Platinum Overtakes Gold As South African Mining Problems Return

Tyler Durden's picture

In some ways it is lucky that the platinum coin nonsense is dead and buried because there may have been certain procurement issues. The reason, as was the case late in 2012, is that the South African mining situation is once again rapidly unraveling, despite hopes by third parties that recent wage compromises between employers and unions had managed to leave striking workers and mining companies at a tense but cordial  impasse. However, as was easily predictable, following the substantial wage hike demanded by miners to end strikes, what resulted was perfectly expected: a collapse in profits. And now Anglo American Platinum has no choice but to shutter a variety of facilities and fire workers outright in order to restore the pre-riot profitability.

From AP: "The world's largest platinum producer said Tuesday it will close some operations, sell one mine in South Africa and cut 14,000 jobs. Anglo American Platinum said a nearly yearlong review found that four mine shafts needed to be closed and one mine sold because of unprofitable operations. The government's minister of mines and the National Union of Mineworkers, NUM, expressed surprise and shock at the announcement." 

Sadly, "surprise" and "shock" are not leverageable bargaining positions, especially when dealing with a company hell bent on protecting the only thing that matters - profits - and unless the union is willing to retract all of its hard won wage gains achieved after nearly a month-long strike, and many workers deaths as hostilities escalated on numerous occasions, then the number of employees at the platinum miner will be drastically cut, and with it the amount of platinum produced, which is also the reason why today for the first time in nearly a year the price of Platinum and Gold reached parity once more. Is there perhaps a loophole for a #trilliondollargoldcoin that the Treasury and the Fed have not rejected yet?

More from AP on South Africa's once again very angry unions:

"The NUM will engage the company in a bid to save these jobs and appeals on workers to work together to safeguard their own jobs," said NUM general secretary Frans Baleni."

 

A Twitter posting from NUM was less diplomatic, saying the union has repeatedly called on workers to unite and defeat the evil nature of capitalism, which seeks to put profits first and humanity last.

 

The labor unrest spread in South Africa, and Anglo American Platinum, known locally as Amplats, saw a more than eight-week strike that crippled the giant at its operation in Rustenburg, about 100 kilometers (60 miles) northwest of Johannesburg. The company had fired 12,000 workers and then agreed to reinstate them in October, though the miners did not return to work until November.

 

Amplats on Tuesday said that 13,000 of the jobs it wants to cut are in the Rustenburg region.

 

Anglo American Platinum said it takes its social responsibilities to its laid-off workforce seriously and would try to create 14,000 new jobs focused on housing, infrastructure and small business development.

Jobs which, it goes without saying, will pay far, far less.

"The platinum business has attractive underlying fundamentals, but we are facing tough decisions to restore profitability to our operations. We must evolve to align the business with our expectations of the platinum market's long-term dynamics and address the structural changes that have eroded profitability over time," said Chris Griffith, Anglo American Platinum's chief executive.

 

The mining industry is a huge part of the economy in South Africa, which is the world's largest producer of platinum, gold and chromium. Most mine workers who carry out manual labor are black. The South African Institute of Race Relations says that the unemployment rate for black South Africans was nearly 41 percent in 2012, while the corresponding rate for white South Africans was 7.5 percent.

And with one of the three metals  down, and platinum prices soaring, how long until other miners are forced to restore profitability by cutting overhead, and in the process trimming production, which benefits nobody - neither management, nor employees, nor shareholders (for Hugh Hendry's thoughts on owning miners, see previously), except for the underlying metal of course, which will just get more valuable as less of it is created.

For an example of the inverse: please sell central banking and paper money.