Search Results for "Africa"

South African Union Rejects Pay Offer

Bloomberg reported that a South African gold miners union has rejected a pay offer from operators, including AngloGold Ashanti Ltd. (NYSE:AU), stopping just short of call a strike.

As quoted in the market news:

Association of Mineworkers and Construction Union members gathered at Sibanye Gold Ltd.’s Beatrix mine Sunday to consider the final wage proposal made by producers such as Harmony Gold Mining Co. The union speaks for about 30 percent of the 94,500 employees represented in the talks.

“If we need to go march at their offices, we will,” AMCU President Joseph Mathunjwa told thousands of workers at the stadium next to a mine shaft about 300 kilometers (186 miles) south of Johannesburg.

Sibanye and AngloGold, the world’s third-largest producer, proposed on July 30 to raise monthly pay for entry-level workers by 1,000 rand ($79) annually for the three years started July 1. Harmony offered a 500-rand increase. Basic pay is currently about 5,800 rand. Living-out allowances, for miners who choose not to live in provided housing, will be raised by 100 rand in the first year from 2,000 rand now.

The National Union of Mineworkers, the biggest labor group in gold, lowered its demand last month for basic pay to 9,500 rand. Still, that’s at least 60 percent more than the current wage.

Click here to read the full Bloomberg report.


Asanko Sees Mine Becoming One of Africa’s Largest Gold Operations

Asanko Gold Inc. (TSX:AKG,NYSEMKT:AKG) released the results of a Phase 2 expansion prefeasibility study. It combines the Phase 1 Obotan project, which is currently under construction, with the Esaase project into Phase 2 of the Ghana-based Asanko gold mine.

As quoted in the press release:

The Phase 2 expansion will integrate the Esaase deposit with the Phase 1 Obotan project to create one large, multi-pit mine producing an average of 411,000 ounces of gold over a 10.5 year Life of Mine (‘LoM’) from 2018. The ore will be mined and crushed at Esaase and then conveyed to a central processing facility at Obotan. The processing facility will be expanded with a 5 million tonnes per annum (‘Mtpa’) flotation plant which will be built alongside the Phase 1 3Mtpa Carbon-in-Leach (‘CIL’) plant. In addition the annual throughput of the Phase 1 CIL plant will be upgraded and increased to 3.8Mtpa by adding two extra CIL tanks to allow for the blending of oxide ores from Esaase with feed from the Phase 1 pits.

The combined project, at an assumed US$1,300 per ounce gold price, yields a 27% after-tax internal rate of return (‘IRR’) with a net present value (‘NPV’) of US$770 million at a 5% discount rate.

Peter Breese, president and CEO of Asanko, commented:

The outcomes from the Phase 2 expansion study have exceeded our expectations and will deliver significant value to our shareholders.

At the time of the merger with PMI Gold in December 2013 we estimated that up to US$100 million in NPV synergies (based on US$1,400 per ounce gold price) could be achieved by developing the assets in a phased approach and leveraging off shared infrastructure and overheads. We have been able to increase those expected NPV synergies to over US$147 million even though we have used a lower gold price of US$1,300 per ounce.

The incremental value and returns of Phase 2 further enhance what was an already robust project and will result in the Asanko Gold Mine becoming one of the largest gold mining operations in Africa with lowest quartile all-in sustaining costs. This highly competitive cost base, which includes corporate overheads, has always been a key driver in our development strategy.

In addition, the expansion of the processing facility to integrate the Phase 2 flotation plant with the Phase 1 CIL plant will give the Asanko Gold Mine total operating flexibility to handle all the different types of orebodies that are currently within the mine plan as well as give us flexibility to fully optimize near mine deposits that may be discovered in the future.

Click here to read the full Asanko Gold Inc. (TSX:AKG,NYSEMKT:AKG) press release.


Yearly Wage Negotiations Could Hurt South African Gold Sector

Mining Weekly reported that Srinivasan Venkatakrishnan, CEO of AngloGold Ashanti Ltd. (NYSE:AU), believes that yearly wage negotiations in South Africa between gold companies and their employees could bring “dire economic consequences for the local gold sector.”

