South African gold mining’s fall from grace – by Lawrence Williams (Mineweb.com – March 18, 2015)

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The ever-continuing gold output decline could be exacerbated by new wage negotiations.

South Africa may have regained its position as the world’s fifth largest gold producer in 2014 when all the figures have been tallied. One estimate of global gold output in 2014 records that the country produced 168 tonnes, a small increase on 2013’s 164.5 tonnes. Not so many years ago, South Africa had totally dominated world gold production producing 1 000 tonnes a year.

But latest output figures from Statistics South Africa show a serious continuing decline in monthly gold production. With new across-the-board wage negotiations coming up over the next couple of months, some suggest that this year could, as a result, see a further sharp slump in output. Initial indications suggest that the wage talks may be extremely difficult. And difficult wage negotiations in the South African context can get out of hand as witness the virtual four month shutdown of much of the country’s platinum sector in 2012.

This was coupled with some horrendously violent events (including the Marikana massacre when police opened fire on striking miners killing 44) and continued reports of other violence and intimidation throughout.

It’s not that we necessarily expect this to be replicated in the gold mining sector negotiations, but inter-union rivalries between the NUM, which represents around 57% of gold sector workers, and AMCU, which tends to be more militant in its approach, which currently looks after the interests of around 25% and is seeking to replace the NUM as the industry’s main union, could add another dimension – and probably not a positive one.

Thus the NUM will be looking to protect its currently dominant position in the gold sector by playing hardball, while AMCU will be looking to gain ground as it did in the platinum mines where it managed to supersede the NUM as the dominant union. Thus initial reports suggest the NUM is, as a preliminary negotiating ploy, looking for wage increases of 100% for the lower paid section of the gold mines workforce.

But this comes at a time when a number of existing mines are operating at a loss even on a cash costs basis, and perhaps half the sector is loss-making on an All in Sustaining Costs metric, and there’s little sign of any improvement in the gold price – indeed it has fallen to four to five month lows this week.

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