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Adding Insult To Injury, South African Gold Mining Union Demands Up To 60% Wage Hikes

Tyler Durden's picture




 

In case the complete disconnect of paper selling from physical hand-over-fist buying (see this chart to explain all the gold activity in Q1 which can be summarized in two words: paper liquidation) were not enough to send the price of precious metals to zero, then news that quite soon gold mining companies in one of the world's largest producers of gold may be going out of business, leading to a collapse in physical product, should be sufficient to really send precious metals well into negative territory. The only question will be if the GDX gets there first. Reuters reports that South Africa's National Union of Mineworkers said it would seek pay rises of up to 60 percent from gold and coal producers, raising the prospect of fresh strikes as firms battle higher costs and falling prices in an already heated labor climate.

We wish the mineworker union godspeed, and the best of luck, as in the current full retard gold supply/demand environment, only a complete halt in South African mining production will accelerate gold's price plunging to sub-extraction costs, as miner after miner mothball operations, only to see even further paper liquidation taking the price to laughably low levels (and why not negative?) yet making purchases of physical product completely impossible as there simply will be none left in the supply channel.

More from Reuters:

Africa's biggest economy is hoping to avoid the 2012 wildcat strike action at platinum and gold mines that cost billions in lost revenue and production and killed over 50 people.

 

Mineworkers are mobilizing to assert themselves, with the NUM fighting a challenge to its once near monopoly in the shafts from the Association of Mineworkers and Construction Union (AMCU), which has poached tens of thousands of platinum miners from it in a violent struggle for members.

 

NUM said it was seeking an entry-level minimum monthly wage of 7,000 rand ($750) for gold and coal surface workers and 8,000 rand for those underground in a submission to the country's Chamber of Mines, a copy of which was seen by Reuters.

 

Elize Strydom, the industrial relations adviser at the Chamber of Mines, said the minimum wage for surface workers is currently 4,700 rand and for underground miners it is 5,000 rand, so the demands for the latter are a 60 percent increase. NUM also said it wanted 15 percent increases for "all other wage categories," or more experienced and skilled workers.

 

The chamber of mines said in a statement it had received the "proposals" from NUM and urged all parties to compromise in the talks which will begin around the middle of June.

 

"We appeal to all parties to explore every option in trying to reach settlement without resorting to damaging industrial action, and to reach agreements that will strike a balance between what is affordable to the companies and meets the expectations of the employees," the chamber said in a statement.

 

Sliding precious metals prices have raised the pressure on miners as they ready for pay talks. Spot platinum on Friday closed at $1,450 an ounce, down around 35 percent from a record high of $2,240 hit in March 2008, and most South African shafts are losing money at this price.

Needless to say, miners can't afford said hikes, and the most likely result will be a repeat of last year's mining violence when many workers were killed, while mine production of platinum and other PMs collapsed. This year it appears the target will be gold.

The rivalry between the two unions triggered violence that killed over 50 people last year and tensions are running high. An AMCU organizer was murdered last weekend, prompting a 2-day strike at platinum producer Lonmin.

 

Anglo American Platinum (AMSJ.J), the world's top producer, now plans to cut 6,000 jobs from an initial target of 14,000 as it seeks to restore profits after falling into a loss last year. It is hardly in a position to give big pay rises after scaling back its original plan under government pressure.

 

Gold and coal producers negotiate through the country's chamber of mines. South African gold companies include AngloGold Ashanti (ANGJ.J), Africa's top bullion producer, Gold Fields (GFIJ.J), Harmony (HARJ.J) and Sibanye (SGLJ.J). Coal producers include Anglo American (AAL.L) and Exxaro (EXXJ.J).

At last check, gold was once more sliding as the silver margin liquidation has woken up correlation algos taking down the entire PM complex lower. Which only means that margins at miners, already razor thin, are about to turn negative, leading to inevitable mothballing and eventually, bankruptcies and permanent shutdowns. Which in a new normal should mean even lower prices, until such time as all paper liquidation is exhausted. Until then enjoy the ride as gold miner after gold miner (because the South African mining union's demands will certainly be noticed everywhere else gold is mined) goes out of business.

For the sake of completeness, below is the gold cost curve of the world's largest mines.