As quoted in the market news:

Gold companies’ management were now looking to reach a new accord with employees and their labour unions to arrest this downward spiral and restore the industry to a more sustainable long-term footing.

‘It is crucial for the future of one of South Africa’s key economic contributors, and indeed for individual mines and their employees, given that companies cannot be expected to persist with unprofitable operations,’ AngloGold said in statement.

The companies would, this year, propose an ‘Economic and Social Sustainability Compact’, which would comprise a mutually agreed set of binding principles that would determine the rights and responsibilities of companies and organised labour in respect of workplace activities and consequences, including wages and conditions of service.

The fundamental principles of the proposed compact would be sustainability through a partnership approach by the companies, the unions and employees.

Proposed wage increases and other terms and conditions of employment would be considered with due regard to their impact on the sustainability of the industry and on employment security.

Venkatakrishnan commented:

When you look at the wage negotiations this year and you look at the backdrop of what has happened [in the] platinum [industry], for example, [we saw] really unsustainable wage increases that [were] followed by job losses.

As a gold industry – excluding Gold Fields, as it has mechanised operations and is different to the other gold companies – our approach here is to say: Look at the totality taken into question here, and the compact, not just talks about the wage increase on one side, but … all the variables that we need to discuss … in terms of wage increases, in terms of what we provide to employees, in terms of productivity [and], importantly, job security, and the impact it has on jobs.

I am quite optimistic that sanity will prevail. Is it going to be an easy process? I don’t think so, but certainly, the dialogue has to start changing.

Click here to read the full Mining Weekly report.


Drill Tracker Weekly: East Africa Intersects High Grades in Oxide Gold Zone of VMS Deposit

Drill Tracker Weekly highlights drilling results in context with our database of over 10,000 drilling and trenching results. The purpose of this report is to highlight drilling and trenching results that stand out from the pack and compare them to their peer group. This report does not constitute initiation of coverage or a recommendation.

East Africa Metals (TSXV:EAM)

Price: $0.065

Market cap: $6.6 million

Cash estimate: $13.5 million (September 2014)

Project: Harvest

Country: Ethiopia

Ownership: 70 percent

Resources: 290,000 tonnes at 2.55 g/t gold, 10 g/t silver indicated; 398,000 tonnes at 4.77 g/t gold, 7.2 g/t silver inferred

Project status: Resource definition drilling

east africa

  • East Africa Metals announced reverse-circulation infill drilling results from the Terakimti deposit on its 70-percent-owned Harvest project in Ethiopia. The project was initially drilled in 2011 by Canaco, which through a series of transactions became Tigray before merging with East Africa in February 2014. China-based Sinotech currently owns 33.5 percent of East Africa.
  • Highlights from current near-surface infill drilling include 15 meters grading 12.36 g/t gold and 38.2 g/t silver starting at 28 meters depth and 19 meters of 6.87 g/t gold and 11.3 g/t silver from 16 meters. The current drilling is focused on delineating and expanding the near-surface oxide mineralization on 20-meter centers overlying the unoxidized massive sulfide mineralization (VMS).
  • An additional two holes that continued through a lower gold- and silver-rich “pyrite sand” zone and into the supergene-enriched massive sulfide intersected 4 meters grading 9.64 g/t gold and 1,151.9 g/t silver at a depth of 29 meters and 13 meters of 1.56 g/t gold, 292 g/t silver and 2.57 percent copper starting at 33 meters. Drill hole TRC018 also intersected the supergene zone with an interval of 33 meters grading 4.45 g/t gold, 1.42 percent copper and 6.3 g/t silver.
  • In January 2014, Tigray outlined an initial small oxide gold resource estimate. The indicated resource includes 290,000 tonnes at a grade of 2.55 g/t gold and 10 g/t silver, as well as an inferred resource of 398,000 tonnes of 4.77 g/t gold and 7.2 g/t silver. The current 4,000-meter reverse-circulation drill program at 20-by-20-meter spacing is currently 70 percent complete.

east africa 2

Discovery hole (Canaco, 2011): 52.1 meters at 1.55 g/t gold, 4.1 percent copper, 25.97 g/t silver

Current holes: 15 meters at 12.36 g/t gold, 38.2 g/t silver; 19 meters at 6.87 g/t gold, 11.3 g/t silver; 14 meters at 7.63 g/t gold, 4.8 g/t silver

 

Disclosure: I, Wayne Hewgill, certify that the information in this report is sourced through public documents that are believed to be reliable, but accuracy and completeness as represented in this report cannot be guaranteed. The author has not received payment from any of the companies covered in this report. At the date of this release the author, Wayne Hewgill, owns no shares in the companies in this report.

