The company will soon begin a consultation process with employees in terms of section 189 and 189A of the Labour Relations Act, with respect to restructuring certain of its South African business units. This follows a review of the options to safely turn around the performance of these loss-making operations.
This consultation with organised labour groups, facilitated by the Council for Conciliation, Mediation and Arbitration (CCMA), will be aimed at safely returning the South African business to profitability, whilst mitigating job losses.
AngloGold Ashanti signalled to stakeholders earlier this year that it would review its South African gold-mining operations in light of heavy, and ultimately unsustainable, losses it incurred. The restructuring of the company’s production and cost base is necessary to protect the overall viability of its South African business over the long-term, and to safeguard employment at viable business units in the West Wits and Vaal River regions.
AngloGold Ashanti says it is committed to transparency and will make the plans and assumptions arising from this review available for scrutiny by an independent third-party, during the CCMA process.
While all efforts will be made to limit the impact on employment to the greatest extent possible, this restructuring contemplates some 8 500 roles across AngloGold Ashanti’s South African business, which currently employs about 28 000 people, including contractors.
Some of the company’s older mines in the South African region have reached the end of their economic lives, several decades after they started production. These mines face systemic challenges, including near-depletion of ore reserves, increasing depth and distance from central infrastructure, declining production profiles, and cost escalations that have continued to outpace both inflation and a subdued gold price.
The cost performance of certain operations, notably TauTona and Kopanang, has been a clear demonstration of these challenges, with all-in sustaining costs in the first-quarter of this year of $1 737/oz and $2 399/oz respectively. This compared with an average gold price over that period of $1 216/oz. Both mines also sustained significant operating losses through 2016.
In order to safeguard the long-term sustainability of its South African business, AngloGold Ashanti has decided to embark on the following actions, subject to the outcomes of the consultation process:
- Place on care and maintenance the Kopanang mine, in the Vaal River region, and the Savuk section of the TauTona mine, in the West Wits Region. Savuka has been in operation for 59 years, and has already been extended 10 years beyond its natural life. Kopanang mine produced its first gold in 1981, 36 years ago;
- Evaluate the feasibility of integrating elements of the 60-year old TauTona mine into the neighbouring Mponeng mine;
As a consequence of these changes, we are also reviewing the associated costs at the regional level, particularly with respect to support services and overheads.
“This is a difficult decision which follows a period of significant and – ultimately – unsustainable losses, and also the evaluation of the options available to return our South African business to profitability,” AngloGold Ashanti CEO Srinivasan Venkatakrishnan, said.
“It is critical that we act to protect the long-term sustainability of this business and the majority of our workforce. We are mindful of the sensitivity that this situation demands, and are committed to supporting all our employees throughout this process.”