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AngloGold to weigh job losses with pay increases in wage talks

Gold producers are proposing ‘a different model’.

AngloGold Ashanti, the world’s fourth-largest gold producer, will present a trade-off between pay increases and job losses to South African unions when wage negotiations begin next month.

The company will tell unions how their demands for higher wages will translate into fewer positions and shorten the life of mines, Chief Executive Officer Srinivasan Venkatakrishnan told reporters on a conference call Monday.

South African gold producers including AngloGold, Sibanye Gold and Harmony Gold Mining are seeking to avoid a repeat of the five-month strike by platinum workers last year. To end the country’s longest mining stoppage, platinum companies increased entry-level wages as much as 20%. Less than a year later, Lonmin said it may cut 3 500 jobs.

“What we cannot have is year-on-year discussions around wages without any economic consequences,” Venkatakrishnan said. “That effectively creates a sunset industry for gold mining in South Africa.”

To combat this, gold producers are proposing “a different model, where one has to discuss the overall impact of wages on jobs, on mine life and on productivity,” Venkatakrishnan said.

Such an approach is necessary because production from AngloGold’s South African operations dropped 18% to 239,000 ounces in the first quarter compared to the same period the previous year because of safety stoppages and lower-grade ore, the company said Monday. All-in sustaining costs for the mines rose 12% to $1,095 an ounce.

By contrast, the company’s international operations caused AngloGold to exceed its overall production and cost forecasts. The company’s output was 969 000 ounces, beating its forecast of 900 000 ounces to 940 000 ounces, while all-in sustaining costs dropped 9% to $926 an ounce.

©2015 Bloomberg News

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