(Updates with basic pay increase in fifth paragraph.)
June 24 (Bloomberg) -- The three largest platinum companies and the main union at their South African mines signed a deal to end a crippling five-month strike after the labor group’s members accepted pay proposals from producers.
Anglo American Platinum Ltd., Impala Platinum Holdings Ltd. and Lonmin Plc each signed three-year agreements with the Association of Mineworkers and Construction Union today, they said in separate statements. Employees are expected to return to work tomorrow, they said in a joint statement. The agreement applies until June 30, 2016.
“It is only a first step to rebuild our businesses,” Lonmin Chief Executive Officer Ben Magara told reporters in Johannesburg, speaking on behalf of all the producers. “It is not necessarily a time of celebration. Clearly there are no winners in this strike.”
The stoppage by at least 70,000 miners cost the companies 23.9 billion rand ($2.2 billion) in revenue and workers 10.6 billion rand in wages since Jan. 23, according to the producers. The deadlock pushed South Africa’s economy into contraction in the first three months of this year as mining production plunged.
The lowest-paid underground workers’ current basic salary of 5,000 rand will be as much as 40 percent higher next month as increases for the first and second year of the agreement come into effect.
The deal includes monthly raises of 1,000 rand in basic pay for the lowest-paid employees in the first two years of the agreement, the producers said. Lonmin will apply the same raise in the third year, while at Impala and Amplats, as Anglo Platinum is known, it will be 950 rand. Those adjustments are on current pay of about 5,000 rand to 6,000 rand a month. South Africa’s inflation rate was 6.6 percent in May.
The increases equal 20 percent at Amplats and 18 percent for Impala and Lonmin for the first year.
The total labor cost to Amplats will climb an average 8.4 percent annually for the duration of the agreement. The other companies didn’t indicate the costs.
The deal will be applied from July last year at Amplats and Impala and from October at Lonmin. Workers won’t receive back- dated payments for the period they’ve been on strike.
Accommodation allowances will increase to 2,000 rand a month and stay there for the duration of the deal, from 1,950 rand now at Lonmin and 1,850 rand at Impala. At Amplats, it will rise by 6 percent annually.
Lonmin declined 2.4 percent by the close in London. Impala fell 0.2 percent in Johannesburg, after adding 1.1 yesterday, while Amplats dropped 2.2 percent.
Palladium for immediate delivery advanced 0.7 percent to $828.28 an ounce at 4:30 p.m. in London while platinum, used to make jewelry and devices that reduce harmful emissions from vehicles, gained 1 percent to $1,470.25 an ounce. South Africa accounts for about 70 percent of all the platinum mined globally.
South Africa’s credit rating was cut on June 13 to one level above junk by Standard & Poor’s, which cited the country’s longest and costliest mining strike as among reasons for the assessment. The rand strengthened for a second day against the dollar, adding 0.2 percent.
Thousands of strikers shouted out their approval for the offer yesterday at a mass rally held by the AMCU at a stadium in Rustenburg, 120 kilometers (75 miles) northwest of Johannesburg.
Lonmin agreed to reinstate 236 workers who lost their jobs, AMCU President Joseph Mathunjwa said at the rally. Amplats employees will get food parcels and vitamins in their first month back at work, he said.
The AMCU’s original demand was that basic monthly wages of the lowest-paid workers be more than doubled to 12,500 rand. The union then relaxed the date by which this could be reached. Some workers will be earning this figure within three years, Mathunjwa said.
The union will still aim at achieving a basic wage of 12,500 by 2017, Mathunjwa told reporters in Johannesburg today.
There “will be a continuation of the struggle to liberate our fellow comrades in the mining sector to realize a decent salary,” he said. “We will work towards their liberation of these slave wage salaries.”
The AMCU has agreed not to strike on the issues contained by the agreement, Mathunjwa said. The union will follow the law on future stoppages over salaries in all mining industries, he said.
“We welcome this positive development in the mining industry and congratulate all those who have been involved in the negotiations,” South African President Jacob Zuma said in a statement. “A long protracted strike was no longer in the interests of the parties involved or the country at large.”
--With assistance from Neo Khanyile and Tshepiso Mokhema in Johannesburg.