This report makes not recommendations to buy sell or hold.

Wayne Hewgill is a geologist with extensive knowledge of the global mining industry gained through 30 years of diversified experience in mineral exploration and new business development in Canada, as well as 10 years living in Africa, New Zealand and Australia. He was previously senior research officer at BHP Billiton, an executive with an exploration company working in Argentina and a mining analyst at three Vancouver-based financial groups where he developed the Drill Tracker database in 2006. He holds a B.Sc. in Geology from the University of British Columbia and is registered as a Professional Geoscientist (P.Geo) with APEGBC.


West Africa: A Look at Gold Mining in Ghana, Mali and Burkina Faso

When it comes to gold extraction, West Africa has made itself known a gold mining hot spot with several companies exploring and mining the region’s significant gold reserves.

To better understand the gold mining endeavors in West Africa, here is a look at the several companies mining in Ghana, Mali, and Burkina Faso.

Ghana

In Africa, Ghana is one of the top gold producing countries. The country supports a large industry of artisanal mining, however, according to the BBC, dropping gold prices threaten this way of life. Artisan mining workers take soil to sheds where they pan for gold, bind deposits together with mercury, roast the rock and sell the gold nuggets at market. Unfortunately, for the miners, lower gold prices make this process less worthwhile. This is beneficial for the government, who is making an effort to cut down on illegal gold mining. This change in the lifestyle of many in Ghana is happening quickly.

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Radisson Mining Resources Inc. (TSXV:RDS) is focused on advancing its wholly-owned O’Brien Gold Project in the Cadillac Mining Camp of Quebec, Canada, into production.

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Of course, mining companies can take steps to mitigate the impact gold prices have on their own finances. The government welcomes their activity, as they are legal miners of gold. For this reason, gold mining in Ghana by resource companies continues unabated. In 2013, Ghana was the world’s 10th-largest gold producer with an output of 85 metric tons.

One of the companies working on a gold project in Ghana is Asanko Gold (TSX:AKG) with its flagship Asanko gold mine. The development phase project has a res ource of 7.5 million ounces of measured and indicated gold. The company expects to have the mine producing at a steady state of greater than 200,000 ounces of gold per year in the second quarter of 2016.

With a focus on West Africa, Perseus Mining Limited (ASX:PRU) holds two gold projects in Ghana. Perseus’ flagship project is the Edikan gold mine which has a 5.3 million ounces of measured and indicated gold resource.  Edikan first produced gold in 2011, and by January 2012, the company was in commercial production. Perseus also has the Grumsea project in Ghana.

Golden Star (NYSEMKT:GSS) is a mining company that has been operating in Ghana since 1999. It holds a 90 percent interest in the Bogoso and Wassa open-pit gold mines, and is currently in the process of increasing its operation through pursuing lower-cost ore ounces for production.

Mali

Behind Ghana, gold production in Mali totaled 67.4 tons in 2013, making the country Africa’s third-largest gold producer after South Africa and Ghana.

Mali while the country has a significant number of gold reserves, it also has its fair share of illegal mining. In an effort to clean up its mining sector, the government recently, canceled 130 mining permits, accounting for approximately 30 percent of existing permits. The cancellations mean the permits are effectively free for the government to issue to other investors that will pursue exploration. But not to be disheartened, the government intends to review all existing mining contracts, licenses and titles and renegotiate those that are not in the best interest of the country, according to Reuters.

The country is home to several big gold companies, including IAMGOLD (TSX:IMG). IAMGOLD operates two producing mines the Sadiola gold mine and the Yatela gold mine in Mali.

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Another big name for the country is AngloGold Ashanti (ASX:AGG) with mines at Morila, Sadiola and Yatela. The latter two are joint ventures between AngloGold Ashanti and IAMGOLD. Morila is a joint venture between Ashanti, Randgold Resources and the government of Mali.