 

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Sun, 05/19/2013 - 19:09 | 3578587 de3de8
de3de8's picture

Divergence can't go on forever.

Sun, 05/19/2013 - 19:21 | 3578598 ZerOhead
ZerOhead's picture

We will all be fucked big time if the cephalopods want to make a couple of quick extra bucks showing us there is no inflation in AGRICULTURAL COMMODITIES as well...

Sun, 05/19/2013 - 19:36 | 3578642 Spider
Spider's picture

Its so funny PM investors dont see the industry structure is so negative right now that there will be future supply crunches - gold costs $1300 plus to mine nowadays all-in:

http://seekingalpha.com/article/1346991-the-true-all-in-cost-to-mine-gold-complete-2012-figures

The paper gamers havent realized that if price is too low miners go out of business and supply is even further restrained.  I dont mind waiting and accumulating physical gold for that future.  he CB's and large investors know this too - these are how the future seeds of a gold parabolic rise are planted.

 

Sun, 05/19/2013 - 19:39 | 3578682 SafelyGraze
SafelyGraze's picture

"South Africa's National Union of Mineworkers said it would seek pay rises of up to 60 percent from gold and coal producers"

yeah, we were just discussing that at our Managers Meeting last week.

we decided to outsource to mining operations. maybe to india or something. 

spoiler: the ore is actually physically located in south africa. you have to plunder/deplete it from your very own selfsame country. even if there are lower wages offshore. what a freekin dilemma. 

Sun, 05/19/2013 - 19:42 | 3578694 nmewn
nmewn's picture

I don't see a problem...pay the miners in product ;-)

Sun, 05/19/2013 - 20:17 | 3578818 smlbizman
smlbizman's picture

just like hear in amerika...todays worker just will not go 5 miles below ground for a bowl of rice a day...pussies...

Sun, 05/19/2013 - 20:40 | 3578896 LetThemEatRand
LetThemEatRand's picture

The problem with centrally planned markets and crony capitalism is that you eventually run out of other countries' slaves.

Sun, 05/19/2013 - 21:25 | 3579008 ZerOhead
ZerOhead's picture

No shortages yet though... Chinese labor at $1.50/hr is being replaced with Bangladeshi labor at $0.20/hr...

Now if we could just outsource our $350/hr lawyers to India and our $70,000 biopsies to China we just might begin to get some disposable income back into the middle class for our bankers to suck out again...

Sun, 05/19/2013 - 23:02 | 3579261 James_Cole
James_Cole's picture

"Needless to say, miners can't afford said hikes, and the most likely result will be a repeat of last year's mining violence when many workers were killed, while mine production of platinum and other PMs collapsed."

Amplats could easily afford it and if they didnt run their company like a bunch of drunken sailors they wouldn't have to blame the mine workers for the shit performance of their operations.

Mon, 05/20/2013 - 04:05 | 3579549 PT
PT's picture

ZerOhead said, "Now if we could just outsource our $350/hr lawyers to India and our $70,000 biopsies to China ..."

Yeah, and CEOs.  Why have overpriced, lazy US CEOs when you can get real cheap ones from China or India?  And politicians, anyone can be bribed and blackmailed and extorted.  We could get ourselves some nice, cheap Mexican politicians ...

... It continually amazes me that no-one has mentioned these ideas sooner. 

Mon, 05/20/2013 - 01:07 | 3579442 TWSceptic
TWSceptic's picture

Rand would agree with that...

Mon, 05/20/2013 - 04:00 | 3579542 PT
PT's picture

LTER said, "The problem with centrally planned markets and crony capitalism is that you eventually run out of other countries' slaves."

You also run out of rich customers.  "My goodness, where did they all go?  There were heaps of rich customers in the US last time I looked ..." 

Sun, 05/19/2013 - 23:22 | 3579297 Roger Knights
Roger Knights's picture

"we decided to outsource to mining operations. maybe to india or something."

I've read that India actually has large gold deposits, but that government regulations are inhibiting development. They either require or prohibit the exploration company to do / from doing the development.

Mon, 05/20/2013 - 03:58 | 3579540 AnAnonymous
AnAnonymous's picture

Bah. 'Americans' have already figured out the solution.

