Johannesburg - The difficult market conditions in the mining industry would require “bitter medicine” including cutting salaries, particularly for the platinum sector, which was on its knees amid metal price weakness and rising costs.
This was the message from Sibanye Gold chief executive Neal Froneman, who told investors yesterday of the pain that the struggling mining sector was under.
“We should be talking about reducing wages not increasing them by 50 percent,” he said referring to the Association of Mineworkers and Construction Union’s (Amcu) demand for a 47 percent wage hike in the platinum majors including Anglo American Platinum.
Amcu, which led a five-month platinum strike in 2014, has demanded R12 500 monthly salaries for entry level workers in wage negotiations that began earlier this month.
Froneman said wages made up 51 percent of Sibanye’s costs while energy was 22 percent
In a bid to prevent a strike at its gold operations, Sibanye agreed to a R50 “monthly safety premium” with its employees early this year. But cutting salaries was likely to be rejected by labour in the platinum sector where labour tensions had escalated in recent years amid union rivalry.
Trade union Solidarity yesterday said salaries should not be cut but should be linked to inflation in return for job security.
Belt tightening
Solidarity general secretary Gideon du Plessis said if companies wanted to tighten their belts they needed to give workers inflation-related salaries.
Du Plessis said companies such as Sibanye had a moral obligation to give job security.
“If companies need to tighten their belts they need to give workers inflation-related (salaries). It is (a) moral obligation for Sibanye to give job security,” said du Plessis.
Sibanye, with a R52 billion market cap, listed on the JSE in 2013 after it was unbundled from Gold Fields and operates the Kloof, Driefontein and Beatrix mines outside Westorania.
It became a multicommodity company last year when it entered the platinum and energy industries.
Sibanye is set to become the world’s fifth-largest platinum producer as it is in the middle of acquiring Anglo American Platinum’s Rustenburg asset for R1.5bn.
The deal is expected to be finalised this year pending regulatory approval.
It snapped up Aquarius Platinum, which owns the Kroondaal Mine in North West, and the Mimosa Mine in Zimbabwe last year.
Froneman blamed the Department of Mineral Resources (DMR) for loss of value through Section 54 safety stoppages, in which it closed mines for safety reasons.
“The DMR is destroying value through Section 54 stoppages,” he said. The DMR stopped mining in the event of accidents for investigations.
Froneman said the platinum industry needed to close unprofitable shafts as part of the company’s consolidation strategy.
“The assets which do not make money should be shut,” he said. Sibanye was planning to smelt, refine and market its products from Rustenburg operations.
Platinum mining in North West was tough, said Jean Nel, the chief executive at Sibanye’s Platinum division.
He said the company targeted saving R800 million within three years in its bid to become a low-cost producer.
He said R135m had been lost through safety stoppages at Kroondaal in the year to June while there were 39 community-led protests around the mine in the past 52 weeks.
Amcu had also led an unprotected strike at the mine that resulted in R56m losses.
Nel said: “I think you have got to be careful with calling a strike in difficult economic conditions.”
He said workers and the government should be the biggest beneficiaries at Sibanye. “We are not going to take shareholders’ money so it can be taken by other stakeholders,” he said.
Sibanye shares added 0.75 percent on the JSE yesterday to close at R64.38.
BUSINESS REPORT