JOHANNESBURG (miningweekly.com) – Centralised wage negotiations between gold producers represented by the Chamber of Mines (CoM) and trade unions, the Association of Mineworkers and Construction Union (AMCU), the National Union of Mineworkers (NUM), Solidarity and Uasa, started on Thursday.

This followed a prenegotiation workshop at the beginning of this week regarding the current state of the gold sector and to develop a protocol that would guide this year’s negotiations. Representatives of AngloGold Ashanti, Gold Fields, Rand Uranium, Harmony Gold, Evander Gold Mines, Sibanye Gold and Village Main Reef attended the workshop.

The protocol was expected to be finalised on Thursday, whereafter the unions would officially table their demands.

Centralised negotiations regarding wages and conditions of employment are held every two years between the CoM and recognised trade unions.

The chamber had received the 2013 demands from the unions, with the NUM, in addition to several other high-cost items, proposing a surface entry level salary of R7 000 a month and an underground and opencast entry level salary of R8 000 a month.

Solidarity proposed a wage increase of 14% and increases in various other benefits, while Uasa suggested a wage increase of 18%.

All indications were that AMCU would participate in this year’s centralised collective bargaining process, with the union calling for, in addition to several other high-cost items, a minimum entry level wage of R11 500 for surface workers and R12 500 for underground workers, excluding accommodation, bonuses and benefits.

The existing wage agreement had expired on June 30 and encompassed an entry level wage of between R4 350 and R4 439 a month for surface employees, and R5 000 a month for underground employees. This excluded benefits, allowances and bonuses.

Since the October 2012 wage increases, the lowest paid underground gold mineworker had been receiving, on average, a monthly basic cash wage of about R5 000. This was for employees in the industry’s Category 4 employment band, who constituted relatively less skilled workers.

Subjected to a high level of strikes, about 40% of the gold mining sector was either marginal or incurring losses during the fourth quarter of 2012, with the CoM estimating that, on aggregate, the gold mining industry had lost about 12 t of production, valued at R5.5-billion.

On the back of this, the chamber put forward that the industry could not afford an increase in wages and benefits, as this accounted for between 50% and 55% of operating costs.

Meanwhile Statistics South Africa had reported gold production, at -2.4 percentage points, emerged as the highest contributor to the 0.7% decline in mining output during May.

Gold output, which has been falling since May 2011, plunged by 14.6% year-on-year during the month under review, compared with a 3% year-on-year decline in April.

Investment economist Kamilla Kaplan said in a note to clients that the contractionary trend that gold production had followed for the last decade, was ongoing.

She pointed out that, at the prevailing gold price, gold miners were already under pressure to sustain operations and that they would struggle to grant the double-digit wage increases sought by the unions in this year’s wage negotiations.