By Allan Seccombe

The gold industry in South Africa will no longer exist in five years if conditions stay the same, executives at Gold Fields warned on Monday after lowering their production forecast for this year by 200 000oz due to wildcat strikes, a fire and operational problems.

The gold price, hovering at less than R498 000/kg, is the highest it has been, but South African gold producers are losing out on the boom as production ramps up after weeks of strikes, but slowly.

Gold companies are facing soaring costs and stagnant, if not falling, productivity levels.

Gold Fields has just completed a "strategic portfolio review", which recommends a "critical review of declining and/or low-margin assets". The two such assets in South Africa are Beatrix and shafts at the Kloof Driefontein Complex (KDC) near Carletonville.

The company has come under pressure from some shareholders to separate its international assets from those in South Africa.

It was critical that gold miners stepped up productivity or job losses and shaft closures would become a reality, Gold Fields CEO Nick Holland said at a media briefing on Monday.

He said the company was looking for ways to protect jobs. When the gold sector starts two-year wage talks early next year, it will be critical to win union support for increased productivity.

"We are closer to the precipice than we were a few years ago. When we all look over the edge and see what’s down there, everyone becomes a lot more focused," Mr Holland said.

"There’s a necessity to do things differently. We’ve just gone through a very tough few months. We’ve gone through a cycle of continued job losses, a drop in production - the statistics are clear for all to see."

Chamber of Mines CEO Bheki Sibiya said last week that thousands of miners would be laid off early next year, possibly more than 10 000. Mining companies have been warning that the spate of wildcat strikes at platinum, gold, chrome and iron-ore mines since August would force a downsizing of their workforces.

National Union of Mineworkers general secretary Frans Baleni said there had been no discussions on productivity-linked wages. "We will consider the matter once it is presented to us, then seek mandate from our members," he said on Monday.

Gold Fields chief financial officer Paul Schmidt said South Africa’s annual gold production had halved to about 180 tons over the past five years.

"If what has happened in the last five years continues, there will be no (gold) industry in five years’ time. We’ll not be sustainable, particularly the legacy assets in SA."

The gold industry has a high fixed-cost proponent - about two-thirds of cash outflow - which remains unchanged when production is reduced. "If your production keeps falling, you have a domino effect - as you close one shaft, the fixed overhead has to be absorbed by the remaining shafts," Mr Holland said.

Gold Fields has an area below its workings at its KDC East mine with 10-million ounces of gold.

"We’d have to mine that in a very different way - still with a lot of people, but in a way that takes the man away from the face and relies on technology," he said. "Technology is not there yet, but we’re all beavering away at it."

"My appeal is to give the gold industry a break. Carbon taxes we just can’t afford - try to keep the fiscal regime similar to today’s."

Gold Fields has dropped its production forecast for this year to 3.3-million ounces, down from the 3.5-million ounces it predicted in the first quarter. It said it had lost 145 000oz due to the strikes.
Courtesy: Business iafrica