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Slipping productivity threatens SA gold sector

28th February 2014

By: David Oliveira

Creamer Media Staff Writer

  

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Despite the general increase in the dollar and the rand gold prices over the last year, the South African gold sector will continue to struggle against competitive gold mining nations like Australia, Canada and China, unless it can resolve its productivity challenges, says engineering consultancy SRK Consulting chairperson Roger Dixon.

“The state of the South African gold sector is tenuous. The majority of the country’s gold mines are ageing and require extensive maintenance, while input costs, such as power and labour, continue to increase.

“South Africa-based mining companies can do little to increase revenue, except hope for the gold price to improve,” says Dixon.

He adds that productivity in the local gold sector has been declining for the last 25 years, despite wage increases that exceed the inflation rate.

Dixon attributes the drop in productivity to ageing gold mines operating outside their intended mine designs, which initially projected productivity levels that would correspond with specific depths and travelling distances. Mines that are exceeding these depths and distances have increased hoisting and haulage costs – as the ore has to be moved further while extraction rates are decreasing with depth.

“At intermediate depths, companies can expect an extraction rate of about 75% to 80%, as the areas where support pillars are situated cannot be mined. The extraction rate of mines that exceed the depths of the initial mine design and go beyond 2 500 m can drop to as little as 60%.

“Not only do mines’ recoverable assets drop by the corresponding percentage in these instances, but their costs to place infrastructure, such as ventilation and cooling, also increase. This decrease in the extraction rate is further exacerbated by the declining grade, as depths increase,” Dixon explains.

He notes that most gold mines in South Africa are recovering less than five grams a ton of gold, with some mines publishing grades of three grams a ton. Also, South Africa’s yearly gold production has dropped from about 1 000 t in 1970 to about 260 t in 2007.

Further, owing to the high operating costs associated with underground mining, Dixon says, more companies are aiming to recover gold from mine dumps and tailings dams to improve profits, despite the recovery grade being lower than that of underground mining.

Generally, mines are designed to have a productive mine life of at least 20 years. However, Dixon says that many South African mines have now exceeded the 20-year life by some margin. “It is obvious that these mines cannot attain the same level of productivity which they were originally designed for.”

However, he notes that newer gold mines, such as midtier mining group Gold One’s Modder East mine, in the east of Johannesburg, have a higher chance of achieving a longer life-of-mine, owing to increased mechanisation and shallower operating depths.

Labour Productivity
Dixon tells Mining Weekly that labour issues further contribute to the decrease in mining productivity, which could result in increased dissent and insubordination among mineworkers, and will further impact on mine productivity.

“The issue comes down to migrant labour, as many of the mineworkers are normally from provinces outside a mine’s host province. Workers use their living-out allowances to rent out substandard accommodation. Mineworkers often have families to support in their homeland and the informal settlement near the mine, which places them under severe financial strain,” Dixon points out.

“They also do not have access to the nutritional food which will enable them to maintain the levels of productivity required of them,” he argues.

Moreover, workers’ productivity is affected by the amount of sleep they get. Extensive working hours, coupled with long travel times to and from the townships in which they live, often result in mineworkers being too tired to work productively.

Mineworkers’ acceptance of living-out allowances also contributes to low productivity levels, as this has caused increased absenteeism, owing to poor nutrition and alcohol abuse, besides other social factors, Dixon says.

Although he acknowledges that the workers should not live in hostels on mine sites, Dixon asserts that mining companies have not properly managed living-out allowances.

“The acceptance of living-out allowances with little or no community development is an issue. Mining companies have chosen to ignore the fact that productivity is dropping. Their lack of concern is worrying,” he says.

Dixon suggests that a collaborative approach be adopted among all the relevant stakeholders to resolve these types of issues. “Debates need to be facilitated to discuss the level of government’s involvement in helping mining companies develop housing, infrastructure and facilities – such as schools and hospitals – around mines.”

Dixon further highlights Section 54 stoppages, which halt mining operations owing to safety issues, as another issue that impacts on productivity at mines. “Currently, health and safety inspectors from the Department of Mineral Resources (DMR) are able to stop mining operations for up to a week to conduct safety training. They can audit a mine and stop operations without consent from mining companies,” he explains.

He adds that, although the DMR’s objectives in this regard are noble, these stoppages can be counterproductive to mining operations. Dixon also maintains that the training after an incident has made little difference to mineworkers’ safety performance and suggests that, for the training to be effective, it should take place before accidents occur.

Mineworkers are also affected by Section 54 stoppages, says Dixon, further highlighting that rock-drill operators often have incentive bonuses for the amount of drilling they do and, should a Section 54 stoppage occur, during which the mine is closed for several days, they may lose these bonuses. This demotivates the workers, further impacting on their productivity.

“Safety training needs to take place before an accident occurs and the DMR needs to place pressure on mining companies to ensure that the Codes of Practice for mining activities are in place and are effectively implemented. The safety goals of the industry will not be achieved by ad hoc stoppages, which are reactive, but rather by implementing proactive measures.

“Further, audits should not only take place after an accident has occurred. The DMR needs to investigate whether a mine’s policies and procedures and Codes of Practice actively meet the requirements of the Mine Health and Safety Act. If there are any irregularities, then a stoppage can occur, but it makes no sense to stop mining only after a death has occurred,” Dixon concludes.

Edited by Samantha Herbst
Creamer Media Deputy Editor

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