Bloomberg News

South African Strikes Halt 39% of Nation’s Gold Output

September 26, 2012

AngloGold Mines Halted in South Africa as Strikes Spread

A six-week strike at Lonmin Plc’s Marikana mine northwest of Johannesburg claimed 46 lives and ended last week as miners secured pay increases of as much as 22 percent, more than quadruple the country’s August inflation rate. Photographer: Alexander Joe/AFP/Getty Images

South African gold mine strikes halted about 39 percent of output, including at AngloGold Ashanti Ltd. (ANG) and Gold Fields Ltd. (GFI:US), as unofficial walkouts spread in the country amid demands for above-inflation pay increases.

AngloGold, the world’s third-largest gold producer, today said all of its South African mines have been stopped. Gold Fields lost a metric ton, or about 32,000 ounces, of output because of strikes at its KDC and Beatrix sites.

Gold-mine workers have been encouraged by the pay increase prompted by a wildcat strike in the platinum industry. A six- week walkout at Lonmin Plc (LMI)’s Marikana mine erupted into violence that killed 46, including 34 shot by police last month. Workers won wage gains of as much as 22 percent, more than four times the August inflation rate, before returning on Sept. 20. Coal of Africa Ltd. (CZA) employees and about 20,000 transport workers are also on strike.

“Workers are now demanding wage increases according to the ‘Lonmin settlement,’” David Davis, an SBG Securities Ltd. gold analyst, said in a note. “Strike action may well spread from other mines to Harmony’s mines and to other industries.” Harmony Gold Mining Co. said it’s so far unaffected.

Direct action over wage demands has spread as workers sidelined traditional representatives for negotiating with management, such as the National Union of Mineworkers, a backer of the governing political party. At Lonmin, workers appointed their own leaders. Julius Malema, a youth leader expelled by the ruling African National Congress, has called for disruption and state control at mine operations.

Urgent Matter

Gold companies may bring forward wage talks scheduled for next year, given “the urgency of the matter,” Vusi Mabena, a stakeholder-relations executive at the Chamber of Mines, said Sept. 21. The chamber negotiates pay on behalf of AngloGold, Gold Fields and Harmony, Africa’s largest gold producers.

AngloGold fell 5.1 percent to 283.29 rand by the close of trading in Johannesburg. Gold Fields, the world’s fourth-biggest producer, declined for a third day, losing 2.3 percent to 102.98 rand. Gold dropped 0.9 percent to $1,744.65 an ounce as of 4:22 p.m. in London.

AngloGold workers striking since Sept. 10 at the Kopanang mine were yesterday joined by staff at other operations, the Johannesburg-based company said today in a statement.

While the company received wage demands today from the strikers, it doesn’t intend to negotiate directly with them, Alan Fine, a spokesman, said by mobile phone. “Wages are not something that’s negotiated at company level, and won’t be.” South Africa accounts for about 32 percent of the company’s output of the precious metal.

Coordinated Strikes

Gold Fields is concerned that threats of violence against staff reporting for shifts are rising, said Sven Lunsche, a spokesman. A strike that started Sept. 9 at KDC West spread to Beatrix yesterday. Workers downed tools at KDC East this month.

There isn’t any suggestion the Association of Mining and Construction Union, a rival to the NUM, is orchestrating the disruption at AngloGold’s facilities, Fine said. The strikes were “obviously coordinated, but as to exactly how it was done, a lot of that is in the realm of speculation,” he said.

Mining companies operating in South Africa have faced above-inflation increases in wage and electricity costs for each of the last three years at least. Power costs increased an average 26 percent last year and 25 percent in 2010. Mines are getting deeper and more difficult to operate as orebodies get depleted.

Unrelenting Pressures

“The combination of declining production and unrelenting inflationary pressures suggests that almost all mature South African operations are likely to face downsizing within the next 12 to 36 months at best as an imperative and not as an option,” SBG’s Davis said of the gold industry.

AngloGold produced about 306,000 ounces in South Africa in the first quarter and Gold Fields’ KDC West and Beatrix about 212,200 ounces. The nation’s gold output was 1.35 million ounces in the quarter, the Chamber of Mines says. It was the fifth- biggest gold producing nation in 2010, according to GFMS Ltd.

Anglo American Platinum Ltd. (AMS), the largest producer of the metal, has lost about 20,000 ounces of output as workers refuse to report for duty at its Rustenburg operations, the company said today. It has issued a “final ultimatum” to them, Chief Executive Officer Chris Griffith said today.

The Rustenburg operations, where about 21,000 workers are on strike at four mines, were on review before the strike started, he said. Job losses are “inevitable” and the industry is “in crisis,” he said.

Anglo’s Review

Anglo American Plc (AAL) said Feb. 17 it will review its platinum assets, given the outlook for continued weak prices for the metal, which had dropped 11 percent in the year prior to that date. Amplats, as the platinum company is known, declined 6.1 percent to 403.02 rand.

Impala Platinum Holdings Ltd. (IMP), the second-largest producer, increased pay to halt a six-week strike in January and February at Rustenburg, the largest mine producing the metal. Workers have since made new demands, Johannesburg-based Impala said Sept. 11.

More than 20,000 freight transport workers are also on strike, demanding a wage increase of 12 percent, the South African Press Association said. Unions rejected an offer of a staggered increase of 8.5 percent effective next March followed by an additional 0.5 percent in September, SAPA said.

To contact the reporter on this story: Carli Cooke in Johannesburg at clourens@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net


Cash Is for Losers
LIMITED-TIME OFFER SUBSCRIBE NOW

Companies Mentioned

  • GFI
    (Gold Fields Ltd)
    • $4.15 USD
    • 0.06
    • 1.45%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus