Chamber of Mines
headquarters “’ venue
for next month’s meeting
between producers and
trade unions
Johannesburg, South Africa — 15 April 2013 – The wage talks across South Africa’s mining sector which are due to start in May will be among the toughest ever with strikes a certainty, given inflation, worker militancy and shrinking company margins.

Revealing this here, Fin24 reports that there is also a real risk of a repeat of the labour violence and wildcat action that led to over 50 deaths last year, costing companies and the state billions in lost revenue.

Emboldened by the high settlements some received after the illegal 2012 strikes, labour militancy has spread from platinum to gold and coal. Some miners have downed tools even before talks start.

Their income is being devoured by rising prices but wages account for over 50% of company costs and they have paid above-inflation wage rises in recent years.

“The gold companies cannot afford anything above inflation,” said David Davis, mining investment analyst at SBG Securities.

“Just escalate US$1 150 by 12% per year and by 2015 the gold price will have to be around US$2 000/oz for the producers to make a 20% margin,” he said. Spot gold is currently at two-year lows around US$1 425/oz.

He said that broadly, the all-in cash costs in South Africa for AngloGold Ashanti, Africa’s top bullion producer, and smaller rivals Gold Fields and Harmony Gold Mining Company were about US$1 150/oz in 2012 and have been rising by 12 to 14% per annum over the last three years. In the platinum sector, the situation is more dire, with about half of the shafts unprofitable at current prices.

Last year’s unrest was rooted in a turf war between the radical Association of Mineworkers and Construction Union (AMCU) and the National Union of Mineworkers (NUM).

AMCU won in platinum and now claims 105,000 members or a fifth of South Africa’s mineworkers. Wage talks in South Africa’s gold, coal and platinum sectors take place every two years, but this will be the first with MCU in such a strong position.

The Chamber of Mines is meeting with AMCU today to see if it is willing to embrace industry-wide wage agreements in the platinum sector but the union has signalled that it is not interested. “Our members are not in favour,” said AMCU national treasurer Jimmy Gama.

Source: Fin24. For more information, click here.