SA mining headed for catastrophe: union

SOUTH Africa's powerful National Union of Mineworkers has called for government intervention to avoid the loss of thousands of mining jobs as BHP Billiton's Ingwe coal subsidiary became the latest to entertain the possibility of job cuts.
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Greg Tubby

"It is our opinion that the minister can no longer remain silent in the face of a concerted effort by the mining industry to hold the country and its people to ransom through threats of retrenching thousands of workers," NUM general secretary Gwede Mantashe said.

"The latest to join the chorus is BHP Billiton's Ingwe. We are heading for a catastrophe."

The Chamber of Mines has warned that the short-term outlook for marginal operations that do not have the flexibility to mine higher grades is one of survival. Average gold cash production costs rose 43% to US$256 an ounce in the first six months of the year while total production costs rose 56% to US$307/oz.

"SA has gone from being the cheapest large-scale producer to the most expensive due to the strong rand," the chamber's chief economist Roger Baxter said.

At these price levels, the chamber warned that seven out of 12 gold mines are loss making, putting around 70,000 jobs and 37% of the country's gold production at risk.

For the SA mining industry as a whole, the chamber estimated up to 120,000 workers are at risk on marginal mines, and about 10% of the R100 billion currently approved capital projects is in danger.

The world's largest platinum producer, Anglo Platinum, has said it may cut as many as "several thousand" jobs because although platinum prices reached a 23-year high on October 9, the rand's 26% appreciation in the year to date has seen the average rand-denominated platinum price decline 9% compared with 2002.

Gold is down 15% in rand terms despite its 15% appreciation in US dollar terms.

Export coal prices to Europe have increased by 19.2% in dollar terms bust has fallen over 10% in rand terms.

SA's Business Day has reported that Minerals and Energy Minister Phumzile Mlambo-Ngcuka yesterday broke with recent comments by President Thabo Mbeki and senior officials, who have played down the effects of the rand's appreciation on the economy.

"We are very, very worried about job losses," Mlambo-Ngcuka was quoted as saying.

"When the rand is down, people say the economic fundamentals are good, but we get punished. Workers have lost out. Only they seem to get hurt [as a result of the strong rand]."

She told the newspaper her department was in daily contact with unions to discuss the threatened job cuts, but was ambivalent about whether the government should intervene to devalue to rand.

"For us to want to pull down the currency? I don't know if that is a good strategy in the long term," Business Day reported her as saying.

NUM's Mantashe said it was now "imperative" that Mlambo-Ngcuka call a summit of the industry, the union and the government to "stem this tide of impending woes".

The Chamber of Mines has urged further liberalisation of exchange controls, for the Reserve Bank to buy US dollars on the market to build up foreign exchange reserves, similar to many East Asian economies, and for domestic real interest rates to be lowered in line with global interest rates.

"It is the responsibility and duty of us all to find a solution to this problem, before we exacerbate an already existing national crisis of unemployment and poverty," Mantashe said.