Gold mines feel the heat

2014-10-05 15:00

The plummeting gold price could push South Africa’s gold mines into yet another period of restructuring, reducing production and shedding jobs.

Mines have been closing and more than a 10th of the sector’s workforce has been let go since June last year.

Mining jobs are not lost gradually, but in tranches of several thousand when whole operations are closed down to stem losses. Last year saw the Blyvooruitzicht mine liquidated, and Sibanye Gold is now weighing its options at its Cooke operations on Gauteng’s West Rand.

That was before the metal this week hit its lowest levels in the year, close to $2?000 an ounce, endangering more important mines owned by one of the three major gold companies, Harmony Gold.

South Africa’s gold mines have been spared the worst of it by the simultaneous weakening of the rand, which this week hit R11.29 to the dollar – significantly softening the decline in rand gold prices.

In their latest financial reports for the quarter to the end of June, both AngloGold Ashanti and Sibanye Gold reported “all-in sustaining costs” that are still comfortably below the current gold price.

But Harmony already has a lot of its mines in the red (see graphic), with average costs equal to prices. The “all-in” measure includes the continuous capital expenditure mines require – separate from the capital expenditure they need to expand.

By June this year, the workforce on gold mines totalled 104?119 permanent workers and 14?318 contractors. In total, the gold mine’s labour force has dropped by 22?000 since the beginning of last year, a 15% contraction. That’s according to the latest workforce statistics from the department of mineral resources, which were released this week (see table).

Since January this year, the permanent gold mining workforce has fallen by 5?500 while contractors have increased by 1?500.


The same statistics also shed light on the ultimate effect of the historic five-month-long strike in the platinum sector this year.

The strike, which paralysed much of South Africa’s platinum industry, led to a R4?billion drop in wages paid in the sector in the first half of the year.

Last year, the sector’s wages and benefits from January to June totalled about R18?billion. This year it was R14?billion.

A large number of contract workers were let go between January and June. The sector’s large outsourced workforce shrunk by 7?315 during the strike, according to the department’s statistics.

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