Apart from the Morila JV with AngloGold Ashanti, Randgold Resources (LSE:RRS) also has the Loulo-Gounkoto mine complex, a joint venture with the government of Mali.

Burkina Faso

Burkina Faso’s economy depends to a strong degree on the price of gold on the international market. In 2013, when that price fell, the country’s real growth was 6.9 percent, down from the previous year’s 9 percent. Agriculture and mining are the largest and most impactful industries in the country. As such, the performance of the mining sector and of gold prices internationally are both very important to Burkina Faso. Currently, the government is making infrastructure improvements on buildings and roads. Major roads are being paved, while others are being formally created in order to make further development possible.

TrueGold (TSXV:TGM) has projects in Burkina Faso since 2003, just when the country’s potential as a gold producer was coming into view. The country’s geology is similar to that of nearby nations like Mali and Ghana that produce gold. The company found the belts of favorable rocks for gold deposits in Ghana extend into Burkina Faso. True Gold’s Karma and Liguidi projects in Burkina Faso are under exploration, and a feasibility study at Karma is about to begin.

Roxgold (TSXV:ROG) operates one project, the Yaramoko project, in Burkina Faso. The project is situated in the southwestern part of the country in the province of Balé. Yaramoko is within the Hounde greenstone belt where other gold projects lie. Currently, Roxgold is advancing a discovery of high-grade gold and has completed a feasibility study for it. It is also completing exploration activity at other areas within the permit.

Endeavour Mining (TSX:EDV), a company that operates over much of West Africa, has aproducing mine at the Youga project, of which it owns 90 percent interest. Youga has been producing since 2008, and yielded 89,448 ounces of gold in 2013. Endeavour is investigating the possibility of trucking material from the nearby Ouare deposit, 40 kilometers away, to the Youga plant to add three years to the total life of the mine.

IAMGOLD also operates in Burkina Faso, with its Essakane gold mine located in the country.

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Radisson Mining Resources Inc. (TSXV:RDS) is focused on advancing its wholly-owned O’Brien Gold Project in the Cadillac Mining Camp of Quebec, Canada, into production.

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At Least 25 Dead Following Central African Republic Mine Collapse

Reuters reported that at least 25 people are dead following the collapse of a gold mine in the Central African Republic. The mine is owned by Axmin Inc. (TSXV:AXM), but was taken over by rebels last year.

As quoted in the market news:

At least 27 artisanal miners were buried in the collapse of the mine on Thursday and 25 bodies have been retrieved, Ahmat Negat, the rebel group’s spokesman, said.

The mine collapse is the latest setback for the country, which has been beset by sectarian violence between the Seleka and Christian militia for over a year.

Click here to read the full Reuters report.


Perseus Mining Reports Busy Q2 at African Projects

Perseus Mining Ltd. (TSX:PRU,ASX:PRU) released its activities report for the second quarter of 2014, commenting that it drilled successfully at its Bokitsi South deposit, “advanced development planning” for its Sissingue gold project and “made significant operational improvements” at its Edikan gold mine.

Bokitsi and Edikan are in Ghana, while Sissingue is in Cote d’Ivoire.

Highlights include:

Edikan Operations

  • Operating efficiency at Edikan continued to improve during the Quarter, particularly in terms of gold recovery and mill run time (excluding down time caused by abnormal events);
  • Gold production totalled 42,543ozs, 86,330ozs and 180,519ozs for the Quarter, Half Year and full financial year respectively;
  • Production costs and all-in site costs were impacted by unscheduled processing downtime and repairs to fire damage and as a result, production and all-in site costs averaged US$1,150/oz and US$1,324/oz for the Quarter respectively;
  • 45,767ozs of gold were sold during the Quarter at an average sales price of US$1,333/oz;

Exploration – Edikan

  • High grade drill intercepts recorded from a 37 drill hole programme on the Bokitsi South deposit confirm the potential for high grade mill feed to be mined earlier than envisaged in the current Edikan Life of Mine Plan;

Development – Sissingué Gold Project, Côte d’Ivoire

  • Metallurgical test work and preliminary economic assessment of alternative project configurations and flow sheets has been completed and a selection of the preferred process route for detailed feasibility assessment is imminent

Click here to read the full Perseus Mining Ltd. (TSX:PRU,ASX:PRU) press release.


