Lonmin to seek cost-saving measures after wage deal

JOHANNESBURG, Oct (HKSE: 3366-OL.HK - news) 31 (Reuters) - South African platinum miner Lonmin (LSE: LMI.L - news) said on Monday it would seek new ways to reduce costs after signing a three-year wage deal with staff which will raise its labour costs by an average of 380 million rand ($28 million) annually over the period.

Lonmin, along with platinum producers Anglo American (LSE: AAL.L - news) Platinum (Amplats) and Impala Platinum (Other OTC: IMPUF - news) (Implats), agreed to a three-year wage deal with the Association of Mineworkers and Construction Union (AMCU) - the industry's main union - to raise miners' basic salaries by 7 percent a year.

The deal means a strike has almost certainly been averted in South Africa's platinum industry, which is still recovering from a crippling five-month stoppage led by the AMCU in 2014.

Under the new wage deal, Lonmin's 5 billion rand annual labour costs will rise by about 7.6 percent on average per year over the term of the wage agreement, the company said.

"We are constantly looking for areas not only to cut costs but to increase efficiency, to increase productivity," Lonmin (Berlin: 30318982.BE - news) CEO Ben Magara told Reuters on the sidelines of the signing of the agreement in Johannesburg.

"If we reduce absenteeism and improve productivity we can actually ensure that we are still ... a viable organisation that is what the purpose of this collaboration is about," said Magara.

He did not say how much he was hoping to save.

The other companies will also be under pressure to cut costs as the industry is having to cope with a commodity price downturn, just two years after being hit by the record five-month strike led by AMCU.

The biggest producer, Amplats, expects an annual increase of 6.74 percent in labour costs.

Implats said its wage bill would increase by 7.6 percent or 684 million rand per year. Its wage costs stood at 9 billion rand last year. Amplats wage figures were not available.

AMCU, known for its militancy and aggressive stance in wage talks, had pushed for wage hikes of close to 50 percent.

($1 = 13.5200 rand) (Reporting by Tanisha Heiberg; Editing by James Macharia and Jane Merriman)