Gold Miners Turn to Payroll as Next Wave of Cuts If Rout Deepens

Miners from global giant Barrick Gold Corp. to small-cap Golden Star Resources Ltd. are grappling with the same dilemma as the gold rout deepens: how to rein in labor costs without sacrificing too much output and revenue.

Barrick is looking at how to do “more with less” as it targets $2 billion in spending cuts, Co-President James Gowans told analysts last week. Toronto-based Golden Star is working to reduce labor costs further, while Kinross Gold Corp., Yamana Gold Inc. and Newmont Mining Corp. are also reviewing headcounts as prices hover around five-year lows.

“It’s everything, it’s holistic, it isn’t one particular area,” Golden Star Chief Executive Officer Sam Coetzer said in an interview. “That’s just the nature of the game.”

The industry has already reduced its workforce by more than a third since 2012, when gold was trading about 30 percent above today’s levels, according to data compiled by Bloomberg. While gold is unlikely to witness the kind of mass firings seen in harder hit industries such as coal and oil, more cuts may be coming with labor accounting for as much as half their expenses.

“They really are trying to cut to the bone,” Kenneth Hoffman, a mining analyst with Bloomberg Intelligence, said in a telephone interview. “The next step is the mines themselves, and that will be the next big wave of cuts.”

Cutbacks so far have included corporate office staff and local contractors, Omar Jabara, a spokesman for Newmont, said by telephone.

While there’s still room to cut corporate jobs, companies can’t go “very far” with reducing mine workers, said Pawel Rajszel, an analyst at Veritas Investment Research in Toronto.

Golden Star

“If they still want to mine at the mines, it’s hard to imagine how they are going to achieve that,” Rajszel said. “Unless, they start bringing in robots.”

In Ghana, Golden Star has opted to close its refractory business to focus on easier-to-process deposits, Chief Executive Officer Sam Coetzer said in an interview in New York Thursday. The company plans to cut 300 jobs in the next quarter and is looking to further reduce expenses, including on exploration and suppliers, he said.

Workers are paying the price of a commodity rout as a slowdown in Chinese demand fans oversupply concerns. Prices for raw materials measure by the Bloomberg Commodity Index dropped to the lowest since 2002 this month.

Glen Mpufane, director of mining at IndustriALL Global Union, which represents about 50 million workers in the mining, energy and manufacturing sectors across the globe, said wage reductions would be a more “responsible” alternative to dismissals. Few companies are considering that, he said by phone from Geneva.

Complex Negotiations

That’s because negotiations can be a complex process that might not always save jobs, according to Hoffman.

“Sometimes the unions will say flatly ’No’ because they know that if they take a wage cut, everyone will have to take a wage cut,” Hoffman said.

Wage talks in South Africa are perhaps the most telling example, he said. The country’s largest miners have been locked in negotiations with worker unions for more than a month, trying to avoid slashing 10,000 jobs as companies grapple with the higher costs and plunging prices for their output.

Newmont and Barrick said there are no plans for wage reductions, while Goldcorp and Kinross did not comment on the issue. Yamana reduced salaries in 2013.

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