Insourcing.

They do not want to work for the wages? Just bring in workers who will be willing too.

'Americanism', due to its large capacity to consume resources, can foster conditions of poverty in many places in the world.

There will never be a shortage of people to enable insourcing.

Sun, 05/19/2013 - 20:09 | 3578731 Bastiat
Bastiat's picture

The banksters will squeeze their balls, kill their stock price until they have to go to the banks to borrow to finance development.  The banks will require hedging or forward sales of output.  Either that or ABX will gobble them up for pennies, then they will gladly sell forward as that has been their game.  Bush Sr. was on the board for years.  The Blanchard lawsuit brought a lot of this out into the public record back in the 90s.  If there's a new gold based money coming then these fuckers know it and they will control as much of the source of "money" creation as possible.  Just my humble opinion of course.

What's to stop them?  Eric Holder gave them free reign: too systemically important to prosecute. 

Sun, 05/19/2013 - 21:11 | 3578911 LetThemEatRand
LetThemEatRand's picture

That's the great thing about the "rule of law" that so many libertarians fail to understand.  That law is whatever the guy with the biggest  check book says it is.    And I say this as someone who loves the theory of libertarianism.

Mon, 05/20/2013 - 04:52 | 3579572 Urban Redneck
Urban Redneck's picture

No, the biggest checkbook only wins (as a rule) when the laws are written to protect those with big checkbooks or there is an excess supply of idiots with law degrees pretending to be lawyers, if both are true then the little guy is fucked.  

However, justice is a process, not an outcome- even with the full backing of nation States and a deep bench of skilled advocates representing each side, the outcome of individual cases can turn on the most bizarre of externalities.

 

Sun, 05/19/2013 - 20:59 | 3578958 Chaffinch
Chaffinch's picture

That sounds horribly like the world we live in Bastiat.

Sun, 05/19/2013 - 23:08 | 3579098 DoChenRollingBearing
DoChenRollingBearing's picture

@ Spider

The numbers I have seen are similar, $1200 or so TOTAL costs to mine each ounce.

But, what about the divergence and the future price of physical gold?  Here are some (admittedly speculative) calculations as to what gold should be worth.  Do FOFOA-like numbers ($55,000) make any sense?

"Gold Arithmetic"

http://tinyurl.com/ba7um78

Sun, 05/19/2013 - 19:51 | 3578716 rogeliokh
rogeliokh's picture

Why even bother to mine? Crimex is the cheapest Gold Mine operation around. Need GOLD, buy paper futures
ask for delivery, nothing need it. No gasoline, no construction costs. Just mine GOLD from Crimex
24/7! Until it collapses.

Sun, 05/19/2013 - 19:10 | 3578590 gimli
gimli's picture

I hear tungsten miners are making out like bandits

Sun, 05/19/2013 - 19:11 | 3578594 SHEEPFUKKER
SHEEPFUKKER's picture

Pretty soon, they will demand higher wages too. And maybe it will be more profitable to melt the tungsten filled gold bars to extract the tungsten. 

Sun, 05/19/2013 - 19:10 | 3578591 fonzannoon
fonzannoon's picture

Something tells me when those miners start to redline Buffet/Munger will be there to throw them a lifeline in exchange for a sweet interest rate and rights to the shiny.

Sun, 05/19/2013 - 19:24 | 3578636 Being Free
Being Free's picture

I think you're right (again) Fonz, though probably not the B-M of Omaha.  The miners, and the mineral rights, are likely the real endgame here.

B Free

Sun, 05/19/2013 - 19:31 | 3578657 fonzannoon
fonzannoon's picture

We should all pool together here and offer to throw a mid sized miner a lifeline ourselves.

Sun, 05/19/2013 - 19:33 | 3578666 LetThemEatRand
LetThemEatRand's picture

Commie!  /sarc

Sun, 05/19/2013 - 19:35 | 3578673 fonzannoon
fonzannoon's picture

LOL

Sun, 05/19/2013 - 21:44 | 3579055 Dr Benway
Dr Benway's picture

It'll be funds like Sprott Global that will do deals like this with desperate miners. It is a fools play because these miners are ludicrously crappy and mismanaged regardless of PM price.

