Business

Mines must dig deep to stay viable

Chantelle Benjamin

First half of 2013 will remain tense as wage talks and possible job losses loom large, writes Chantelle Benjamin.

Last year workers at Harmony Gold's Kusasalethu mine went on strike for higher salaries. The mine's management and the unions have until March to solve the latest wage dispute. (Delwyn Verasamy, M&G)

Harmony Gold has initiated a legal process that would lead to the loss of 6 000 staff at its deep-level Kusasalethu mine near Carletonville in the next few months, if management and labour fail to reach an amicable solutions.

The mine (formerly known as Elandsrand), has been placed on care and maintenance following the 78-hour sit-in in December of 1 700 largely Association of Mineworkers and Construction Union (Amcu) members and intimidation of staff.  

Analysts believe that the unrest at the Carletonville mine is a continuation of last year's wave of strikes, rather than an indication of new labour unrest in the mining sector. But they are warning that 2013 will bring with it new challenges around labour issues. These challenges include scheduled wage negotiations in the gold and coal sectors in May and June because a two-year wage deal comes to an end, and job losses in the struggling platinum sector.

The long-awaited review of Anglo American Platinum (Amplats) is expected to be released at the end of January, and many believe restructuring and resulting job losses are inevitable.

Analysts say that the wave of labour unrest in the platinum industry has largely played itself out, although there might be leftover grievances from 2012 that may yet  spark further labour unrest.

"There is a lot more positivity at the moment, despite Harmony's problems. There is a lot more certainty in the market following the ANC leadership conference in December," said one expert.

However, analysts warn that wage negotiations, which exclude the platinum sector, and possible job losses in the mining sector, could create tension in the sector in the first two quarters of 2013.

Global pressures
"It all depends on what workers ask for," said one analyst. "Labour costs are already relatively high and if staff suddenly go from wage demands of inflation-plus-R12 500 to inflation-plus-R16 000 then there will be a problem."

Mining operations such as Lonmin and Anglo Platinum have already indicated that they are looking at restructuring operations in South Africa following a turbulent two quarters at the end of last year and global pressures.  

The reigning view is that areas such as Rustenburg – which have old and deep mines, and are costly to run and maintain – might be hardest hit.

Harmony Gold chief executive Graham Briggs said this week that the mine will remain closed during the two-month negotiation period required by the Labour Relation Act's section 189. Even if a deal is reached, it will only be clear in July if the mine is viable.

In the December 2012 quarter, the mine lost R252-million as a result of the closure of the mine. It is expected that Harmony as a whole will only produce 1.2-million ounces, rather than the expected 1.3-million ounces.

"The problem with old, deep mines like Kusasalethu, is that once they are closed they seldom reopen because of flooding and sterilisation issues," said an analyst.

Ian Woodley, Old Mutual resources and fund manager, said the gold sector has been restructuring for the past 15 to 18 years, so "there is no reason to think it will change this year".

"My estimate is that [the number of] people employed in the sector have been reduced year on year, and the current industrial climate makes it more difficult for mines not to look at this."

Previous forecast
Outgoing Anglo American chief executive Cynthia Carroll warned in February last year that the company would reduce certain operations. She said that platinum industry returns had been shrinking and that the group had been dissatisfied with Amplats's performance.

Amplats reported a 29% fall in headline earnings in its 2011 financial year, and dropped its platinum sales forecast for 2012 to between 2.5-million and 2.6-million ounces – a 200 000 ounce reduction over the previous forecast.

Amplats lost 235 000 ounces of production during strikes last year and the ramp-up process, of which 195 000 ounces were lost as a result of the initial safety suspension and illegal strike action.

One analyst pointed out that negotiations with the National Union of Mineworkers and Amcu in the coal sector at the end of the last year had been "reasonably mature". But another analyst said: "You are dealing with a different group of people in the coal sector to the gold sector. Coal has always been better structured and organised. I am not convinced that it will go as smoothly in the gold sector."

The Chamber of Mines this week said it supported Harmony's decision to temporarily close its Kusasalethu mine. Elize Strydom, a senior executive for the chamber, said management had no choice but to temporarily close the mine because it could not ensure the safety of its workers.

Negotiations
"They have made the right decision by asking all parties involved to come to the negotiating table. If they cannot find a solution and losses continue at the present rate, then they probably won't have any alternative but to look at retrenchments," she said.

If that decision is taken, 5200 permanent employees and about 600 contract workers are likely to lose their jobs. The unions and the mine have 60 days following the issuing of the notice to unions on January 7 to reach an agreement.

According to Harmony spokesperson Marian van der Walt, workers at the Kusasalethu mine embarked on an unprotected strike in October over salaries and this was resolved by October 26.

"Amcu wanted us to pay workers for wages lost during the strike and Harmony refused, so there was a second wave of unprotected strike action despite Amcu having been recognised at Harmony," said Van der Walt.

According to union and Harmony sources, negotiations had not yet started to resolve the matter. One of the problems facing Amcu has been tracing its members who were previously housed in accommodation on the mines, which have since been closed.

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