JOHANNESBURG—South African gold miners have literally dug themselves into a hole, with the world’s deepest mines threatening the safety of workers and the companies’ ability to make money.
Powered for decades by the cheap labor of apartheid, the country’s deepest gold mines plunge almost 12,000 feet below the earth’s surface—and have provided nearly half the gold bullion and jewelry ever produced.
But as miners have dug ever deeper to retrieve what remains of the world’s largest gold deposits, they have faced an economic and moral conundrum: Gold at these depths is costlier and more dangerous to mine.
South Africa’s three largest gold miners by market capitalization reported collective losses of about $543 million last year, as global gold prices remain some 40% below their 2011 highs. Costs of mining an ounce of gold in South Africa are high compared with the global average. And the human toll is mounting, too.
Deaths in South African mines rose for the first time in a decade last year, climbing 21% to 88 from 73 a year earlier. So far in 2018, 65 workers have died, including 24 deaths at
, South Africa’s largest gold producer.
Unions say the deaths are due to a lack of investment in health-and-safety equipment and infrastructure. “What is happening is a crime against humanity as people are forced by economic conditions to work in dangerous conditions with no accountability on the part of management,” said Joseph Mathunjwa, president of South Africa’s Association of Mineworkers and Construction Union.
Fatalities are inevitable, analysts say, because of the sheer number of people working underground. “It’s very easy for stakeholders to sit on the side and criticize business, [but] we’ve engineered out many of the risks,” said Neal Froneman, chief executive of Sibanye, which employs nearly 65,000 people across its South African gold and platinum operations. “Most of our fatalities are due to behavioral issues, where people knowingly break rules. In mining, that one slip up can be fatal.”
In a June 11 incident at a Sibanye mine, five miners entered an abandoned section of a mine shaft and died. Fifteen days later, a worker at another Sibanye mine entered the path of a scraper and died.
Legacies of apartheid—the system of white-minority rule that ushered young black people toward unskilled jobs—are also contributing to the industry’s demise. Mining companies likely couldn’t have dug so deep without South Africa’s abundant cheap labor; and it is nearly impossible to mechanize older operations at current depths with the type of ore they are extracting.
Compounding the problem, young workers emerging from school today—nearly a quarter-century after Nelson Mandela was elected president—often lack the necessary skills for more technical jobs, industry experts say.
“The biggest problem really is the quality of education in the mining sector,” said Wlady Altermann, head of the geology department at the University of Pretoria. “People, especially poorly skilled and not educated, make mistakes.”
Since 2007, South Africa has slid from being the world’s No. 1 gold producer to No. 8, with production tumbling 45% and the number of employees in the gold sector down by a third. In the same period, mine workers’ total earnings doubled, further hurting profitability. Last year, 75% of gold mines operating in South Africa were unprofitable, according to the Minerals Council South Africa.
Companies including the world’s No. 3 gold producer, AngloGold Ashanti Ltd., are shifting operations away from South Africa. The company sold two of its three remaining operational underground gold mines in South Africa earlier this year and is focusing more heavily on mining elsewhere on the continent, including in Ghana and Mali.
“We’re still trying to run up the escalator,” Srinivasan Venkatakrishnan said in August, just before stepping down as chief executive of AngloGold to take over the Indian mining company Vedanta Resources PLC. “The problem is the escalator is speeding up.”
It is safer and less expensive for companies such as
, the world’s biggest gold producers, to mine in other jurisdictions, from the U.S. to Australia to Peru.
, the world’s No. 8 gold producer, has established a mechanized-mining training program at South Deep, its one remaining South African asset and the country’s only fully-mechanized gold mine. But South Deep is losing around 3 million South African rand ($203,265) a day, the company said in August.
“We are training a lot of people in the classroom, and the training facilities are getting some good results, but our ability to translate that into the workplace is somewhat absent,” Nick Holland, chief executive of Gold Fields, said in August. The company also said that month that it expects to let go 1,100 employees and about 460 contractors at the mine, or about 28% of its workforce there, as part of a restructuring.
Workers are left with difficult choices. Sibongile Ntozini worked in road construction before joining South Africa’s
as an engineering assistant at the Great Noligwa mine.
“The salary is much better,” said the 39-year old, who holds a trade certificate in electricity. “However, considering the level of danger that we are expected to work under, I’d say that we deserve more.”
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