Sun, 05/19/2013 - 21:45 | 3579048 Dr Benway
Dr Benway's picture

Alcyone discussing selling a metal stream at a top price of $6.50 per ounce of silver, to undisclosed investor betting the crappy company won't blow up.

http://m.miningweekly.com/article/alcyone-secures-a10m-in-funding-2013-0...

Was this along the lines of what you were thinking, fonz?

Sun, 05/19/2013 - 19:10 | 3578592 Racer
Racer's picture

As an aside, I was just trying to renew my library books when this came back:

"The following error was encountered:

  • Zero Sized Reply

Squid did not receive any data for this request."

ROFL

Sun, 05/19/2013 - 19:11 | 3578593 solgundy
solgundy's picture

Gold & Timing Posted on May 19, 2013 by  

Bull markets I have stated many times are 7, 11, 13 or 21.

Gold has three very interesting bottoms. The 1999 is the intraday low. 2000 is the lowest yearly closing. Then 2001 produces the lowest quarter closing. This is an interesting set up that is rare to say the least. So effectively, both the 11 and 13 cycles come into play since the low was not a single event. So we got the 13 year since 2012 was the highest closing but we got the intraday in 2011 as 11 up from the lowest closing. Had both the intraday and the close been unified in 1999, then the ideal would have been 2010 with a max of 2012.

Likewise, on the way down we should have had a 19 month correction but the move up to create the highest annual closing in 2012 extended the cycle. Everything happens for a reason and this may prove to be the currency crisis.

 

This decline will be no different than anything before. The bulk of the drop always takes place within the first 2-3 years. So just as gold crashed from $875 in 1980 to $293 by 1982, the 5 year bear market prevailed but low was $280 compared to $293. The 19 year low was only $254.

Even if gold declines into 2015, the bulk of the drop will most likely take place during this year as was the case 1980-1982. A lower low in 2015 may be marginal. That depends upon the low we see this time. If it is in the 1150 area, then the worse case should be 875-907.

We still see the phase transition for 2017 time frame and that is normally up to a 2 year event so 2015-2017 does not change anything long-term. The rest will be in the report.

Sun, 05/19/2013 - 20:09 | 3578684 Haole
Haole's picture

I reject this reality and replace it with my own...

Scary thing is, Martin was calling for a probable correction to sub-$1400 levels well over a year ago if memory serves and metals bugs far and wide were poo poo'ing it.

Another few years and another $400/oz+ in "losses" is really going to start to **** with people's heads.

 

Sun, 05/19/2013 - 19:13 | 3578597 ZerOhead
ZerOhead's picture

Stuff will never be cheaper until suddenly there is none...

Sun, 05/19/2013 - 19:35 | 3578674 knukles
knukles's picture

Oh man, you just gave Krugman a 4 hour orgasm, dude ...

Sun, 05/19/2013 - 19:20 | 3578610 russwinter
russwinter's picture

This is post is normally password protected, but I am going to throw it open for a hour. Is A Force Majeure Of The Comex Gold Exchange Really Just A Tinfoil Hat Theory?

http://winteractionables.com/?p=2576

Sun, 05/19/2013 - 19:40 | 3578687 Chaffinch
Chaffinch's picture

Thanks for the link Russ. Good article - very interesting to see the drop in hedging by the miners.

Mon, 05/20/2013 - 03:50 | 3579536 Acet
Acet's picture

Great article.

By the way, "loucura" just means madness.

Sun, 05/19/2013 - 19:19 | 3578620 blindman
blindman's picture

Keiser Report: Whimsical Price Tyranny
".. In the second half, Max talks to Dr. Michael Hudson, author of The Bubble and Beyond, about debt and wage deflation and about the intersection of interest rates and wages going back to David Ricardo when wages were measured against the price of bread to today when they are measured against the price of debt."
.
http://maxkeiser.com/2013/05/18/keiser-report-whimsical-price-tyranny/

Sun, 05/19/2013 - 19:51 | 3578717 Bollixed
Bollixed's picture

Max and Stacy sure seem tense toward each other since they got married. Either that, or they're afraid of heights...

