Analysis: South Africa's mining crisis may lead to more

New Post Public Reply Private Reply Replies (0) Message Board
Lmcat

Analysis: South Africa's mining crisis may lead to more unrest

Striking platinum mineworkers gather for a report back on negotiations at Lonmin's Marikana mine in South Africa's North West Province, August 29, 2012. REUTERS/Mike Hutchings

Striking platinum mineworkers gather for a report back on negotiations at Lonmin's Marikana mine in South Africa's North West Province, August 29, 2012.

Credit: Reuters/Mike Hutchings

JOHANNESBURG Wed Sep 5, 2012 9:30am EDT

(Reuters) - South Africa's mining industry is being sucked into a vicious circle as labor unrest spreads from platinum to gold with steep wage demands neither sector can afford.

Fueled by outrage over the police killing of 34 striking miners last month, the militancy in the world's top platinum producer is leading to closed shafts and job losses, triggering in turn more union and social tension.

"This may be the beginning of a ‘Miner Spring'. Perhaps we have reached a point now where the inequity in the pay scale would lead to broader civil disobedience and protest action," said Tony Healy, an expert on South African labor law.

The worker stridency has found fertile soil in the squalor of the poor communities that ring the mines in South Africa, the continent's wealthiest economy but one scarred by the inequalities of its racist past.

It is also the most serious challenge since the end of white rule in 1994 to the unwritten pact at the heart of post-apartheid political and economic power: unions aligned to the ruling ANC deliver modestly higher wages for workers, while also ensuring labor stability for big business.

Operations have been frozen for almost a month at world No. 3 platinum producer Lonmin after violence erupted with the killing of mine security guards and two police officers. The mass shooting by police followed days later.

Although the most violent, it was just one in a string of incidents caused by a turf war in the platinum belt between the dominant National Union of Mineworkers (NUM) and the militant Association of Mineworkers and Construction Union (AMCU).

Aquarius Platinum shut its Everest mine in June, citing labor infighting, with the loss of 2,000 jobs. Lonmin has warned if its strike is prolonged, 40,000 jobs will be lost.

But worker anger at NUM is rife, with its leaders seen as too close to management and the ANC, its senior partner in an official governing alliance.

At Marikana on Wednesday, demonstrating miners chanted "We hate Zokwana" - a reference to NUM President Senzeni Zokwana.

The discontent has enabled AMCU to recruit thousands of disenchanted NUM members at Lonmin, Impala Platinum and Aquarius Platinum. They are also active at Anglo American Platinum, the world's biggest producer, although have not had as big an impact.

In response, NUM has signaled it is prepared to push its own wage demands harder, by insisting that negotiations on two-year collective agreements in the gold and coal sectors start several months early.

"We are strongly of the view that we need to arrest the dissatisfaction that members have over their wages and start talking sooner rather than later. Maybe as early as February next year," spokesman Lesiba Seshoka told Reuters.

NUM members have been getting pay rises above inflation but at the bottom of the pay scale that does not go far as most mineworkers have on average eight dependents.

GOLD HIT TOO

The anti-NUM contagion has now infected the gold sector, with 12,000 workers at Gold Fields, a quarter of its workforce, downing tools last week because of anger with their local NUM leaders, whom they want replaced.

Gold was supposed to be immune, in part because much of its workforce lives on hostels on private mine property. In the platinum sector most workers live off-site in communities around the mines where union recruiters can work freely.

But the Gold Fields' wildcat strike, which ended on Wednesday, did not need outside agitators. The workers in the hostels became fed up with their NUM branch and insisted they step down.

Gold was also seen as shielded from militancy by the industry-wide, collective bargaining process that defines wage talks among the big producers. Platinum has a company-by-company process that has provided a gap for upstart unions to muscle in pit by pit and claim they can strike better deals.

But if NUM wants to bring wage talks forward, this framework may start to fall apart.

WORKERS WANT MORE, COMPANIES HAVE LESS

The battle cry at Lonmin, which began with 3,000 rock drill operators who launched the illegal strike, has been for a basic wage of 12,500 rand ($1,500) a month, well over double the 5,400 rand they currently receive.

If Lonmin concedes, it will add about $30 million a year to its wage bill against a first-half profit of $18 million.

