The mining industry should brace itself for a shift to more mechanised processes in what will be a noticeable and ‘very painful’ change for many, says economist Mike Schussler.
“The industry needs to realise that mechanisation is now probably becoming much more viable, because the costs of labour and so forth has increased,” commented Schussler in a Q&A with Moneyweb.
Mechanisation could hurt many
While many will be affected by the mechanisation evolution, it would ‘probably’ be better for the industry in the longer run, envisaged Schussler.
“I think we’re also going to see a lot more skilled workforce coming to the fore, which is unfortunate for the unskilled workforce from what we’ve had previously.”
Impact of platinum strike
Much of the current trend towards mechanisation has really gained momentum following the protracted platinum wage strike earlier this year.
The mining industry in South Africa lost well over seven million work days during this time, according to Schussler.
Production was curtailed and a combined loss of R24 billion was reported by the three biggest platinum producers, namely Impala Platinum, Anglo American Platinum and Lonmin.
“And at the same time the prices went nowhere. Before the three biggest producers in the world of platinum, went on strike the price was $1 453 and by the time the strike had ended it was about $1 425,” Schussler told Moneyweb.
He added, “And right now, the platinum price has fallen quite sharply and is now around $1 250 odd… The production isn’t there and there is a bit of a squeeze. If it wasn’t for the fall of the rand it would be a major catastrophe.”
Schussler anticipates are greater sell-off among platinum miners, following Anglo’s announcement that it was placing much of its Rustenburg operations for sale.
“The industry as such has probablyl seen the worst that its every going to see in our lifetimes,” opined Schussler. “So its probably now back onto a more mainstream thing and the fact that AMCU’s president has now also tried to woo investors.
“They understand now that people are not just going to put money in to something where there are big labour tensions and strife and the like. And the fact of the matter is, you can only earn what you produce and if we don’t learn that lesson now, we’re in big trouble.”