AngoGold Ashanti Warns It Could Cut 8,500 Jobs. Are U.S. Miners Next?

Job Cuts
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South Africa-based AngloGold Ashanti Limited (NYSE:AU) announced a major restructuring process, one that could see it terminate 8,500 jobs, or one-third of its workforce. The third-largest gold miner in the world, AngloGold is looking to close some of its unprofitable operations as it pursues a turnaround in its home country.

In a statement, the company said it had “made the difficult decision” to begin talks with unions on eliminating up to 8,500 jobs, or almost a third of its workforce in South Africa. The company is facing rising costs as it looks to ensure the viability of its remaining operations. In the first quarter of 2017, AngloGold’s South African mines reported their first loss since 2012, as costs soared by 44% and output dwindled 16% year-over-year.

The company has operations in Australia, Brazil, Guinea, and Tanzania, but its mines in South Africa are among the deepest in the world; its Mponeng shaft reaches 2.5 miles below the surface. That has complicated efforts to reduce costs.

The company said that while it has some good assets, some are very old. Those mines that have reached the end of their economic lives and are faced with declining output, as well as increasing depth and costs.

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During the first quarter, the company noted that the so-called all-in sustaining costs at the TauTona and Kopanang mines in the South Africa $1,737 and $2,399 an ounce, respectively. Its average gold price received in the quarter was $1,216 an ounce. Both mines also sustained huge operating losses throughout 2016.

In order to ensure the long-term sustainability of its South African business, the company has decided to place on care the Kopangagn mine and the Savuka section of the TauTona mine. Savuka has been in operation for 59 years, and production has already been extended 10 years beyond its natural life. The Kopanang Mine produced its first gold in 1981.

AngloGold isn’t alone with its struggles. Many South African and U.S.-based mining companies are struggling with increased production costs. Between late 2014 and late 2016, the U.S. mining industry suffered 25 consecutive months of declines.

2015 was the first year since 2009 to see annual job losses, when the U.S. mining industry shed 131,000 jobs. According to the U.S. Bureau of Labor Statistics, 2015 also saw the third-most job losses in a single year between 1939 and today.

While the number of U.S. job losses in the mining industry was lower in 2016, 80,000 jobs were still axed. Time will tell what kind of year 2017 will turn out to be for American gold mining and precious metal companies.

Sources:

AngloGold Ashanti to restructure South African Operations to ensure their viability,” AngloGold Ashanti Limited, June 28, 2017.

Current Employment Statistics, Highlights December 2016,” Bureau of Labor Statistics, January 6, 2016.

Worst year for US mining jobs since 1986,” Mining.com, January 8, 2016.

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Categories: Job Cuts, News

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