8 South African Gold Miners Shot

The Associated Press reported that South African police were searching for the killers of eight gold miners, who were found dead at an illegal shaft on the outskirts of Johannesburg.

According to the publication:

Illegal mining is common in South Africa, a major producer of gold and platinum. Workers brave unsafe conditions below ground amid reports of the involvement of organized crime and even clashes between rival groups seeking to extract precious metal from shafts.

Click here to view the full report. 


Barrick Gold Sells 13.5 Percent of African Barrick Holdings

Mineweb reported that Barrick Gold Corp. (TSX:ABX,NYSE:ABX) has sold 13.5 percent of its holdings in African Barrick Gold plc (LSE:ABG) to institutional investors. Previously, the company had tried to sell all of its African Barrick stake.

As quoted in the market news:

The disposal was conducted by means of a placement of 41 million ABG ordinary shares, representing 10% of the ordinary share capital of African Barrick and 13.5% of the parent company’s holding in ABG.

UBS, J.P. Morgan Securities and RBC Europe handled the sale. However, even after the sale, Barrick will still own 60% of ABG. In 2012 Barrick tried to sell the entire subsidiary to China National Gold Corp., but the two companies could not agree on price.

Click here to read the full Mineweb report.


Sibanye CEO Slams Illegal South African Gold Mining

In an interview with Mining Weekly, Neal Froneman, CEO of Sibanye Gold Ltd. (NYSE:SBGL), said that illegal gold mining has become such an issue in South Africa that it might be a good idea to let the South African National Defence Force handle it.

As quoted in the market news:

‘It’s literally war,’ said the highly regarded head of the JSE- and NYSE-listed Sibanye.

‘It’s at a level where I don’t think it would be inappropriate to bring in the SANDF. It’s way out of control,’ he said, recounting incidents of 150-plus illegal miners attacking plants.

Sibanye was having to spend R300-million on security, made up of former high-ranking Hawks.

The South African Police Services was unable to help because of their lack capacity to go underground.

Click here to read the full Mining Weekly report. 


Lost Gold Output Could Cost South Africa $35M a Day

Gold strikes starting this week in South Africa could cost the country $35 million a day, Nasdaq reports in a video.

As quoted by the market news:

After protests last week they were due to stage widespread strikes this week over pay – arguing their salaries haven’t kept up with inflation. Producers, squeezed by rising costs and falling prices, have offered 6.5%. But the hardline union AMCU wants a 150% increase and the main National Union of Mineworkers 60 percent.

Click here for the full video, as per Nasdaq


African Barrick Gold Could Close Tanzanian Mine

Frequent robberies and a proliferation of small arms in the Great Lakes region may lead African Barrick Gold (LSE:ABG) to close the Tulawaka Gold Mine, reported AllAfrica.com.

As quoted in the market news:

[Mr Philbert Rweyemamu, Tulawaka Gold Mine General Manager], noted that frequent armed robberies at the mine were a big concern leading the company to incur huge losses. “We have been experiencing an increase of armed robberies often disrupting operations of the company,” he said.

The General Manager disclosed that Tulawaka Gold Mine will soon wind up its operations and hand over to the State Mining Company (STAMICO).

Read the full news story on AllAfrica.com

 


South African Gold Miners Poised to Strike

 

Reuters reports that the union representing South Africa’s gold miners has threatened to down tools this week over wages. Strikes, however, could put their jobs at risk and cost an already struggling industry millions a day.

As quoted in the market news:

This live-or-die dilemma hangs equally over boardrooms, mining shafts and communities in an industry which could lose over $35 million a day in output due to stoppages, and also slow already sluggish growth in Africa’s biggest economy.

The National Union of Mineworkers (NUM) has threatened to down tools [this] week over wages, a move that would effectively shut a gold sector already in a state of steep decline.

Click here for the full Reuters story


African Barrick Adds to CEO Departures

U.S. jobs data will be reported today, and investors remained cautious awaiting the news.

