gold mining

Sibanye Gold (SBGL) Offers Unions Innovative Deal

March 4th, 2016 by

Virtually all of the gold and platinum mining firms operating in Africa have been plagued by some form of labor strife over the last three years. This has arisen for a number of reasons, all stemming from a prolonged period of depressed precious metal prices. These include: large worker layoffs; slow or nonexistent wage growth; the presence of dangerous working conditions; and disputes between labor unions and the large employers in the mining industry.

With the strong recovery of gold prices, however, some mining companies are making strides toward reconciliation—if the unions will meet them halfway.

Sibanye’s Innovative Offer

Sibanye Gold (SBGL) is one of the leading mining companies that operates in South Africa, engaged in both extracting the metal from the ground as well as preliminary refining duties that produce 80% pure gold doré bars. The company has not escaped the downward vortex wrought by the years-long slump in gold prices, and remains locked in a dispute with representatives of organized labor, such as the Association of Mineworkers and Construction Union (AMCU).

gold miningYet, now that metal prices have been on the rebound, Sibanye has partnered with fellow South African miner Gold Fields (GFI) in bringing an unique new offer to the table: an accord that incorporates a social and economic program for workers, their families, and the broader community.

Sibanye CEO Neal Froneman last year unveiled a plan that would “create value for all stakeholders” by investing in the local community, providing housing and health care, as well as various education programs.

“Together with Gold Fields, Sibanye had already created 640 jobs through local economic development programmes and was planning to create another 1,000 by the end of 2018. The company had 305 bursars; 6,321 learnerships; 6,673 local community representatives undergoing adult education and another 6,000 being provided with portable skills. It had spent 130 million rand ($8.5 million) on uplifting labour sending areas, built two clinics that service West Rand communities and had 17 school projects on its books.”

[quote from Mining Weekly, lightly edited for clarity]

The workers’ associations and unions were skeptical of the offer, claiming it was merely a tactic for avoiding new wage negotiations. The plans have thus far been tabled—but with the increase in gold prices helping to improve Sibanye’s margins, the company is calling for employees and their representatives to come back to the bargaining table.

Thus far, the company’s executives have ruled out reopening discussions over a new wage structure, but is bringing the expansion of its social and economic program back to the forefront. It would seem to be the first such arrangement of its kind in the industry. The offer remains unresolved.

Sibanye Gold SBGL 6-month price chart. Source: Google Finance

SBGL 6-month price chart. Source: Google Finance

After a period of fantastic gains that saw SBGL’s share price advance 122% from mid-July through February, the company’s stock has since fallen from its highs of $15 per share to currently trade closer to $14/share. This is still about 2.4 times as high (141% higher) than where the stock began the 2016 calendar year.

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.