….GOLD HIT TOO…

The anti-NUM contagion has now infected the gold sector, with 12,000 workers at Gold Fields, a quarter of its workforce, downing tools last week because of anger with their local NUM leaders, whom they want replaced.

Gold was supposed to be immune, in part because much of its workforce lives on hostels on private mine property. In the platinum sector most workers live off-site in communities around the mines where union recruiters can work freely.

But the Gold Fields' wildcat strike, which ended on Wednesday, did not need outside agitators. The workers in the hostels became fed up with their NUM branch and insisted they step down.

Gold was also seen as shielded from militancy by the industry-wide, collective bargaining process that defines wage talks among the big producers. Platinum has a company-by-company process that has provided a gap for upstart unions to muscle in pit by pit and claim they can strike better deals.

But if NUM wants to bring wage talks forward, this framework may start to fall apart.

WORKERS WANT MORE, COMPANIES HAVE LESS

The battle cry at Lonmin, which began with 3,000 rock drill operators who launched the illegal strike, has been for a basic wage of 12,500 rand a month, well over double the 5,400 rand they currently receive.

If Lonmin concedes, it will add about $30 million a year to its wage bill against a first-half profit of $18 million.

But the demand has spread from rock drill operators to thousands of less-skilled workers who also want 12,500 rand as a minimum monthly wage.

Lonmin already has a shaky balance sheet and is widely expected to offer a rights issue to shore it up. Much of the platinum sector is already underwater with shafts seen closing because of depressed costs and soaring prices.

Gold companies look on firmer ground, in large part because of high bullion prices, but they too are getting squeezed and the sun may be setting on South Africa's 120-year-old gold industry.

Take Gold Fields, the world's fourth largest bullion producer that gets about half of its production from South Africa. Its total cash costs per ounce in South Africa have risen from $618 in 2007 to $1,360 last year.

The average gold price over the same period has risen to $1,569 an ounce from $659 but there is no guarantee the bull run will be maintained.

Global mine inflation, the cost of running a mine, is about 15 percent per year but has been higher in South Africa. Power costs have soared and NUM has consistently delivered above-inflation wage hikes for its members, usually 10 percent or more.

Adding just 15 percent a year to Gold Fields' costs would mean it would need a gold price of over $2,000 an ounce by 2014 just to break even in South Africa.

In a research note, SBG Securities forecast downsizing at almost all South Africa's mature gold operations over the next 3 years in the face of "declining reserves and unrelenting inflationary pressures."

The gold sector underwent a painful restructuring over a decade ago when the price of bullion slumped, leading to tens of thousands of job losses and South Africa's fall from world No. 1 gold producer to 4th place.

The above text is a segment of a full article I posted today on the OFF TOPIC Forum under the same title.

Cheers,

durban1