This week saw another change in top management at a major gold producer, this time at Tanzania’s largest gold company, African Barrick Gold (LSE:ABG). ABG said on Wednesday that Australian Bradley Gordon, formerly with Intrepid Mines (TSX:IAU), will man the company tiller, taking over from Greg Hawkins who has “resigned to pursue other opportunities.”

The CEO switch follows African Barrick’s failure earlier this year to sell a 75 percent stake of the company to China National Gold Group after talks collapsed in January.

The CEOs of Kinross (TSX:K, NYSE:KGC), Barrick (TSX:ABX, NYSE:ABX), Newmont (NYSE:NEM) and AngloGold Ashanti (NYSE:AU) have all exited the corner office in recent months amid a falling gold price and escalating costs.

In a commentary, Mineweb’s Lawrence Williams interprets Hawkins’ resignation as fallout from ABG’s poor performance since it was spunoff from parent company Barrick Gold and listed on the London Stock Exchange three years ago:

“Thus, Hawkins is the latest gold mining company CEO to be ousted, in this case to see if new blood can revitalise the ailing African gold miner. African Barrick stock has lost 73% of its value since its launch in 2010 and, although part of this fall is attributable to the plunging gold price and so outside management control, Hawkins is seemingly carrying the can for the company’s continual underperformance,” Williams wrote.

 Other company news

Johannesburg-based Gold Fields (NYSE:GFI) said on Thursday that despite incurring a second-quarter loss of $129 million, it will buy three Australian mines from Barrick: Granny Smith, Lawlers and Darlot. The cash and stock deal will add 452,000 ounces to GFI’s annual production profile and make it Australia’s third largest gold producer.

Sibanye Gold (NYSE:SBGL), a spinoff from Gold Fields, announced Wednesday that it will acquire the West Rand operations of junior miner Gold One International (ASX:GDO) for 150 million shares, Reuters reported. Gold One’s underground and surface operations west of Johannesburg are expected to add about 260,000 ounces a year to Sibanye’s production over the next five years. The mine also produces uranium as a byproduct.

Turquoise Hill Resources (TSX:TRQ, NYSE:TRQ), a subsidiary of Rio Tinto (LSE:RIO, ASX:RIO, NYSE:RIO) that is developing the Oyu Tolgoi copper-gold complex in Mongolia, said this week it is selling its majority stake in an Australian mining firm to a private Chinese coal company. Shanxi Donghui Coal Coking & Chemicals Group Co., Ltd. is offering $160 million for Inova Resources, which is 56.2 percent owned by Turquoise Hill. Inova owns two copper and gold mines and a molybdenum and rhenium deposit in Queensland.

Junior company news

Seabridge Gold (TSX:SEA), which is developing the huge KSM copper-gold project in British Columbia, announced Tuesday the results from three holes testing for high-grade core below the Iron Cap deposit. “The evidence strongly suggests that the Iron Cap deposit sits above a high-grade core zone,” Seabridge explained in a release. The news comes just over a week after Seabridge announced discovery of a large core zone it named Deep Kerr. The company’s stock has risen 14.5 percent over the past 5 days.

Guyana Precious Metals (TSXV:GPM) said Thursday it completed the previously announced acquisition of DPG Resources, based in Ontario. Guyana is purchasing all 18.7 million shares of DPG plus warrants. After the amalgamation GPM said it will hold about $4.8 million in cash. The company has a 100 percent interest in two of four past gold producers in Guyana.

Canamex Resources Corp. (TSXV:CSQ) released drill results from its Bruner gold project in Nevada. CSQ said it intersected a high-grade structure grading 30.7 grams per tonne (GPT) within a wider zone averaging 7.2 GPT over 9.1 meters.

“We continue to intersect stockwork gold mineralization in all holes drilled into the Penelas East target. There appears to be a lower grade stockwork zone surrounding the high-grade structure(s), which should allow for considering open pit mining of this gold zone,” COO Greg Hahn said.

