Strikes in South Africa shut 39% of country's gold production

09/26/2012 4:28 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

Wildcat strikes have spread across South Africa’s mining sector. Strikes at AngloGold Ashanti (AU), Gold Fields (GFI), and other gold mining companies have halted about 39% of South African gold production. AngloGold said today that all production at its South African mines has been halted. The company is the world’s third largest gold producer.

For more on the South African strikes and their effect on prices for commodities such as gold and platinum see my September 25 post http://jubakpicks.com/

The latest round of the labor turmoil that began with a six-week strike at Lonmin’s (LNMIY) Marikana platinum mine isn’t limited to the mining sector, however. Coal of Africa (CZA.LN) workers have also gone out on strike along with 20,000 transport workers.

The new wave of strikes shares this with the Marikana strike: Workers have sidelined representatives from the National Union of Mineworkers in favor of representation by committees of their co-workers. The National Union of Mineworkers is a key ally of the African National Congress government. Opponents of the ruling faction of the African National Congress are attempting to use the strikes to challenge current party leadership.

There is one crucial difference, however, between the strikes on Lonmin’s platinum mine and the strikes in the gold fields. While platinum mining companies negotiate with workers on a mine by mine basis, labor negotiations are handled for the country’s biggest mines by the Chamber of Mines. Wage talks were scheduled for next year, but they are now likely to be brought forward.

Any increase in labor costs—and the Lonmin settlement saw increases of 11% to 22%--is likely to cause some South African gold mines to close. The sector already faces huge cost increases as the mines, among the world’s deepest, get deeper. South Africa’s dilapidated electric power sector is currently producing the worst of all worlds with rising costs (up 26% in 2011) and frequent power interruptions.

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