But the demand has spread from rock drill operators to thousands of less-skilled workers who also want 12,500 rand as a minimum monthly wage.

Lonmin already has a shaky balance sheet and is widely expected to offer a rights issue to shore it up. Much of the platinum sector is already underwater with shafts seen closing because of depressed costs and soaring prices.

Gold companies look on firmer ground, in large part because of high bullion prices, but they too are getting squeezed and the sun may be setting on South Africa's 120-year-old gold industry.

Take Gold Fields, the world's fourth largest bullion producer that gets about half of its production from South Africa. Its total cash costs per ounce in South Africa have risen from $618 in 2007 to $1,360 last year.

The average gold price over the same period has risen to $1,569 an ounce from $659 but there is no guarantee the bull run will be maintained.

Global mine inflation, the cost of running a mine, is about 15 percent per year but has been higher in South Africa. Power costs have soared and NUM has consistently delivered above-inflation wage hikes for its members, usually 10 percent or more.

Adding just 15 percent a year to Gold Fields' costs would mean it would need a gold price of over $2,000 an ounce by 2014 just to break even in South Africa.

In a research note, SBG Securities forecast downsizing at almost all South Africa's mature gold operations over the next 3 years in the face of "declining reserves and unrelenting inflationary pressures."

The gold sector underwent a painful restructuring over a decade ago when the price of bullion slumped, leading to tens of thousands of job losses and South Africa's fall from world No. 1 gold producer to 4th place.

Job losses in the mining sector have already added to South Africa's social ills, inequalities and poverty levels, but the next round looks set to come at a time of hardened union militancy which will stoke tensions higher.

http://www.reuters.com/article/2012/09/05/us-...QU20120905

Gold Fields Ltd (GFI) Stock Research Links

GFI Board Company Profile Buy Rating Time & Sales News Filings Financials
Scroll down for more posts ▼

Top 10 Most Recent News Articles

Fermi's Founder Pushes for Board Overhaul: What's Next?

Updated Category News Views 4

Fermi's Roller Coaster: A Founder’s Stand Seems like Fermi Inc. is on a wild ride through the business landscape, and it's giving shareholders more whiplash than satisfaction these days. Toby Neugebauer, co-founder of Fermi and the loudest voice in the room, is feeling like his company is facing some serious turbulence and seems determined not to sit idly by as it hits...

Continue Reading
QuickFi Nabs Top Finovate Award for Fourth Time

Updated Category News Views 5

An Unstoppable Force in Fintech Well, if QuickFi hasn't made a name for itself in fintech, then folks, I don't know what to tell you. This year, they’ve snagged yet another prestigious Finovate Award—this time for Best SMB/SME Banking Solution. That's not their first rodeo either; it’s the fourth time they’ve walked away winners. It's almost like they're...

Continue Reading
Jari Spirits Set to Shake Up U.S. Market After Big Wins

Updated Category News Views 4

Korean Spirits Jari Eyes U.S. Market Entry Some stories just have that perfect 'right time, right place' vibe, and CJ Foods' recent splash with their Korean spirits brand jari is one of them. Buckle up, because this one's about a Korean distilling sensation gearing up to hit American shores with a bang. Accolades Pave the Path Jari, the premium Korean distilled spirits...

Continue Reading
Streamlined AI Video Analytics for Public Safety Unveiled

Updated Category News Views 3

AI Without the Headache Alright folks, IREX is shaking things up, and not in the usual iterative, bit-by-bit tech progression way. StreamVLM™ has been rolled out as the world's first vision-language model (VLM) analytics engine tailored for the public safety sector—specifically, for cloud platforms. I’ve been around the block enough times to spot a significant shift...

Continue Reading
Intus Bio Secures $2.7M for Colorectal Cancer Test

Updated Category News Views 5

Pioneering Efforts in Early-Onset Colorectal Cancer Detection The battlefield of colorectal cancer prevention just got a serious upgrade with Intus Bio grabbing a $2.7 million award. This ain't just pocket change—it's a shot at rewriting the script on how we approach early-onset colorectal cancer, the pesky number one cancer gnawing at the under-50 crowd. Partnering...

