S. Africa mine unions may win big wage hikes-Harmony

Reuters News
Posted: May 03, 2013 4:30 AM
S. Africa mine unions may win big wage hikes-Harmony

By Sherilee Lakmidas

JOHANNESBURG (Reuters) - South African mine unions may obtain double-digit wage hikes this year that companies can ill afford, gold producer Harmony Gold said on Friday, as it posted a third-quarter loss caused by production shortfalls following labor unrest.

The share price of South Africa's No. 3 bullion producer plunged over 9 percent to an eight-year low, underscoring market concerns about the ongoing impact of strike action, rising costs and falling prices.

Biennial wage negotiations for South Africa's gold sector get under way in May or June and this year's pay talks are set to be among the toughest ever as worker militancy heaps pressure on shrinking company margins.

"Wage negotiations are going to be difficult this year with more owners and more unions in the room," Harmony's chief executive Graham Briggs said in a conference call with journalists after the results were released.

"The final figure will depend on how profitable we are going to be next year. I certainly don't think there would be a double-digit increase on basic pay but the end result with a profit share could be a substantial increase. So the end result may well be double digit," Briggs said.

South Africa's gold, platinum and coal producers have been agreeing to above-inflation wage increases for years but steeply rising power and other costs mean another round of big rises would push many into the red.

But trade unions, embroiled in a battle for members and influence, are pushing hard for steep wage increases in a bid to win the hearts and minds of rank and file workers.

A bitter turf war between the established National Union of Mineworkers and the more militant Association of Mineworkers and Construction Union triggered violence last year that killed over 50 people, and wildcat strikes hit mine production hard.

The main reason why Harmony fell into a loss in the March quarter was the temporary closure of its Kusasalethu mine because of the union rivalry and violence.

Harmony's third-quarter headline earnings per share slumped to a 47 cent loss.

The company is slashing planned capital spending by almost a third as it re-adjusts to falling gold prices. Briggs said 1.4 billion rand ($156.21 million) would be cut from its 2014 spending plans, the bulk of which will come out of Papua New Guinea where it is hoping to develop a massive copper-gold mine.

"The sudden drop in gold price requires us to look more carefully at our costs," said Briggs.

(Editing by Ed Stoddard and Pascal Fletcher)