Durban Roodepoort Deep, the world’s ninth largest gold producer, may cut jobs at its 6,100 employee, Blyvooruitzicht gold mine in Carltonville in South Africa, after the strong rand had made it unprofitable, reports Bloomberg.
The company began a 60-day review of operations at the mine, two and a half weeks ago. Ilja Graulich, a DRD spokesman, says that after the 60 days, the company has the right to start looking at retrenchments.
The rand is currently sitting at four and a half year highs, after it broke the key R6 to the dollar level on Friday afternoon (SA time). With the rand currently at R5.93 and gold at $404.85/oz, the rand gold price has averaged below R80,000/kg since the beginning of this quarter. The current price of R77,106/kg deems the majority of South African mines unprofitable. In the first quarter of 2004, Blyvoor alone had mining costs of R86,855/kg.
In March, the company announced it was investigating the effect of the rand’s strength on operating margins at the mine by setting up an eight-person task team, representative of management and organised labour.
“It simply is not constructive to complain that the strength of the rand is beyond our control and to kid ourselves that we can try to run our business as usual.” Said Deon van der Mescht, divisional director of South African operations at the time.
Last year the company concluded a 60-day review process and restructuring exercise focused on returning the North West operations to profit. After the review period, 3,000 workers were fired at the mine resulting in a reduction in wage costs to 44 percent of total working costs and a planned 26 percent reduction in monthly working costs, from R106 million in July 2003 to R78 million in October 2003.
Harmony, the biggest producer of South African gold, is currently in negotiations with unions, to cut close down a number of its South African jobs, and in the process retrench thousands of employees.
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