Mining job cuts looming as electricity predicament bites

JOHANNESBURG – South Africa’s Gold Fields, the world’s fourth-largest gold miner, said yesterday it would scale back at some mines and trim production, putting 6 900 jobs at risk, in response to a power crisis which has reduced electricity for industry by 10 per cent.

Operations in South Africa’s key mining industry were halted for five days last month because of an electricity shortage. Since then, miners have operated with 90 per cent of the electricity they would normally need.Gold Fields forecast gold production for the third quarter would fall between 20 and 25 per cent compared with the December quarter due to the crisis and the impact of the Christmas break.It also said sustainable production at its South African operations was likely to fall by between 15 to 20 per cent from the fourth quarter onwards as a result of the 10 per cent power cuts imposed on miners by power utility Eskom.About 6 900 jobs of Gold Fields’ total workforce of 53 000 could be affected, the miner said.The National Union of Mineworkers (NUM) will start meeting the government and the Chamber of Mines this week to talk about the jobs, it said.”Everyone is worried,” NUM spokesman Lesiba Seshoka said, adding that Gold Fields had made attempts to start talks with the 280 000-strong union.”We will be reviewing the situation as soon as we get a final report from our regions,” he said.AngloGold Ashanti, the world’s third-largest gold miner, has not announced job cuts, but see losses of 400 000 ounces in 2008 due to the power crisis.Harmony said it had lost about 800 kg during the five-day production halt.”I suppose the most stark issue here is the potential for job losses (at Gold Fields),” said a Johannesburg-based gold analyst who did not want to be named.”Harmony has announced they have already reduced their work force, their contractors, by nearly 5 000,” referring to a review of the group’s operations that has included selling off some of its mines, and not as a result of the power crisis.Gold Fields said on Monday all non-essential electricity use had been stopped, but it would spend about 200 million rand on extra emergency power to safeguard employees in case there is a total blackout.”The inability of Eskom to supply the mines their full power requirements, and to commit to additional electricity demand for new mining projects…in development, has caused a significant crisis in the South African mining industry,” Terence Goodlace, the head of Gold Fields South Africa operations, said.”It is paradoxical that we have to consider downscaling in the current record-high gold price environment.”Gold hit an all time high of US$953,60 on Thursday, and yesterday spot gold was at US$947,70/$948,50 a troy ounce.Goodlace said all available electrical power would have to be directed to higher margin, revenue generating shafts, at the expense of lower margin shafts and a development project at its Driefontein 9 shaft.Gold Fields said to meet its 10 per cent cut in electricity, two shafts and a shaft depth extension project at Driefontein and two shafts at Kloof mine would be mothballed, closed or scaled back.Its South Deep mine was to be restructured for geological reasons, which would be compounded by the power rationing, it said.Production at its Beatrix mine, which is less energy intensive than Driefontein and Kloof, was unlikely to be affected.It also said it was studying opportunities to generate its own electricity at the different mines.- Nampa-ReutersSince then, miners have operated with 90 per cent of the electricity they would normally need.Gold Fields forecast gold production for the third quarter would fall between 20 and 25 per cent compared with the December quarter due to the crisis and the impact of the Christmas break.It also said sustainable production at its South African operations was likely to fall by between 15 to 20 per cent from the fourth quarter onwards as a result of the 10 per cent power cuts imposed on miners by power utility Eskom.About 6 900 jobs of Gold Fields’ total workforce of 53 000 could be affected, the miner said.The National Union of Mineworkers (NUM) will start meeting the government and the Chamber of Mines this week to talk about the jobs, it said.”Everyone is worried,” NUM spokesman Lesiba Seshoka said, adding that Gold Fields had made attempts to start talks with the 280 000-strong union.”We will be reviewing the situation as soon as we get a final report from our regions,” he said.AngloGold Ashanti, the world’s third-largest gold miner, has not announced job cuts, but see losses of 400 000 ounces in 2008 due to the power crisis.Harmony said it had lost about 800 kg during the five-day production halt.”I suppose the most stark issue here is the potential for job losses (at Gold Fields),” said a Johannesburg-based gold analyst who did not want to be named.”Harmony has announced they have already reduced their work force, their contractors, by nearly 5 000,” referring to a review of the group’s operations that has included selling off some of its mines, and not as a result of the power crisis.Gold Fields said on Monday all non-essential electricity use had been stopped, but it would spend about 200 million rand on extra emergency power to safeguard employees in case there is a total blackout.”The inability of Eskom to supply the mines their full power requirements, and to commit to additional electricity demand for new mining projects…in development, has caused a significant crisis in the South African mining industry,” Terence Goodlace, the head of Gold Fields South Africa operations, said.”It is paradoxical that we have to consider downscaling in the current record-high gold price environment.”Gold hit an all time high of US$953,60 on Thursday, and yesterday spot gold was at US$947,70/$948,50 a troy ounce.Goodlace said all available electrical power would have to be directed to higher margin, revenue generating shafts, at the expense of lower margin shafts and a development project at its Driefontein 9 shaft.Gold Fields said to meet its 10 per cent cut in electricity, two shafts and a shaft depth extension project at Driefontein and two shafts at Kloof mine would be mothballed, closed or scaled back.Its South Deep mine was to be restructured for geological reasons, which would be compounded by the power rationing, it said.Production at its Beatrix mine, which is less energy intensive than Driefontein and Kloof, was unlikely to be affected.It also said it was studying opportunities to generate its own electricity at the different mines.- Nampa-Reuters