AngloGold "reviews" South Africa mines as strikes bite

Thu Nov 8, 2012 6:32am EST
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By Sherilee Lakmidas

JOHANNESBURG (Reuters) - Anglo Gold Ashanti (ANGJ.J: Quote), the world's third-largest bullion producer, cut its dividend and warned of restructuring at its South African operations after weeks of wildcat strikes wiped out $400 million in output.

"We are in the middle of a review of our South African operations and there is no doubt that we are going to have to do some restructuring work," chief executive Mark Cutifani told journalists on a conference call on Thursday after the group reported third quarter results.

Restructuring could mean marginal shafts are closed, leading to job losses at a time when social tensions are running high in South Africa's mining communities and companies are under political pressure to avoid taking such a course.

The decline of South Africa's once dominant mining industry has been hastened by a wave of illegal strikes that have rocked its gold and platinum sectors this year. The violence unleashed has killed around 50 people and unnerved investors.

South Africa's gold output fell 11.1 percent in volume terms September compared to the same month last year, according to official data released on Thursday while production of platinum group metals slid 17.8 percent.

Global mining giant Anglo American (AAL.L: Quote) is also reviewing the viability of shafts run by its platinum unit in South Africa, Anglo American Platinum (AMSJ.J: Quote) (Amplats), the world's largest producer of the precious metal.

In the case of AngloGold - which is not part of Anglo American - the labor unrest is seen adding pressure to less-profitable and older operations where reserves have been in decline as shafts plunge deeper into the earth, adding to costs.

"The onset of the strike action has accelerated the imminent decline of mature mines and accelerated the likelihood of the downsizing of the operations," said David Davis, mining investment analyst at SBG Securities.   Continued...