South Africa 11.7.2018 04:58 pm

Most SA gold mines unprofitable

According to the Minerals Council SA, three-quarters of South Africa’s gold mines are either unprofitable or barely making money.

Three-quarters of SA’s gold mines are unprofitable or barely making money, says the Minerals Council SA according to Business Day.

According to the organisation, our 140-year-old gold industry, which has been the world’s leading source of the precious metal for decades, has been relegated to eighth place, just ahead of Mexico.

Our mines are old and afflicted by falling grades and productivity and rising costs.

It’s amid this turmoil that big players in the gold sector including Sibanye, AngloGold Ashanti, Harmony and Village Main Reef have begun wage talks with unions on Wednesday.

The mining companies and unions will be attempting to set a fresh two-year wage deal.

READ MORE: Illegal gold, chrome mining milking the economy – expert

This may be difficult, as unions’ demands do not seem to reflect the realities of the fraught situation the gold industry is in.

The National Union of Mineworkers (NUM) is demanding that basic entry-level wages be increased by 33% to R10 500/month from R7 785. Association of Mineworkers and Construction Union (Amcu) came with their usual demand of R12 500/month, a figure that would place wages 58% above what they are currently.

Minerals Council SA argues that with labour costs making up 53% of gold mining costs, an increase of those proportions, combined with the costs of the other demands, would force marginal mines out of business and lead to large job losses.

“Increases without a commensurate improvement in the gold price, exchange rate, cost profile or outputs will mean that the cost of labour as a portion of overall costs will rise, and the number of marginal and unprofitable operations will increase,” the council said on Tuesday.

The council is expected to table a counteroffer aligned to the consumer price index, which increased by 4.4% year-on-year for May, with some at the talks expecting a settlement to be two or three percentage points above that level.

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