Sun, 05/19/2013 - 20:07 | 3578771 Haole
Haole's picture

Never forget the four rings of marriage:  The engagement ring, the wedding ring, the suffering and the murdering...

Sun, 05/19/2013 - 21:33 | 3579028 Conax
Conax's picture

They did the deed, and now she's probably cut him off.  The thrill is gone.

http://www.youtube.com/watch?v=4fk2prKnYnI

Sun, 05/19/2013 - 19:24 | 3578635 Bam_Man
Bam_Man's picture

Maybe that's the plan.

Bankrupt every PM mining company on the planet and then buy them for pennies on the dollar in bankruptcy court.

Mon, 05/20/2013 - 05:03 | 3579575 Urban Redneck
Urban Redneck's picture

The mineral rights and mining licenses are not necessarily transferrable without the consent of the jurisdiction in which the mine operates... 

 

Sun, 05/19/2013 - 19:25 | 3578639 Cacete de Ouro
Cacete de Ouro's picture

Price Disguisery

Sun, 05/19/2013 - 19:30 | 3578655 JustObserving
JustObserving's picture

Just Japan and USA are printing $1920 billion a year and yet gold and silver are falling?  The cost of mining silver is around $22 an ounce for many miners.  China and other developing countries have to print to keep up with USA and Japan.  The world is awash in fiat money.  

So the banksters have to attack gold and silver to show there is no inflation - no downside to QE.  So far that scam is working.

Sun, 05/19/2013 - 19:31 | 3578658 russwinter
russwinter's picture

Grannies in China can start trading this gold sale starting at 10:00 PM EST, open an hour and half, then reopens at 1:30 AM EST for two more hours. Let's if they can hit 25,000 kg.

http://www.sge.sh/publish/sgeen/sge_price/sge_price_daily/index.htm

Sun, 05/19/2013 - 19:32 | 3578664 blindman
blindman's picture

as the price drops just take your "abilify"
and buy. abilibuy^tm. (see side effects and
contraindications.)
"...IMPORTANT SAFETY INFORMATION:

Elderly people with psychosis related to dementia (for example, an inability to perform daily activities as a result of increased memory loss), treated with antipsychotic medicines including ABILIFY, are at an increased risk of death compared to placebo. ABILIFY is not approved for the treatment of people with dementia-related psychosis (see Boxed WARNING).
" ..etc...
.
off topic but the commercials and ad art most definitely suggest
the experience of living in a well lit and colorful slow-motion cartoon,
based on this alone I would like to have a dose.
when will the rain stop?

Sun, 05/19/2013 - 19:37 | 3578680 Yen Cross
Yen Cross's picture

 Stop Hunting pricks. [IMG]http://imageshack.us/a/img18/6940/stophunters.png[/IMG]

Sun, 05/19/2013 - 19:38 | 3578681 urbanelf
urbanelf's picture

I wish I got a pay raise everytime I became 30% less productive.

Mon, 05/20/2013 - 04:04 | 3579548 StopIt.Now
StopIt.Now's picture

You have to be a government employee...

Sun, 05/19/2013 - 19:42 | 3578693 q99x2
q99x2's picture

I'm marching on the Hamptons if they don't increase my EBT by 60%. How you like me now Bernanke M'Fr.

Sun, 05/19/2013 - 19:48 | 3578708 Fuku Ben
Fuku Ben's picture

This could be great or ugly depending on where you are at and how play PM's on the way down and then on the way back up

I hope the underpaid slaves go on strike as the faux market continues to push prices down. 

http://www.zerohedge.com/news/2013-01-15/platinum-overtakes-gold-south-a...

http://silverdoctors.com/10-of-us-annual-silver-supply-just-vaporized/

Sun, 05/19/2013 - 19:49 | 3578711 negative rates
negative rates's picture

Moneitary deflation is the reason for lower PM prices here at home, while foreigners enjoy these low prices in comparison, we must become more efficient just to remain or break even. It's the worst of both worlds compliments of our politicians.  

Sun, 05/19/2013 - 19:53 | 3578724 Yen Cross
Yen Cross's picture

   DHS is buying ammo for it's lead content.

Mon, 05/20/2013 - 04:02 | 3579546 StopIt.Now
StopIt.Now's picture

Yea, and they'll be using that ammo to lower the number of people unemployed, and then blame it on 'lead poisoning'...

