Effect of strikes ‘will haunt mining’

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Independent Newspapers

Production at South African mines is slowly picking up, but analysts say the sector will have many hurdles to overcome in the new year. Photo: Bloomberg

WHILE mining companies are ramping up to full production after weeks of crippling wildcat strikes, analysts have warned of further challenges next year.

The long-term effects of the recent spate of unprotected strikes was still to be realised, they warned, with the foreign investment confidence index at a 10-year low.

“The lag effect of the strike action suggest negative output growth for the remainder of the year, continuing into the first half of 2013. The latent effect is expected to have a negative implication for the gold mining, construction and steel industries, directly contributing to already high input costs,” Saijil Singh, lead analyst at international credit insurer Coface, said yesterday.

Among the mines affected by labour unrest, Kumba Iron Ore’s Sishen mine was not too far off its operating capacity of 120 000 tons a day, said Gert Schoeman, a spokesman for Kumba.

AngloGold Ashanti said all six of its local underground mines and its surface operations were operating.

Lonmin said it was focusing on getting production levels back to normal in a safe working environment after the tragic events at its Marikana mine in August.

“We can confirm that the ramp-up to full production is going better than expected. The attendance figure is currently at 88 percent, which is normal when taking into account leave schedules,” said spokeswoman Sue Vey.

“Full-year 2012 sales of 701 831 ounces of platinum have been achieved.”

Lonmin awarded wage increases of between 11 and 22 percent in September.

At Gold Fields, all mines were back to full production, spokesman Sven Lunsche said. Gold Fields and other gold producers agreed to a 2.5 percent increase for entry-level employees.

The wider effects of the strikes have been profound.

Mining output contracted 12.7 percent in the third quarter and the sector has been volatile this year.

Tony Zoghby, Africa industry leader for mining at Deloitte, said full production was not expected until mid-January, when companies resumed operations after the Christmas break.

The Chamber of Mines estimated that the sector lost between R12 billion and R15bn in revenue by September because of the strikes.

Vusi Mabena, a senior executive at the chamber, said mining companies were back to “relative normality” but declined to indicate when the industry was expected to recover from the impact of the strikes, citing the complicating factor of a slowdown in the global markets.

Nomura analyst Tyler Broda said platinum companies were having difficulty ramping up to full production and, as a result, a shortage of the metal was expected in the first quarter of next year.

“Our analysis suggests that challenges definitely remain in the longer term. However, owing to the loss of 350 000 ounces to strikes, a strong Chinese jewellery market and further tensions on supply in the future, the underlying cumulative surplus will be approaching zero in 2013. We now expect the market to be in deficit through 2014,” Broda said.

Meanwhile, Deloitte confirmed that escalating capital costs would be a major issue for mining firms next year.

In a study, “Tracking the trend 2013: The top 10 issues mining companies may face in the coming year”, Deloitte found lower grades and costs were affecting decisions on continued production, expansions and new projects.

“Unless mining companies improve operational efficiency, proactively control maintenance costs and invest in cost reducing technologies, this trend is likely to continue,” the report said.

Other issues included demand uncertainty, capital project deceleration and skills shortages.


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