Posted May 20, 2014 8:04 pm by Comments

Continued labor unrest at South African mining companies should come as no surprise according to a new report from JPMorgan Cazenove that is summarized in a great article (SA’s labour model lays a path ‘to destruction’) in BusinessDay. The investment bank has warned that unless South Africa’s platinum producers restructure their cheap-labour model, industrial strife will not abate and the industry will continue on a journey to “self-destruction.”

Their report also comes out at a time when Amplats, Lonmin and Impala appear to have run out of solutions to end a crippling 16-week strike as talks between the companies and the Association of Mineworkers and Construction Union (Amcu) have broken down over the union’s demand for a basic wage of R12,500 (roughly $1,200) in four years – a 30% annual wage increase that the mining companies cannot afford.

The JPMorgan report considers mechanization as a possible way to resolve the labor problems but this will not be feasible for the next 10 to 20 years. Moreover, the structure of South Africa’s ore bodies (they lie in very thin reefs) and the existing infrastructure of mine shafts are not conducive to mechanized mining.

South Africa’s continued mining labor problems would certainly be of interest to any foreign investors who hold shares of the following South African ETFs or mining stocks:

  • iShares MSCI South Africa Index ETF (NYSEARCA: EZA)
  • AngloGold Ashanti Limited (NYSE: AU)
  • Gold Fields Limited (NYSE: GFI)
  • Harmony Gold Mining Co. (NYSE: HMY)
  • Sibanye Gold Ltd (NYSE: SBGL)

You can read the full article, SA’s labour model lays a path ‘to destruction,’ on the BusinessDay Website.

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