Sun, 05/19/2013 - 20:06 | 3578770 They trynna cat...
They trynna catch me ridin dirty's picture

Weren't two major wars fought over who would have access to the South African gold and diamond mines (Boer Wars)?  You mean to tell me after all that trouble, the heirs of Oppenheimer, Rhodes, De Beers, etc., are just going to allow a bunch of kafirs to dictate the terms of who gets the goods for how much?  I'm going to go out on a limb here and say nah, not happening.

Unless, of course, that is the way TPTB want it.

Sun, 05/19/2013 - 20:42 | 3578903 orangegeek
orangegeek's picture

Good timing on the part of the unions - pay raise demands as gold continues to slide.

Sun, 05/19/2013 - 21:23 | 3579011 Jack Burton
Jack Burton's picture

Fire the bloody lot of them! Back to work for the going wage or make way for willing replacements. That's the ticket! Boot 'em out. Plenty of willing miners ready to go underground for the going wage. Greed will be their undoing!

Sun, 05/19/2013 - 22:16 | 3579157 greatbeard
greatbeard's picture

>> Greed will be their undoing!

And you know what about South African miner's wages and the cost of living?  The current monthly wage is about $475.  You think you'd work like they do for $125 a week?

Sun, 05/19/2013 - 21:41 | 3579049 They Tried to S...
They Tried to Steal My Gold's picture

So the Dispicable Central Bankers incite the unions to go on strike causing massive production problems while at the same time slamming the Gold price. 

 

ILLOGICAL in a FREE MARKET SYSTEM - but this is not free market. 

 

THE MINERS IF THEY ARE SMART WOULD TIE THE PAY SCALES TO THE PRICE OF THE METALS....IF THE PRICE GOES UP SO DOES THE WAGES.

 

Call it COWA - Cost of Wage Adjustments.

Sun, 05/19/2013 - 21:45 | 3579058 Conax
Conax's picture

There was a documentary that showed miners in Africa or some damned place, and down in the mine they worked in 130 F heat..... All day long.  I wouldn't make it to first break.  Who could blame them for striking?  There will be a riot ginned up, the army will shoot half of them, and back to business as usual, with some fresh replacements.

Mon, 05/20/2013 - 01:01 | 3579432 TWSceptic
TWSceptic's picture

Bad news for Soros since he bought millions of shares of GDX & GDXJ. I don't think the bottom is close. Another 50% decline in mining shares is possible.

 

Silver 4% down already today...

Mon, 05/20/2013 - 02:59 | 3579518 dunce
dunce's picture

Companies that can not produce economically will shut down operations and the mine value will fall hard and fast. The govt. can then nationalize them at the market value giving them govt. bonds for their sharply reduced value. After the govt. takes over operation the unions will not be able to strike. Govt ownership,political hacks for management, and unionized labor is a recipe for reduced production and higher gold prices.

Mon, 05/20/2013 - 04:01 | 3579543 StopIt.Now
StopIt.Now's picture

Makes sense.

Mon, 05/20/2013 - 04:01 | 3579545 AnAnonymous
AnAnonymous's picture

The heat is on for a certain category of 'americans'

Entering the 'american' game is no certainty they will be some room for all the 'american' wannabees.

'Americans' are be so used to consider that mining that ore will come as cheaper as possible one could wonder how all the 'americans' residing in SA are going to manage to establish that 'american' middle class of theirs.

It looks somehow too late.

'Americanism', that human natural thing, so natural it cant be spread to every human being.

'Americanism' in its apex.

Mon, 05/20/2013 - 06:49 | 3579625 TheFourthStooge-ing
TheFourthStooge-ing's picture

AnAnonymous squatted and dropped this Brown Baby Mao:

'Americanism', that human natural thing, so natural it cant be spread to every human being.

Guy displaying his deep knowledge of human nature...

Knowing human nature, that is certainly knowledge I'd like to pay for.

Alas, just a scam as so many: human nature is only the traits that 'AnAnonymists' want to push forward to support their Chinese citizenism point of view.

'AnAnonymism' in its apelike nature is eternal.

Do NOT follow this link or you will be banned from the site!