Safety stoppages ordered by the Department of Mineral Resources have cost struggling mines more than R13.6-billion in lost revenue since 2012.
A leaked Chamber of Mines document showed revenue losses because of stoppages for 60% of its members rising sharply over four years.
Mines were most affected this year with an estimated loss of R4.84-billion – almost R2-billion higher than the R3-billion lost in 2014 and almost double the R2.55-billion loss in 2012.
The stoppages accelerated despite a huge improvement in safety over recent years.
“This revenue loss does not capture full financial impact as fixed costs components add to total losses‚” the chamber’s document reads. “Indirect costs from co-impacted operations and ramp-up challenges are also not included.”
Industry players‚ speaking on condition of anonymity for fear of reprisals from the department‚ said the increased cost burden of section 54 notices – to temporarily close all or parts of mining operations under the Mine Health and Safety Act – came when the industry was under tremendous financial pressure from weak commodity prices and the retrenchment of thousands of workers.
One source said the R4.84-billion loss this year could be doubled when fixed costs and the ramp-up to restore production were included‚ bringing the true cost to R9.7-billion. Extrapolated across the industry‚ this would be a R16-billion loss this year.
Using the R12500 wage demand from the Association of Mineworkers and Construction Union (Amcu)‚ the cost of the stoppages represented 106666 annual salaries.
“When you challenge a stoppage … there is a sense that you then get bullied‚ you get audited and stopped to death.
“All the CEOs are s**t scared about speaking up‚” a frustrated mining executive said.
“It is such a mess. Nobody is making money; they are struggling to survive and nobody can afford to be singled out for more severe treatment.”
The Chamber of Mines supported the justified application of stoppage notices‚ its CEO Roger Baxter said.
“Yes‚ we are concerned that in some cases section 54s are applied inconsistently and unfairly.”
He said the notices often involved shutting down unaffected areas as well. The reasons given in some of the notices were not clear or justified and affected shafts were not opened “expeditiously”‚ Baxter said.
“In many cases” the department’s inspectorate could have issued section 55 notices‚ which demanded remedial action from mines without suspending operations‚ he added.
“The chamber’s leadership has engaged the leadership of the Department of Mineral Resources and believes this is one of the areas we can work on together to ensure the sustainability of the industry‚ without compromising safety‚” Baxter said.
Repeated requests to the department for statistics on section 54 notices over the past few years were not answered.
Instead‚ in an e-mailed response, chief inspector of mines David Msiza said there had been 9000 inspections and audits last year and 1074 section 54 notices were issued. There were 2935 section 55 notices. Only one appeal was received and resolved last year‚ he said.
“It has to be highlighted that the majority of the section 54 notices resulted in the halting of the affected working place and not necessarily the entire mine‚” Msiza said.
“The notices are issued in terms of the law in cases of dangerous working conditions and serious transgressions of the law to prevent harm to mineworkers and not for petty reasons.”
Impala Platinum had 54 safety stoppages and lost 52000 ounces of platinum group metals worth R720-million in the year to end-June‚ its CEO Terence Goodlace said at a recent results presentation.
It had to pay employees who were not producing and cover costs of maintaining operations, spending R600-million at suspended mines during the year.
“We support every single stoppage where there is a danger to safety and health‚” Goodlace said.
Implats ordered 4016 stoppages to ensure safe operations‚ but these were localised instead of shutting entire shafts.
He said it took days to restore output levels after a shutdown.
Companies were asking the inspectorate for stoppages to be ring-fenced to affected areas.
In an affidavit prepared for a court application to set aside the Mining Charter and the amended charter‚ mining lawyer Hulme Scholes said section 54 notices were used to “victimise” mining companies that speak out against the Mineral Resources Department.
Msiza denied this. “No‚ the Department of Mineral Resources does not issue notices to victimise companies. They are issued as a corrective measure to protect the lives of mineworkers.”
He said the notices had “contributed significantly” to better safety. Last year‚ 84 people died on SA’s mines compared to 615 in 1993. There had been a 21% improvement so far this year‚ he said.
