Cost of labor.

Last week 34 striking miners were killed and 78 injured in police firing at Marikana in the Western Bushveld Complex in South Africa. The platinum mine is owned by the British company Lonmin, formerly called Lonrho which was described as " an unpleasant and unacceptable face of capitalism " in the House of Commons in 1973 by Prime Minister Edward Heath for its role in busting sanctions on the racist government of Rhodesia which is now known as Zimbabwe. Lonmin is the third largest producer of platinum in the world, around 15%, and aims to produce 750,000 ounces of platinum this year although that is now doubtful given the month long strike at its mine. Lonmin was valued at $10 billion 4 years ago in a takeover bid by Xstrata but is now valued at $2 billion. It has debt of $945 million and is planning a rights issue to raise around $1 billion to reduce its debt. Platinum was priced at $500 an ounce in 2000 and is now at $1500 an ounce, nowhere near the price of gold which has risen from $275 in 2000 to $1665 an ounce today. Platinum is also much more expensive to extract and refine which is why Lonmin is making a loss. The mine employs 28,000 miners who are paid Rand 5,400 ( $648 ) per month and are demanding R 12,500 ( $1500 ). They say that freedom from apartheid has made no difference to their lives and they have no money to send home to their families. The miners were instigated into violence by a smaller union which wants to increase the numbers of members and thus its power. This seems to be a classical story of poor management, poverty and political exploitation of illiterate people in a developing country. The miners have large families, often with over 10 dependents, and the increasing wages are insufficient to compensate for the rising cost of food. Being illiterate they are easy to inflame with talk of rise in the price of platinum. The sudden rise in the price of precious metals and the $10 billion valuation may have tempted management to take loans which they find difficult to service today. If the mine were to shut down the shareholders would lose money but they and the managers would have already made a lot of money from the mine and would just move on to some other business. They would blame the politicians who would blame management and the miners would end up starving. Should natural resources of a country be exploited just for making money or for creating jobs for the poor? The 2G scam and the Coal licenses scam in India hinges on that question. Licenses were given away cheaply without auction incurring a notional loss of Rs 3 trillion. However cheap license meant that phone calls are cheap and the price of electricity is affordable. Finally, poor people must stop producing children or they will die. Starvation or bullets, that is the choice.