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Gold strike bites as fuel dispute ends

Jul 28 2011 17:24 Reuters

Company Data

EXXARO RESOURCES LIMITED [JSE:EXX]

Last traded 125.00
Change -2.32
% Change -0.02
Cumulative volume 583477
Market cap 44.76bn

Last Updated: 20/10/2014 at 04:31. Prices are delayed by 15 minutes. Source: McGregor BFA

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Emalahleni - A strike by South African fuel workers that slowed commerce and caused panic buying at the pumps ended on Thursday, just hours before 100 000 gold miners were to down tools in a move that could push up bullion prices.

Mediators said the union representing petroleum workers which was seeking 9.5% wage hikes had reached a deal with employers, who had offered 8%.

The country's annual strike season is in full swing with unions demanding 10% to 20% pay rises, well above 5% inflation. The strikes have already hit chemicals, coal and diamond mining with worries about economic damage increasing the longer they last.

Some 100 000 workers at AngloGold Ashanti, Gold Fields, Harmony Gold and another smaller mining group plan to walk off the job. The work stoppage could cost the sector about $25m a day in lost output at a time when the precious metal is trading near record highs.

Their share prices extended losses on Thursday.

Unions representing coal workers said they held "inconclusive" talks with the Chamber of Mine (COM) on Thursday and gold sector talks were set for Friday.

At Emalahleni, 100 km east of Johannesburg, thousands of striking coal workers vented their anger near an Anglo American operation.

"I've worked 38 years for this company and I still get only R3 700 a month. How am I supposed to survive with that? And my family?" said one striking worker, Joseph, 55, who declined to give his last name.

Coal companies hit by the strike include Exxaro Resources [JSE:EXX], Optimum Coal and Xstrata

Strikes typically last up to a few weeks, with the average recent settlements being about 8% annually. Employers, who see the wage deals as the cost of doing business, usually ramp up production after reaching new labour deals to try and make up lost production.

The biggest worries for the economy are strikes that stretch into mid-August, work stoppages that hit power utility Eskom, which provides almost all of the country's power, or affect platinum, with South Africa being the world's largest producer of the precious metal.

Gold fight

"There are no new offers just yet," said COM spokesperson Jabu Maphalala of the gold dispute. Wage talks on that front are to resume on Friday.

The National Union of Mineworkers (Num) is seeking 14% from the gold producers, who have offered between 7% to 9%. In the coal sector, the Num is seeking 14% while employers have offered 7% to 8.5%.

South Africa was once the global leader in gold production but now is fourth in the world due to dwindling grades and increasing depths. A short-term work stoppage is unlikely to affect the spot price, which hit an all-time high of $1 628 an ounce on Wednesday on US and European debt woes.

But analysts say a prolonged strike may push the price of bullion even higher.

Markets will also be watching the outcome of talks between the unions and Anglo American Platinum, the world's No 1 producer which accounts for about 40% of global output.

The Num is demanding an eye-popping 20% and Amplats' last offer was 4.6%.

"Even the threat of a strike sends a signal to investors that it is more dangerous to be short platinum, and that will in itself be supportive of prices," said David Jollie, an analyst at Mitsui Precious Metals in London.

Economist have warned that well above inflation settlements erode the country's global competitiveness by driving up the cost for a workforce that is already more expensive and less efficient than those in emerging market rivals.

Employers have also been shedding jobs to pay for the higher wage bills, driving up an unemployment rate already at 25%.

While wages in the mining sector - which employs more than a half million people - have increased by nearly 30% since September 2008, about 22 000 jobs have been cut.
num  |  exxaro resources  |  eskom  |  mining sector  |  wage increases
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