Tarsis Resources (TSXV:TCC) started exploring its Yago gold-silver property in Mexico, which it recently acquired from Almaden Minerals (TSX:AMM). “Sporadic exploration has been carried out within both target areas by a number of different junior operators between 1998 and 2007. The culmination of this work at La Sarda and La Tejona has identified surface and subsurface mineralization intermittently over 3 km2 and 2.5 km2, respectively,” Tarsis stated.

Gold price update

Gold continued its upward trajectory after making gains last week, pushing past $1,370 an ounce despite a healthy U.S. dollar and continuing uncertainty regarding the U.S. Federal Reserve’s position on quantitative easing (QE). Gold started the week strong, hitting a two-month high on Monday before slipping back to $1,364.60 on the spot market. The yellow metal staged a comeback on Tuesday though, reaching $1,373 on a lower dollar ahead of the release of minutes from the Federal Reserve’s Open Market Committee. The FOMC has been signalling it plans to scale back QE, but Wednesday’s notes provided no clear consensus on when its $85 billion a month bond purchase program could end, allowing gold futures to finish the day up $2.60 at $1,375 an ounce. Choppy trading on Thursday amid a stronger dollar marked the precious metal down a few dollars, with spot gold ending the day at $1,372.50 and December gold at $1,371.90.

 

Securities Disclosure: I, Andrew Topf, hold no direct investment interest in any company mentioned in this article. 

Related reading:

Gold Prices Surge Ahead of Eastern Buying Season

 


South African Gold Mining Facing Uphill Climb

South African Gold Mining Facing Uphill ClimbTrouble is brewing again in South Africa, this time in the country’s lucrative gold mining industry, as sides remain deadlocked in wage negotiations.

According to media reports, the National Union of Mineworkers (NUM), which represents nearly two-thirds of the country’s gold miners, is planning protests after rejecting an offer to raise wages by 5 percent.

The union is pushing for much higher wages, including a 60-percent hike for entry-level jobs.

“We will be rolling out protest action in various mines,” Frans Baleni, secretary-general of the NUM, told reporters in Johannesburg on Monday. Strikes have not been ruled out, and the dispute will go to arbitration, a process that is expected to last about a month.

Both sides are trying to avoid a repeat of the labor unrest that plagued South Africa last summer, when workers seeking a pay increase walked out of mines owned by Lonmin (LSE:LMI), the world’s largest platinum producer. Protests led to violent clashes with police that caused the deaths of nine people and forced Lonmin to temporarily shutter its South African operations.

Conditions in South Africa’s platinum mines are notoriously bad, but producers are not in a position to improve them, considering the poor economics of mining platinum there, as explained to Platinum Investing News in a May interview with David Franklin of Sprott Asset Management.

While South Africa’s platinum industry has quieted down this summer following the resolution of strikes at Amplats, (OTC Pink:AGPPY) the country’s gold industry is in a funk and the wage demands are just the tip of the iceberg.

Losing its crown

The country that mined a third of the world’s bullion and once accounted for 79 percent of global gold production is now seen as an also-ran in the race for gold mining supremacy. In Gold Investing News’ annual ranking of gold-producing countries, South Africa finished fifth in 2012, behind China, Australia, the United States and Russia. Last year, a series of strikes caused South Africa’s gold output to drop to 170 tonnes, its lowest level since 1905, and an amount equal to just 6 percent of total gold production.

How did this happen? The reasons for South Africa’s problems are varied and complex, spanning issues that can broadly be characterized as technical, economic, workforce-related and political. In brief, here they are explained:

1. Technical: South Africa’s mines are some of the deepest in the world, with shafts extending up to 4 kilometers underground since most of the accessible gold ore has been depleted and mining companies are forced to dig deeper for the precious metal. That, of course, has increased costs for producers, despite a weakening local currency, the rand, that makes the purchase of goods and services cheaper. Added to the technical difficulties of going farther underground is the increasing problem of power in South Africa. Bloomberg reported in March that the country’s platinum and gold production was threatened by an impending electricity shortage predicted to be the worst in five years. Crimped power supply makes it difficult for mines to expand and can even lead to blackouts and mining stoppages, as occurred in South Africa in 2008.

