A number of South African gold and coal mining firms are looking to avoid a threatened strike by the National Union of Mineworkers (Num), with the outstanding issues being the level of wage increases, retirement fund contributions and job grading.
However, analysts say that while the Num and certain companies have deadlocked over the wage negotiations they are likely to settle next week.
“I think that the outstanding gold and coal producers are likely to conclude their negotiations next week. The companies wouldn’t want a strike, as there is too much to lose. If the remaining coal and gold miners offer a wage increase of 10% per annum then they should,” a gold analyst said.
At 12:25, most gold stocks were marginally lower with AngloGold down R1 or 0,40% to R235, Gold Fields declined R1,65 or 1,94% to R83,20 while Harmony surrendered R1,30 or 1,52% to R84,50.
Num has declared that it will down tools at Gold Fields and Harmony’s South African operations and the South Deep gold mine from July 27 but AngloGold has avoided the prospect of the strike by offering wage increases of 9,5% to 10%.
“We would like to avoid a strike for economic reasons and it also hardens relations between workers and management. A strike also sends a negative signal to investors,” said Chamber of Mines (CoM) coal negotiator Elize Strydom.
In the coal sector, Anglo Coal, Eyesizwe, BHP Billiton’s Ingwe and Kuyasa mines face the prospect of a strike while the mines owned by AfriOre, Kangra and Xstrata have, for the moment, averted a strike.
At 12:25, BHP Billiton was 15 cents or 0,35% firmer at R42,40 while Anglo American was last 33 cents or 0,27% higher at R122,45.
Along with platinum, coal and gold are South Africa’s key mining commodities with the country being one of the world’s largest producers of gold and one of the world’s biggest exporters of coal.
If there were to be a major industry strike from July 27, it would be the first since 1987.
The fringe benefits and wage offers on the table are likely to result in a substantial increase in gold and coal miners’ costs at a time when the rand is strengthening.
“The latest round of wage increases is likely to result in a major increase in gold miners’ costs. They are likely to settle at a 10% wage increase plus fringe benefits, which will cut most of the gold miners’ profit margins by 4% to 5%,” a gold analyst said.
In the case of the coal miners, the CoM’s Strydom said that a wage offer of 9.5% to 10% plus other fringe benefits would result in a 14% plus increase in wage costs.
Mining in South Africa is one of the most labour-intensive industries and in the case of gold mining over 50% of total production costs are made up of labour costs, the CoM said in a statement.
The strong rand has knocked the gold mining industry’s profits after the bonanza 2002 year.
However, the increases demanded by the mine workers need to be seen in the context of the fact that workers were locked into a two-year wage increase at a time when the gold market rallied and the local gold producers generated windfall profits.
“The Num is emotionally charged as gold producers have made millions in profit from the recent gold market boom. The Num was locked into a two-year wage agreement at the time and effectively missed out on that boom,” an analyst said. – I-Net Bridge