South African Gold Producers Halt Mining Operations

on Sep 27, 2012

Share prices of AngloGold Ashanti (NYSE:AU) plunged by 3.18 percent to $34.45 after the company was forced to halt its South African mining operations as tens of thousands of its workers went on a wildcat strike.

According to the Financial Times, 35,000 employees of the South African mining company ignored traditional labour resolution mechanisms and joined the protest. Workers from the West Wits and Vaal River mines left their night shifts on Tuesday and gathered with their colleagues at Kopanang mine. AngloGold’s spokesman Alan Fine said no formal demands have been presented to the management.

The spread of unrest in South Africa has been described by David Davis, research analyst at SBG Securities, as the “Lonmin Effect”. Platinum mining company Lonmin was first to experience major unrest at its Marikana mining operations and following the death of 45 people, finally agreed to increase wages and benefits by 22 percent.
*”In our view, the gold mining industry is fast reaching an impasse, as we believe that the contagion of illegal strike action will likely engulf the industry,”* Mr Davis opined.

The world’s top platinum producer AngloAmerican Platinum (PINK:AAUKY) is also experiencing difficulties with wildcat strikes at its mines in Rustenburg where less than 20 percent of its 26,000 workforce showed up for work. Since the beginning of the week, the company has lost more than 20,000 ounces of production and has seen its share price fall by 1.79 percent to 14.78. With shareholders getting impatient, frustration in the management of the company becomes more and more visible. Chris Griffith, Amplats chief executive as quoted by the FT:

>>“This is an industry that is in crisis – the platinum industry. And it’s very important that we get our employees back to work and it’s very important that our employees follow the rule of law and that we do not reward anarchy.”
!m[](/uploads/story/471/thumbs/pic1_inline.png)Mr Griffith has stated that the workers’ actions are illegal and the company is unwilling to negotiate outside of the current agreement, which is due to expire in six months. The CEO warned that the company cannot afford prolonging the developing situation for too long and eventually the workers will have to face severe disciplinary actions including contract terminations.

This week another 9,000 workers went on strike at GoldFields (NYSE:GFI) with demands of increases in monthly salaries up to R 16,000 (£1,204), reinstatement of previously suspended miners and the dismissal of a particular senior executive.
The FT reported that according to South Africa’s president Jacob Zuma the value of lost production in the platinum and gold sectors in the past nine months has reached R 4.5 billion (£339 million), while the indirect impact resulting from the strike actions cost the Treasury R 3.1 billion (£240 million). The newly revitalized strikes started last week and have halted 39 percent of the national gold input. Analysts expect further delays in production for the South African gold mining companies.
Gold and platinum miners in South Africa are currently the highest paid employees among the labour intensive industries in the country.


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