2. Economic: The effects of a declining gold price and rising costs have had a predictably negative effect on South Africa’s gold producers, whose pre-tax profits margins are among the worst in the industry. Reuters said in a recent article that South Africa’s gold mines were profitable in 2008 and 2009, even when gold was at $1,000 an ounce, but labor and power costs have doubled the cash costs per ounce. That spells trouble with a declining gold price. The same article quotes the chief economist at South Africa’s Chamber of Mines as saying that the average price of gold in South Africa has fallen from 509,000 rand (US$51,868) per kilogram in the fourth quarter of 2012 to under 400,000 (US$40,761) rand/kg in the first six months of this year.

“This precipitous fall in the price … has been the biggest decline that has taken place since the 1920s,” he said. “At a 400,000 rand a kilo gold price, our estimate is that about 60 percent of the industry is in loss-making territory.”

3. Workforce: It’s a sad — and some would say shameful — fact that South Africa’s gold industry was built on the backs of cheap, predominantly black, labor. Now that labor, represented by the country’s two main unions, the NUM and the Association of Mineworkers and Construction Union, is seeking to redress perceived injustices through substantial wage increases.

The other significant labor issue is the declining number of workers in the gold shafts, whose numbers have fallen to around 142,000 last year from almost 500,000 in 1990, according to Reuters. A declining labor pool puts upward pressure on wage costs.

4. Political: The union-driven push for more pay is justified on the basis of allowing a more equal distribution of wealth from the country’s lucrative gold-mining sector. Baleni, the NUM official quoted above, said in a July 29 Bloomberg article that the unions aren’t going to allow South African gold mining companies to “plead poverty”, citing for example the 45.3 million rand (US$4.6 million) in salary and bonuses paid to Gold Fields (NYSE:GFI) CEO Nick Holland last year.

Mining has always been political in South Africa, and the industry has faced frequent calls for nationalization. The African National Congress, which has ruled South Africa since the end of apartheid, for years faced pressure from its leftist fringes to nationalize mines, and only recently put an end to such plans — announcing last December that mines will stay private but that mining companies will pay higher taxes.

A way forward?

The government clearly has an interest in solving the labor problems that continue to plague the goldand platinum mining sectors, especially with an election looming next year, but the industry has little wiggle room when it comes to negotiations. As explained above, the economics of gold mining in South Africa simply do not support the kind of wage increases the unions are seeking, which raises the specter of more confrontation in the coming weeks. How it will all turn out is anyone’s guess, but what is clear is that South Africa’s gold mining industry is in trouble and it will take some major substantive changes to turn the ship around. Let’s hope that ultimately, cooler heads will prevail, and that both sides are able to come up with solutions that work towards lowering costs, perhaps focusing on the non-labor side, while allowing room for wage increases that will attract more people back into the industry and satisfy worker’s justifiable demands for better pay.

 

Securities Disclosure: I, Andrew Topf, hold no direct investment interest in any company mentioned in this article.

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South African Unions, Gold Producers Unable to Strike Wage Deal

Bloomberg reported that wage talks between South African mine worker unions and gold producers has reached an impasse and will now go to arbitration.

As quoted in the market report:

It doesn’t rule out a strike as soon as possible,” Lesiba Seshoka, a spokesman for the National Union of Mineworkers, said by phone. The union represents 64 percent of employees in the industry.

To view the whole Bloomberg report, click here.


Major South African Miners Focus on Agressive Capex, Cost Cuts

Mineweb reported that South African gold miners are feeling the crunch of operating in a cost-prohibitive environment, as gold prices sag. They are taking aggressive cost-cutting measures across the board.

As quoted in the Mineweb report:

The recent fall in precious metals prices has really focused the attention of South Africa’s major gold and platinum miners on cutting costs and capex as operations begin to look marginal at best.

To view the whole Mineweb report, click here.


INN Video: Richard Williams of Helio on Exploration in Africa

 Helio Resource (TSXV:HRC) Co-Founder and CEO, Richard Williams, spoke with the Investing News Network during PDAC in Toronto on Tanzania and Namibia as a mining jurisdiction and how it “demonstrated a willingness to attract foreign investment”. In these difficult markets, Richard says that investors should look at “the overall picture and see who’s behind the company and who’s supporting the company” especially in the locations that they are mining in.

Click here to see the Helio Resource (TSXV:HRC) profile