Northam Platinum Signs 3-year Wage Deal with NUM

South African miner Northam Platinum (JSE:NHM) has signed a three-year wage agreement with South Africa’s National Union of Mineworkers (NUM), which includes wage hikes of more than double the inflation rate, the company announced on Tuesday (October 2).

The agreement allows increases in basic wages for entry level underground employees of R1,000.00 in the first year, R1,100.00 in the second year and R1,200.00 in the third year. There will also be a R200.00 annual increase in housing/living out allowances over the course of the three years.

“We recognize the mature and constructive manner in which the engagement has been undertaken. The agreement provides for continuity, certainty and allows all stakeholders to focus on the sustainability of the business going forward,” stated Paul Dunne, CEO of Northam.

According to Reuters’ calculations, the increase works out to be just under 11 percent annually, compared with an inflation rate of 4.9 percent.

Failing prices and rising costs often times do not allow South African mining companies room for big wage hikes but despite this, unions state that the increases come off a low base rooted in the country’s apartheid past when the black labor force was exploited and simultaneously underpaid.

“NUM members at Northam Platinum are very pleased and excited that the wage agreement was concluded without any strike, violence, intimidation and loss of life,” the union stated in a press release.

Luckily for Northam, its financials are in better shape than many other miners in the South African area, thanks to high grades and a switch to mechanization, which is the change from working largely or exclusively by hand to doing that work with machinery.

At the end of Q2 2018, Northam reported that its PGMs production rose 4.5 percent year-on-year, largely due to strong operational performance at its Zondereinde mine in Limpopo, which produced 348,888 ounces of equivalent refined 6E, an increase of 7 percent from Q2 2017.

Additionally, earnings increased from R967 million in the second quarter of last year to approximately R1.1 billion in Q2 of this year, with normalized headline earnings around R420 million compared to R398 million in the prior comparable period.

As of 3:00 p.m. EST, Northam was down 0.41 percent, trading at ZAC 3,900.00.

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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.