is already the longest and most costly in living memory for South Africa's mines, though there has been a renewed drive to break the deadlock in recent days after several weeks with no formal direct talks between the two sides.

The talks involve the Association of Mineworkers and Construction Union (Amcu) leadership and chief executives from Anglo Platinum (Amplats) [JSE:AMS], Impala Platinum (Implats) [JSE:IMP] and Lonmin [JSE:LON].

Both sides indicated that there was no clear end in sight for the negotiations, which entered a third straight day on Thursday.

"We are still talking. We don't know when this will break," Lonmin CEO Ben Magara told Reuters on the sidelines of the talks.

Amcu President Joseph Mathunjwa said he did not know whether the current offer was ready to be taken to members for a vote.

Underscoring the widening impact of the stoppage, Amplats said it now expected full-year production to be 2.1 million ounces, down from its previous estimate of 2.3 to 2.4 million.

There is "potential for further downside revisions from the ongoing industrial action", the unit of global mining house Anglo American said in a trading update.

A painful restructuring is considered likely after the dust clears from the strike, with job losses expected, especially around Amplats' struggling Rustenburg operations, which it has signalled it could sell or mothball.

The strike, which started exactly 13 weeks ago, has hit about 40% of global production with more than 700 000 ounces lost and counting.

Million ounce strike

Even if the strike were to end next week, production losses will still mount as the mines slowly reboot.

"Based on the extent of direct losses from strike action to-date, and adding in an allowance for lower production as a result of safe-start procedures, re-hiring, re-training and ramp-ups, I expect losses to platinum production this year to be in the order of 900 000 to 1 million ounces," said William Tankard, metals analyst at Thomson Reuters GFMS.

Exacerbating the industry's woes is the muted price reaction to the stoppage despite its scale. Traders have bet there are adequate above-ground stocks and demand remains far from robust in major markets such as Europe.

Spot platinum prices are just under $1 400 an ounce, around 3.5% lower than just before the walkout began on January 23.

The sector's viability is also being shaken. Producers have lost R14.5bn to the strike so far, according to an industry website that gives a running tally.

These factors plus rising costs explain why the producers have been trying to draw a line in the sand, setting the stage for a protracted showdown between capital and labour.

Mathunjwa, Amcu's uncompromising president, has cast the talks in class-war terms and says his union aims to rectify decades of exploitation of black labour by white capital.

Initially demanding an immediate doubling of the basic wage - net salary before allowances such as housing - for entry-level workers to R12 500 a month, Amcu has since said it would accept annual increases that would reach this goal in three or even four years' time.

The producers' latest offer, made last Thursday, was for wage rises of up to 10% and other increases that would take the minimum pay package - the basic wage including the allowances - to R12 500 a month by July 2017.

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