Labour stakes raised as Amcu clears throat

[miningmx.com] – juls MINING share investors will no doubt be fearing the worst following Harmony Gold’s decision earlier this month to issue a Section 189 programme at its west Rand Kusasalethu mine which would put it into mothballs.

The notices are now issued and the Kusasalethu miners are staring retrenchment in the face; in just less than 60 days, in fact.

The chief risk for anyone wanting to dabble in gold company exposure is that the unpredictable, wildcat nature of labour protests and disruptions of 2012 will simply roll forward and even intensify in 2013, especially as gold and coal producers sit down to renegotiate two-year wage deals from about April.

According to Graham Briggs, Harmony’s CEO, there’s no way his company can continue to operate the mine while anarchy reigns. There was a 23-day strike at the mine in October, and while officially no industrial action has been called, the conditions of work are so dangerous that Briggs doesn’t see a way to continue.

He spoke of death threats to mine management, workers firing on police, and the prospect of further underground sit-ins which present obvious dangers. “It just takes one person to lose his head,’ said Briggs referring to the possibility of underground violence which would be difficult to control and may result in adding to the two on-mine fatalities already suffered since October.

Economically, Kusasalethu is suffering where once it was turning the corner. The December quarter results is likely to show a R150m net loss and a R252m after-capex outflow at a time when the 260,000 oz to 300,000 oz a year mine was starting to show progress.

“It’s an orebody that deserves to be mined,’ says Briggs commenting on the mine’s 25-year life of mine. So while mothballs is a likelihood, permanent closure is not on the radar. Rehiring of staff should begin in July provided, of course, the threat of mothballs doesn’t send unions to the table.

The thread linking Harmony’s troubles with the violence of the platinum companies last year, the devastating height of which was the Marikana massacre in August, is the Associated Mineworkers & Construction Union (Amcu).

It’s not a new union, but it hit the headlines last year because it started to unseat the traditional dominance of the National Union of Mineworkers. Amcu is thought to have a majority representation at Impala Platinum’s Rustenburg mine, for instance. Briggs said 62% of Kusasalethu workers were Amcu-aligned.

However, the worry about Amcu is that there are so few controls within the organisation.

Briggs said Amcu had not submitted any demands at Kusasalethu and tended to be reactive only. A meeting between Amcu and Kusasalethu’s management on January 4 started at 8am only to finish at 11pm without remotely finding a conclusion, Briggs said.

ALL EYES ON AMCU

All eyes then on January 18 when Amcu meets press; primarily to give its view on the restructuring at Anglo Platinum Mines (Amplats) which sees, potentially, another 14,000 jobs cut in addition to the 6,000 at Kusasalethu. But press will also want to know Amcu’s strategy for Harmony; not to mention what it intends to do regarding other mines throughout the country where it is a gathering force.

For his part, Briggs was also doubtful progress would be made over the next two months – the threat of the Section 189 notwithstanding – and thinks that Kusasalethu will be mothballed with the result of 100,000 ounces lost to Harmony’s forecast annual production which will then fall to 1.2 million ounces.

“I don’t think this is brinkmanship,’ said David Davis, an analyst for SBG Securities of Briggs’ decision to put Kusasalethu on care and maintenance. “I just think it’s a function of basic conditions of employment. There’s no strategy at Amcu and Harmony can’t carry on,’ he says.

It raises the question, too, of what investors can expect of labour relations in the sector for 2013. “The country can’t afford it; the miners can’t afford,’ said Elize Strydom, chief negotiator at the Chamber of Mines of SA regarding the prospect of continued on-mine violence. She is called a meeting last week with unions in order to “understand the rules of the game,’ as she terms it – a meeting that may have been thrown into disarray by the retrenchments at Amplats which may have altered the mood considerably among unions with the year barely a month old. “We need to find a way to avoid a repeat of last year,’ Strydom said. But any remnant festive goodwill will surely have been blown away by now.

Relations between management and unions are always hotter during annual wage negotiations, so the gold and coal two-year wage deals set to be discussed from April this year will carry extra meaning. “It’s going to be tough but it has to be done,’ says Strydom. “We will have to negotiate with all unions and perhaps set up a protocol again,’ she adds.

In the meantime, the creation of Sibanye Gold, the company which houses the unbundled South African mines of Gold Fields due to be listed in February, may result in job losses as its new CEO, Neal Froneman, is a ‘Mr Fixit’ of note and will set about sweating the assets.

AngloGold Ashanti is also in the throes of a review of its South African mines which another analyst said was likely to result in shrinkage of employment in the sector.