Continue Reading
High-Grade Copper Spurs Optimism for PolarX in Alaska

Updated Category News Views 4

Copper's New Pulse: PolarX Makes Waves in Alaska Ever hear about striking copper so rich it's practically shimmering? Well, PolarX Limited just might have hit that sweet spot up in the rugged expanses of Alaska. Let me tell you, when you're knee-deep in resources, like what they’re discovering at the Caribou Dome Project, it sure feels like you’ve struck modern-day...

Continue Reading
Sustainability Investments: $17 Trillion Wager Faces Divergence

Updated Category News Views 4

Sustainability Investments: A Tale of Contrasts In the world of sustainability, a staggering $17 trillion has been poured into technologies over the past decade. That’s no chump change. But what do we have to show for it? According to Bain & Company’s latest report, this massive financial injection hasn’t exactly hit a home run. Progress, much like the stock market...

Continue Reading
Americas Cardroom's Poker Series Hits $7.2M Haul

Updated Category News Views 6

Massive Prize Pools Emerge in Just Four Days I found myself eyeballing some jaw-dropping numbers from Americas Cardroom's latest poker series, the Online Super Series XL. It's not every day you see nearly a hundred tournaments rake in over $7.2 million in prize pools in just four days. From September 6th to 9th, a whopping 62,847 entries signed up to make an honest...

Continue Reading
Modeling and Mental Health Join Forces for Wellness

Updated Category News Views 5

A Fresh Alliance for Mental Wellness in Modeling Alright, let's shine a spotlight on a significant step in the modeling industry, a place typically less vocal about mental health. In a move that feels long overdue, Brain-Body Therapy and Mother Model Management have joined forces, marking the beginning of a collaborative effort to propel mental wellness to the forefront...

Continue Reading
Oil Markets Shift Focus: Pipelines Trump Drilling

Updated Category News Views 8

Decoupling Oil Price and Production Response This oil market isn’t your usual rodeo. With Brent flirting with $100, it’s a seismic shift that’s not yielding new drills but redirecting capital to the existing infrastructure landscape. Ask yourself why we're not seeing the usual cavalry charge of new rigs. It’s simple: Pipeline mileage and producing wells have...

Continue Reading

Top 5 Most Recently Viewed Articles

Delisting of Velo3D, Inc. Highlights Market Challenges

Updated Category News Views 874

NYSE Moves to Delist Velo3D, Inc. The New York Stock Exchange (NYSE) has announced it will begin delisting proceedings for Velo3D, Inc. (VLD) because the company no longer meets the exchange’s continued listing standards. As part of this process, trading in Velo3D’s securities will be halted immediately. For the company and its shareholders, that means uncertainty,...

Continue Reading
BILL Enhances Payment Solutions for Small and Midsize Businesses

Updated Category News Views 168

BILL Expands Payment Solutions for SMBs SAN JOSE, Calif. - BILL (NYSE:BILL), a premier financial operations platform for small and midsize businesses (SMBs), has launched new payment solutions aimed at making transactions simpler and more secure for both SMBs and their accountants. These updates to BILL's payment engine feature the new Local Transfer for international...

Continue Reading
C3SA Partners with Mimic to Revolutionize Cybersecurity Defense

Updated Category News Views 136

C3SA and Mimic Strengthen Cybersecurity Through Partnership C3SA, a leader in data protection and cyber resilience, has announced a significant partnership with Mimic, an innovator in ransomware defense. This collaboration aims to provide organizations with integrated and proactive protections to fend off ransomware attacks efficiently. The Power of Combined Expertise...

Continue Reading
Qualigen Therapeutics Faces Nasdaq Compliance Challenges Ahead

Updated Category News Views 80

Qualigen Therapeutics Faces Nasdaq Compliance Challenges Qualigen Therapeutics, Inc. recently found itself in the spotlight as it received a notification from The Nasdaq Stock Market LLC regarding a breach of compliance involving its independent directors. This issue arose following the resignation of Matt Korenberg from both the Board of Directors and the Audit...

Continue Reading
Miller Lite Partners with Top Rank to Elevate Boxing Experience

Updated Category News Views 417

Miller Lite Partners with Top Rank to Elevate Boxing Experience Miller Lite, known for its rich heritage in sports, is initiating an exciting collaboration with Top Rank, a prominent boxing promotion company, in a partnership that will impact the boxing world significantly and will spread across the 2025 boxing season. This alliance represents a unique blend of passion...

Continue Reading