ONE of the hardest jobs for any mining executive in this depressed global economy is to sell SA as an investment destination.
Getting board approval and shareholder confidence from places such as London and New York for a project in SA, no matter how great the potential, must be close to impossible.
Platinum’s woes have been well documented, but the gold sector has been struggling for much longer than bullion’s decade-long rally. Producers have failed to benefit fully from record gold prices because of high energy and labour costs, and safety stoppages.
South African gold output peaked at more than 1-million kilograms in 1970, according to the Chamber of Mines.
Gold is what I would call a sensitive industry, one that can’t afford a breakdown in relations between government, labour and mining executives. This is especially the case when the country is facing a storm of negativity around the future of mining.
So unprotected strike actions, which virtually shut almost half of the industry, do not bode well for a country with unemployment of about 25%.
About 40% of SA’s gold output remains closed as the continent’s biggest and the world’s third-biggest miner, AngloGold Ashanti, has shut all its local mines because of unofficial strikes. Gold Fields’ Beatrix and KDC West operations have also been disrupted.
"Clearly, for SA’s gold sector, as for many others, there is a very clear trade-off between investing in the sustainability of our business and not putting employment at risk," AngloGold CEO Mark Cutifani said yesterday.
"If the current unprotected strike continues, it compounds the potential likelihood of a premature downsizing of AngloGold Ashanti’s South African operations."
AngloGold has a workforce of about 35,000 employees in the country. That’s more than the world’s biggest gold miner, Barrick Gold, has in its entire portfolio, according to Bloomberg data.
Contagion from Marikana threatens to speed up the sunset of SA’s 126-year-old gold mining industry, without an alternative industry to take up the many workers who will be left unemployed.
IT MUST be called a shotgun settlement. Lonmin had to sign in order to get operations going again. The existence of such a settlement suggests the unions’ traditional place is breaking down.
The breakdown is being speeded up by what is seen as the cozy relationship between union leadership and the ruling African National Congress. New upstart unions are much more willing to engage in illegal and violent strike action, Peter Attard Montalto, director and emerging markets economist at Nomura International, says.
And these unions have had recent success, albeit with the loss of 46 lives. The National Union of Mineworkers has now belatedly joined the push for huge jumps in wages, pushing for increases of more than 20% in order to remain relevant to its constituency.
The minute the union decided that the way forward was to join in, and not to caution workers of the threats posed by the wage hikes far above inflation, must be considered one of the low points in the organisation’s 30-year history.
This isn’t merely a case of politics being played out across the various mining belts across the country. The union is losing its place in South African society.
Will others follow, or can the mining union, with a proud history, reclaim its spot?
SINCE the middle of May, the price of gold has rallied more than 15% as hopes that the global economy would stage a recovery faded. Economic data out of Europe, US and China pointed to the possibility of even further stimulus injections by the world’s leading central banks.
Last month, the US Federal Reserve, the European Central Bank and the Chinese central bank met and to some extent the result exceeded market expectations.
So with markets getting exactly what they had hoped for, gold was expected to ease after the euphoria of the additional stimulus.
"The yellow metal’s resilience over the last couple of weeks has been impressive and this has likely attracted even more followers," Swiss banking group UBS said.
As we head into the fourth and final quarter of the year, gold may find support as tensions in Europe, after a brief lull, look to rise again as politicians try to sell even more austerity to their voters in places such as Spain.
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