Gold mining industry shooting itself in the foot
The gold mining industry has been digging its own grave by telling just half of the real cost story, Gold Fields (NYSE:GFI) CEO Nick Holland told the audience Thursday at this year’s Denver Gold Forum in Colorado.
In his presentation he said operating costs were swelling while yields were decreasing and total expenditure had grown in line with the gold price.
According to Gold Fields’ proprietary notional cash expenditure (NCE) measure, the sector’s costs surge 21% over five years matched the bullion price’s 21% rise over the same period.
The reality is, added Holland, that gold miners don’t really make that much money.
The CEO explained that part of the problem was the fact that the top-eight gold-mining producers, which made up 40% of the industry, had declined nearly 2% a year over the last six years.
In a related development, Gold Fields representatives threw a bunch of pamphlets out of a moving pick-up truck at its KDC west mine on Friday, to show striking workers how much money they had lost for not showing up at work so far this week, Fin 24.com reports.
Titled “Gold Fields’ loss of earnings update” it said that on the fifth day of the “no work no pay” strike, workers who had not reported for duty would not be paid.
For underground workers (by pay grade) this was:
A3: R887.05; B1: R912.10; B2: R1057,85; B3: R1249.85: B4:1467.85.
The pamphlet said: “Nobody benefits through this unlawful action”.
The loss to surface workers was: A3: R783.65; B1: R806.30; B2: R945.20; B3: R1125.70; B4: R1334.85.
The A3 covers the grade of a general labourer.
The amount excluded living out and other allowances in respect of earnings lost for the period that they participated in the strike, the loss of bonus payments due to days not worked and food and accommodation per day.
Meanwhile, the National Union of Mineworkers (NUM) hardened its stance Friday as platinum miners rejected Lonmin’s wage increase offer, which was far below their demand.
The miner offered a 900 rand ($112.50) increase that would give new-entry workers a basic monthly salary of 5,500 rand ($688), the union said.
President Jacob Zuma’s government reacted negatively to the news, promising to disperse what it says are illegal protests and to disarm strikers.
Strikers’ leaders, mining unions, Lonmin company representatives and government officials continue negotiations Friday.