Sibanye to cut fewer jobs, but warns of gold unit losses

Sibanye-Stillwater has cut nearly half the number of jobs it warned the market in February to expect, but not enough to soothe unions in an ailing sector bleeding jobs in recent years.

In a market update on the reduction of its workforce by 3,450 at the Beatrix and Driefontein gold mines, as well as a production outlook for its gold division after a five-month strike, Sibanye said it agreed to keep one of its Driefontein shafts in production as long as it makes quarterly profits.

Sibanye advised the market in February that it had started talks with organised labour about cutting 5,870 permanent employees and 800 contractors at its Beatrix and Driefontein mines in the Free State and Gauteng respectively, because of heavy losses since 2017.

However, on Wednesday it said it will cut nearly half that number of jobs, with the bulk of that number coming from voluntary separations, early retirement and natural staff turnover, while 800 employees and 550 contract workers were retrenched.

The Minerals Council SA’s chief economist, Henk Langenhoven, has warned of large-scale job cuts and mine closures stemming from rampant electricity cost increases. The council has said electricity prices for mining companies have risen 523% since 2006, with a 30% increase over the next three years.

Deeply frustrated

Council data shows the mining sector has lost 53,500 jobs since 2007. Of those, an estimated 18,303 job cuts stemmed directly from electricity price increases, with the gold sector accounting for 7,341 lost positions.

SA’s gold mines are generally deep underground, using a lot of electricity to cool, ventilate and to hoist employees and ore.

The National Union of Mineworkers is deeply frustrated at the level of job cuts at Sibanye, spokesman Livhuwani Mammburu said.

“Why, when there are operational issues, does Sibanye make retrenchments the first place to cut costs. They must think outside the box. Why are executives, who earn millions in salaries and bonuses, never targeted at a time like this?” Mammburu said. 

The mining sector lost 20,000 jobs in the first quarter of 2019, Statistics SA said in mid-May. SA’s unemployment is at 27.6%, up 0.5 percentage points from the fourth quarter of 2018 as 237,000 were added to the ranks of the unemployed.

Sibanye said the 8 Shaft at Driefontein will remain open, keeping 970 permanent and 55 contractors employed, as long as the mine makes quarterly profits.

Reduce pumping costs

The Beatrix 1 Shaft, three shafts at Driefontein and the Beatrix 2 processing plant will be closed or put on care and maintenance.

Sibanye will also start flooding certain shafts to reduce pumping costs.

“To ensure further sustainability of the West Rand gold mines, avoiding premature mine closure will require an ongoing regional approach to reduce costs through the rationalisation of infrastructure and services, including a regional mine water management solution,” Sibanye CEO Neal Froneman said.

As the company’s three gold mines — Beatrix, Driefontein and Kloof — return to production after a five-month wage strike by about 14,000 people, or half its workforce, started in November, Sibanye updated its output and cost outlook for the year.

Sibanye expects the gold division to return to pre-strike production levels during the third quarter of 2019, or the three months to end-September.

Second-half production is forecast to be 514,000oz-546,000oz, Sibanye said, noting this is closer to a normalised level of production. All-in sustaining costs were set at R590,000/kg-R630,000/kg, about R40,000/kg higher than it would have been if there had not been any disruption.

Full-year production was pegged at 772,000oz-804,000oz, with all-in sustaining costs targeted at R715,000/kg-R750,000/kg, which means the gold division will post a hefty loss for the year. The gold price is at R630,000/kg.