Machines will replace labour

2014-06-15 15:00

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Tens of thousands of miners could lose their jobs in the next few decades as mines move towards full-scale mechanisation.

The platinum strike will be a factor that encourages mines to mechanise, says Cor Booysen, a former platinum analyst and now the portfolio manager at Fairtree Capital.

According to him, machines will not replace thousands of miners overnight. “There won’t be any massive mechanisation right now, but it’s a threat for labour in the long term,” says Booysen.

Stanlib resources analyst Kobus Nell says Lonmin’s Rustenburg mine and the Bokoni mine of Anglo American Platinum (Amplats) in Limpopo are examples of mines that have returned to intensive labour after mechanisation efforts failed.

South Africa is renowned for its deep mines, which – because of the depth, narrowness and slope of the reefs – are very expensive to mechanise. Machines have to be specially designed for South African conditions and shafts have to be widened to accommodate them.

The grade of the ore and the international prices of precious metals determine whether mechanisation is worthwhile. Opencast mines, where trucks and hydraulic shovels are used, are easier to mechanise.

Amplats’ Mogalakwena mine near Mokopane in Limpopo is a mechanised opencast platinum mine – the largest in the world – and has far lower operating costs than its other mines. In 2009, Mogalakwena’s cost per ton was R196, compared with the average cost of R463 per ton at Amplats’ other mines.

A few other platinum mines that have also been successfully mechanised are Mototolo (near Burgersfort, Limpopo), Union North Mine (near Northam, Limpopo) and Tumela (near Thabazimbi, Limpopo).

Amplats’ executive head for safety, health and environment Dean Pelser says a mechanised mine typically needs only a third of the labour required by a conventional mine.

Mechanisation is good and bad news. It can lead to unemployment, but to more profit (and therefore more tax revenue), and to higher salaries for those who are employed as mechanisation requires more skills.

According to Peter Major, a fund manager and mining analyst at Cadiz Asset Management Group, mines have been trying since the 1980s to implement mechanisation and this has led to more than 100?000 job losses.

He says: “Opencast mines are 10 times worse for the environment, employ 10 times fewer people and weaken your country’s trade balance, because expensive machinery and imported diesel are required to mechanise the mines.”

There is “nothing as productive as human labour”, according to Major, but poor education and trade union activity have destroyed the productivity of South Africa’s mining sector.

“Over the past 11 years, we have seen double-digit wage increases but there was no improvement in productivity. Workers have become accustomed to the wage rises, but then the prices of the precious metal turned around and now the mines can no longer afford them.”

He says machines are expensive but more reliable, and when the machine is no longer profitable it can be put into storage, while it’s difficult to get rid of labour.

Earlier this year, Amplats, the world’s largest platinum producer, said it plans to replace its labour-intensive underground mines with mechanised opencast mines.

It planned to make the transition in five to 10 years.

Gold Fields also recently brought in a technical team from Australia to breathe new life into the slow-moving mechanisation plans for its South Deep mine on the West Rand. About 2?500 people were dismissed when the decision to mechanise was taken five years ago.

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