Window closing on mining investment
THE country has a limited period in which to convince international banks and rating agencies that South Africa is still a premier mining investment destination, or capital flows might go elsewhere because of the labour crisis enveloping the sector, says AngloGold Ashanti CEO Mark Cutifani.
His warning comes days after Moody’s Investor Services lowered South Africa’s sovereign credit rating, saying the government had "diminished capacity" to handle its political and economic challenges and due to the increasingly negative investment climate.
Marginal mines could be shut if the wave of wildcat strikes in the platinum, gold, and coal sectors continued, Mr Cutifani said at a press briefing yesterday.
Those minerals, along with iron ore, chrome, manganese and others, generate more than half of South Africa’s foreign exchange revenue.
AngloGold Ashanti’s wildcat strike started last Tuesday and the company is losing up to 32,000oz of gold a week, worth R474m at current prices.
Mr Cutifani described the mining industry and South Africa as being "on a knife’s edge". Strikers’ high wage demands, combined with other soaring input costs, "call into question the long-term viability" of some of AngloGold’s shafts.
"We’ve got a small window of opportunity to turn this around or my greatest fear will be realised — that many people will lose their jobs, many families will lose their breadwinners," he said. "Many companies will be hurt, but in the long term South Africa will be worst off for what’s happening now."
Mining companies were all trying to convince local and international investors, banks and rating agencies that SA was "still the place you want to continue investing in", Mr Cutifani said.
"If we can’t convince the world to invest in the future of SA then our future looks grim," he said.
An estimated 80,000 workers out of South Africa’s total mining workforce of 514,000 were engaged in illegal strikes, Mr Cutifani said.
The global economic crisis had a greater effect on the unrest in the mining sector than people realised, he said. "We must make sure we understand what’s happening on a global scale to ensure we respond the right way as a country. We must pull together because, for us to fracture at this moment, is the worst thing that can happen to us in dealing with those global challenges."
If shafts are closed and the workforce downsized, AngloGold would not restart those mines in the short to medium term because of the costs, he said.
In many cases, striking mineworkers have declared themselves unaffiliated to recognised unions, making it difficult to resolve the strikes because companies want to deal with these.
AngloGold was disappointed that its workers had broken their commitment to collective bargaining structures. No formal demands had yet been submitted.
"We do not intend to reward broken commitments, violence and threats of intimidation," Mr Cutifani said, adding the company would deal only with the National Union of Mineworkers.
AngloGold Ashanti has a R3.5bn capital programme for its 2012 financial year. "I’m not going to start threatening capital but, clearly, if we don’t resolve the issue, how do I justify to shareholders that we should continue investing in South Africa?"
Anglo American Platinum said yesterday the strike at its operations around Rustenburg showed no signs of abating and it would dismiss staff not attending disciplinary hearings today.
The strike at Gold Fields’ Kloof Drie fontein Complex West and Beatrix continued yesterday. So far, 1,000kg of production had been lost, with no signs of the action abating, the company said yesterday.
Yesterday 80% of the workforce at Bokoni Platinum mine in Limpopo — a joint venture between Canadian Atlatsa Resources and Anglo Platinum — joined the wave of illegal strikes.
Workers were demanding salaries of R16,500 and planned to appoint a committee of workers to represent them.
The company said yesterday an agreement with unions was effective until June, and it " will not negotiate any issues outside of formal bargaining structures".
With Carol Paton
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