AngloGold warns of mining industry demise

AngloGold Ashanti, Africa’s top bullion producer, says steep wage demands and rising power costs could turn South Africa’s once thriving gold sector into a “sunset” industry.

AngloGold, which reported it had swung to a quarterly profit sending its shares 5% higher yesterday, said looming wage and electricity tariff rises were a concern.

“We cannot have year-on-year discussions on wages without any economic consequences. That effectively creates a sunset industry for gold mining in South Africa,” said AngloGold chief executive Srinivasan Venkatakrishnan, referring to wage demands.

The National Union of Mineworkers (NUM), which represents more than half of the workers in the gold sector, is seeking increases of up to 75% in the basic pay for entry-level workers to R10 000 a month.

Power utility Eskom has requested the energy regulator, Nersa, to approve a 25.3% increase for 2015/2016 (June-July) in electricity tariffs, which would include a previous 12.69%, granted in March.

AngloGold said this too would hurt the gold sector, where profit margins are under pressure.

Venkatakrishnan said: “As an industry, we can’t take kindly to the fact that a service provider says I can’t control my costs, so give me an increase.

“We manage our costs and request other service providers to manage their costs.”

He said power made up 7% of AngloGold Ashanti’s costs in 2010, but this had risen by up to 25%, despite the gold producer having slashed its consumption by 20% under an agreement with Eskom. – Reuters