Stoppages cost mines billions
A leaked Chamber of Mines document showed revenue losses because of stoppages for 60% of its members rising sharply over four years.
Mines were most affected this year with an estimated loss of R4.84-billion – almost R2-billion higher than the R3-billion lost in 2014 and almost double the R2.55-billion loss in 2012.
The stoppages accelerated despite a huge improvement in safety over recent years.
“This revenue loss does not capture full financial impact as fixed costs components add to total losses‚” the chamber’s document reads. “Indirect costs from co-impacted operations and ramp-up challenges are also not included.”
Industry players‚ speaking on condition of anonymity for fear of reprisals from the department‚ said the increased cost burden of section 54 notices – to temporarily close all or parts of mining operations under the Mine Health and Safety Act – came when the industry was under tremendous financial pressure from weak commodity prices and the retrenchment of thousands of workers.
One source said the R4.84-billion loss this year could be doubled when fixed costs and the ramp-up to restore production were included‚ bringing the true cost to R9.7-billion. Extrapolated across the industry‚ this would be a R16-billion loss this year.
Using the R12500 wage demand from the Association of Mineworkers and Construction Union (Amcu)‚ the cost of the stoppages represented 106666 annual salaries.
“When you challenge a stoppage … there is a sense that you then get bullied‚ you get audited and stopped to death.
“All the CEOs are s**t scared about speaking up‚” a frustrated mining executive said.
“It is such a mess. Nobody is making money; they are struggling to survive and nobody can afford to be singled out for more severe treatment.”
The Chamber of Mines supported the justified application of stoppage notices‚ its CEO Roger Baxter said.
“Yes‚ we are concerned that in some cases section 54s are applied inconsistently and unfairly.”
He said the notices often involved shutting down unaffected areas as well. The reasons given in some of the notices were not clear or justified and affected shafts were not opened “expeditiously”‚ Baxter said.
“In many cases” the department’s inspectorate could have issued section 55 notices‚ which demanded remedial action from mines without suspending operations‚ he added.
“The chamber’s leadership has engaged the leadership of the Department of Mineral Resources and believes this is one of the areas we can work on together to ensure the sustainability of the industry‚ without compromising safety‚” Baxter said.
Repeated requests to the department for statistics on section 54 notices over the past few years were not answered.
Instead‚ in an e-mailed response, chief inspector of mines David Msiza said there had been 9000 inspections and audits last year and 1074 section 54 notices were issued. There were 2935 section 55 notices. Only one appeal was received and resolved last year‚ he said.
“It has to be highlighted that the majority of the section 54 notices resulted in the halting of the affected working place and not necessarily the entire mine‚” Msiza said.
“The notices are issued in terms of the law in cases of dangerous working conditions and serious transgressions of the law to prevent harm to mineworkers and not for petty reasons.”
Impala Platinum had 54 safety stoppages and lost 52000 ounces of platinum group metals worth R720-million in the year to end-June‚ its CEO Terence Goodlace said at a recent results presentation.
It had to pay employees who were not producing and cover costs of maintaining operations, spending R600-million at suspended mines during the year.
“We support every single stoppage where there is a danger to safety and health‚” Goodlace said.
Implats ordered 4016 stoppages to ensure safe operations‚ but these were localised instead of shutting entire shafts.
He said it took days to restore output levels after a shutdown.
Companies were asking the inspectorate for stoppages to be ring-fenced to affected areas.
In an affidavit prepared for a court application to set aside the Mining Charter and the amended charter‚ mining lawyer Hulme Scholes said section 54 notices were used to “victimise” mining companies that speak out against the Mineral Resources Department.
Msiza denied this. “No‚ the Department of Mineral Resources does not issue notices to victimise companies. They are issued as a corrective measure to protect the lives of mineworkers.”
He said the notices had “contributed significantly” to better safety. Last year‚ 84 people died on SA’s mines compared to 615 in 1993. There had been a 21% improvement so far this year‚ he said.
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