Johannesburg, Reuters—The leader of South Africa’s AMCU union said on Friday a wage deal with the top three platinum producers was imminent, signalling a possible end to a crippling five-month strike that has disrupted global output of the metal.
Workers from the Association of Mineworkers and Construction Union (AMCU) begged leader Joseph Mathunjwa on Thursday to end the country’s longest mining strike and sign the latest offer—an increase of about 20 percent, or 1,000 rand (93 dollars) a month.
Mathunjwa told Johannesburg radio he would take the offer to more AMCU members at mines on Friday, before meeting with management at Lonmin, Anglo American Platinum and Impala Platinum later or over the weekend to relay the response of his miners to their offer.
“At least there is light at the end of the tunnel, which is not the light of a goods train,” he told Talk Radio 702.
The main outstanding sticking point was whether the wage deal should stretch over three or five years, he said.
“We are in quite a sensitive stage of trying to resolve this and reach an agreement. We won’t do things haphazardly,” he said.
Bishop Joe Seoka, who mediated between miners, companies and the government after the police killing in August 2012 of 34 wildcat AMCU strikers, said communities around the Rustenburg mines in the platinum belt, made desperate by the strike, were ecstatic.
“The mood is very jubilant. People are very happy, very excited,” he told Reuters.
“Yesterday I could have flown if I’d had wings. If it hadn’t happened yesterday, it could never have happened.”
Investec Asset Management, a top 10 investor in all three mining companies, said a deal would end a worrying period of uncertainty but the industry faced major challenges.
“We are not out of the woods yet,” Hanré Rossouw, Cape Town- based head of resources at Investec, told Reuters.
“There are still some hard questions to be asked about ongoing sustainability of the industry. A large part of the industry is not generating positive returns,” he said.
South Africa is home to 80 percent of the world’s known platinum reserves and the strike has halted production at mines that usually account for 40 percent of global output of the precious metal.
The cut in production has helped push global palladium prices up 15 percent this year, and platinum prices up 6 percent, but both have seen bouts of heavy selling over the past two days on signs of a wage deal.
The strike by the 70,000 AMCU members began in January and dragged Africa’s most advanced economy into contraction in the first quarter. Mining output fell at the steepest rate in nearly 50 years, pulling manufacturing down with it and putting the economy at risk of a recession.
Fitch ratings agency changed its outlook on South Africa to negative from stable on Friday, partly due to the impact of the strike. Standard and Poor’s is also expected to adjust its rating after local markets close.
When it first downed tools, AMCU said it wanted a roughly 150 percent pay rise to 12,500 rand per month, but platinum companies said this was totally unrealistic and for much of the negotiations said it wouldn’t go beyond 10 percent.
Even if a deal is now agreed, platinum producers face renewed financial challenges after suffering huge revenue losses in the strike and with the prospect of paying increased salaries, while restarting mines that have lain dormant for five months.
According to a website run by the three companies, the strike has so far cost them 22 billion rand (2.05 billion dollars) in revenue, while workers have lost nearly 10 billion in wages.
“The mining companies are in a very difficult place, they are not a juicy investment,” said Peter Major, mining analyst at Cadiz Asset Management.
“The companies are saying: ‘We will worry about when we are going to pay them later. We just want this thing over’.”
Shares in Anglo American were up 1.7 percent by 1243 GMT on Friday, while Impala Platinum rose 1.2 percent. Lonmin, which is the most exposed to the strike, eased 0.7 percent, after jumping 9 percent in the previous session.
The platinum strike also threatens to destabilize labor relations across South Africa as other groups, in particular the NUMSA metalworkers’ union, sharpened their rhetoric and pushed for strikes in pursuit of wage increases way above inflation.
“Hopefully a resolution to the platinum strike would cool labor risks elsewhere because a NUMSA strike would be pretty devastating,” said Peter Leon, mining analyst at Webber Wentzel.