Lonmin has become the first mining company in South Africa to inform the National Union of Mineworkers (NUM) of its intention to make worker retrenchments, Mining Weekly reports today (30th January).

The government has set up a task team after consultation with the union as it attempts to tackle the possibility of a rumoured 18,000 miners being retrenched as pgm prices continue to suffer.

However, NUM spokesman Lesiba Seshoka has told the news provider that it has only entered into official process with Lonmin, the world's third-largest platinum producer, about its 4,000 workers.

Companies must be able to prove under Section 189 of the Labour Relations Act that retrenchments are necessary for them to be able to continue their operations, while fair criteria must be applied to the process if it goes ahead.

Henri Lombard, International Director of mining and exploration consultant Geo Consult, explained that firms will do whatever it takes to keep on top of their profits, even if the task team has stated that job losses are a last resort.

"Mines consolidate their positions and focus their activities on what makes money, they close down shafts that are not profitable, they stop exploration and stop looking for new projects in other countries," he told Mining Weekly.

"There has been a change in the mining environment to which mines and exploration companies are having to adapt."

The NUM revelation comes after Lonmin confirmed that it registered platinum sales of 126,202 oz in the fourth quarter of 2008, a figure which represents a decrease of 13.3 per cent from the corresponding period in 2007.

Furthermore, the company saw its sales of all pgms fall from the 271,394 oz recorded in 2007 to a total of 228,805 oz, while production of platinum was at 132,935 oz and pgm output was 243,818 oz.

The declines can largely be explained by the fact that opencast mining has been halted at Marikana, although more tonnes were mined there from underground in Q4 2008 compared to Q4 2007.

A Lonmin statement to the Johannesburg Stock Exchange read: "The platinum group metals pricing environment during the first quarter of the 2009 financial year remained challenging and the short-term outlook for pgm pricing continues to be difficult to predict."

Despite those concerns, Lonmin has confirmed that it expects to remain on track to achieve its previous forecast of selling 727,000 oz of refined platinum in the financial year to September 2009.

Meanwhile, Xstrata, which failed with a £5 billion hostile offer for Lonmin last August, has claimed that it will not be looking to pursue further mergers or acquisitions in the current economic climate, Reuters reports.

Chief Executive Mick Davis told the news provider: "Now is not the time. I think that it's too early to aggressively pursue merging opportunities and I think one has to see how the general economy, and in particular how it impacts on the mining sector, develops this year.

"I think that there is still a lot to unfold during the course of this year and I just think it's just too early to act and to move."

However, the world's fifth-largest diversified mining group by value added that it is holding 24.9 per cent of Lonmin's shares "to provide a significant stake in a business with attractive long-term fundamentals", Business Day reports.

Xstrata had claimed that it would revive some of the company's underperforming assets, but it abandoned the offer in October over concerns relating to market instability and financing debt for the acquisition.

Sources:

Lonmin on track with sales forecast (30/01/09)
http://www.businessday.co.za/articles/topstories.aspx?ID=BD4A928817

PGM explorer notifies union of retrenchments (30/01/09)
http://www.miningweekly.com/article.php?a_id=150738

Xstrata says not looking at more M&A (29/01/09)
http://uk.reuters.com/article/businessNews/idUKTRE50S1PX20090129

Lonmin's December sales sink (30/01/09)
http://www.mg.co.za/article/2009-01-29-lonmins-december-sales-sink