Investors shed shares on SA mine pay turmoil

Negative perceptions abroad grow as wildcat strikes spread

FOREIGN investors are selling their Gold Fields shares because of the illegal strike that has cost the miner 39,000oz of gold production and revenue of R584m, says its CEO Nick Holland.

Operations have been disrupted at Gold Fields and its peers AngloGold Ashanti and Harmony; the world’s largest platinum miner Anglo American Platinum; and at a host of smaller mining companies since August.

Kumba Iron Ore yesterday reported that 300 of its 10,000 workers had embarked on an illegal strike for higher wages.

SA has mineral resources worth $2.5-trillion and should be one of the world’s premier mining investment destinations, but negative perceptions about the country have grown as the strikes have spread.

“We’ve seen investors who have been in the South African gold space for many years who are now selling out. They perceive that these issues are making the risks too high for them to continue to invest here,” Mr Holland said in an interview yesterday.

From being one of the topperforming gold shares in the world this year, Gold Fields is now one of the worst among eight major gold miners. The company was losing 2,300oz of gold a day due to the strike at two of its mines. SA accounts for 48% of production and 40% of its profit.

Jan Nelson, CEO of Pan African Resources, also reported the divestment of long-standing funds from the company.

“Anecdotally, we’re hearing a lot of institutions invested in (South African) equities are thinking differently,” Razia Khan, an economist at Standard Chartered in London, said yesterday.

“It’s not just a London thing, but a lot of South African institutions have been switching out of equities and are looking for ave- nues for diversification — given the risks and what it would mean to the bottom lines of several mining companies.

“There were significant labour market issues that needed to be resolved in SA. The tragic events since mid-August have focused a lot of investor attention on that.”

The police shooting and killing 34 workers on strike at Lonmin’s Marikana mine in August received big international press coverage and was a trigger for many of the subsequent illegal strikes.

On Tuesday Gold Fields applied to the North Gauteng High Court for an order on the evacuation of 5,500 hostel dwellers at its Kloof Driefontein Complex — the company’s largest operation that produces more than a million ounces of gold a year.

“If we don’t get people back to work in the next week or two, there will be permanent impairment to certain shafts,” Mr Holland said. “Financially we can sit it out until next year, but we won’t let it stand that long. We’ll work out how … to stop this thing.”

If Gold Fields had to pay the R12,500 a month wage demanded by the strikers, it would result in the loss of a quarter of its jobs and the closure of the Beatrix mine and most of Kloof Driefontein.

Gold miners negotiate wages on a collective basis, and Mr Holland said they were resolute in not acceding to demands for increases outside the two-year agreement that ends next June.

“As far as we’re concerned wage agreements are sacrosanct. If they want to have early discussions about what we might do from July 1, provided that it doesn’t compromise us or invalidate the existing collective agreement, we can think about it.

“Wegave a 9.5% wage increase three months ago when inflation is 5.5%. I can’t see any basis for moving beyond that until June.”