Safety drive in South Africa cuts into production

February 15, 2012

A sharp fall in fourth quarter earnings for AngloGold Ashanti can be attributed to the production time lost because of safety stops at its mines, the company’s chief executive said.

AngloGold Ashanti chief executive Mark Cutifani said the stops, known as “Section 54s” because of the regulation invoked, cost 2.7 t (73,000 oz) in lost output last year, worth about $126 million at current spot prices. This has created a significant risk to forecasting production, Cutifani said in a presentation.

In recent months, South Africa’s mineral resources department has ramped up efforts to reduce accidental deaths in the country’s mines, the world’s deepest and among its most dangerous.

Fatalities among mostly black miners are far below those reached under white-minority rule, but around 10 workers are still killed underground each month in the country, Reuters reported.

AngloGold, which gets 40 percent of its global output from South Africa, estimated that output for 2012 would be at 133 to 137 t (4.3 million to 4.4 million oz) of gold.

The safety drive across the gold and platinum industries in South Africa has cut output and is a key reason behind a 17 percent spike in spot platinum so far this year.

Of the 2.7 t (73,000 oz) that Cutifani said were lost, 1.5 t (50,000 oz) were lost during an period of accelerated enforcement during the fourth quarter and that the nature of the stops was inadvertently raising new risks.

“The concern we have in a deep underground gold mine (is that) when you stand an operation for five days, you are creating new safety hazards that we believe in certain cases are well in excess of the hazard that you are trying to correct,” Cutifani said. “It is now an industry issue. We have as an industry come together with a view to again engaging with the department of mineral resources in a conversation that gets us all to the right outcome.”

The Mine Health and Safety Act makes provision for the implementation of section 54 orders, which states that if an inspector believes that any occurrence, practice or condition at a mine endangers or may endanger the health or safety of any person at the mine, the inspector may give any instruction necessary to protect the health or safety of persons at the mine, including but not limited to an instruction that operations at the mine or a part of the mine be halted.

Minister of Mines, Susan Shabangu, attributes the decrease in fatalities in the industry over the years to this approach.

The Minister pointed out that there had already been 13 fatalities in the mining sector for 2012 and accused some CEO's of valuing profits more than the lives of people.

Cutifani, said the group was absolutely aligned with the DMR on the need for stoppages in the industry in order to improve safety calling it a legitimate tool and appropriate. His concern however was that where previously working areas were stopped for localized hazards, these were now leading to full mine shutdowns.

Cutifani pointed out that 95 percent of stoppages at AngloGold are initiated by management in a self regulatory manner and that re-starting and re-introducing a mine’s whole workforce sometimes created new safety hazards that were worse than the one trying to be corrected.


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