I THINK MINING

Yesterday I posted a personal perspective on the deaths of many miners at the hands of police on the platinum mines of South Africa.  Since that posting things have gone from bad to worse.  There are more reports of more deaths.  And speech is getting more heated.  Here is one comment on a news report:

Then they wonder why Julius Malema says Nationalise the mines, and give the Land back to the people. Apparently there is a man somewhere in London who owns this mine, paying the workers R3000 a month; in the mean time he gets billions of billions of rands from this mine. Somoene owes the people some answers. Some disciplinary sanctions must be applied accordingly. WE WANT JULIUS MALEMA BACK!  He is a man with integrity; he speaks the truth, regardless of what the person next to him thinks. That’s a true leader.

Hysterical calls for nationalization are sure to multiply after this killing spree.  Those who stand to profit most, the black elite, will make sure of that.  And if they do not, be certain that Julius Malema will prompt them and make his own demands.   Comparing London manager’s salaries with those of the miners will make things worse.

The market for platinum is falling, as noted in this report–and that will make higher pay more difficult to negotiate and make demands for nationalization even louder:

According to the Wall Street Journal, Europe is by far the world’s largest market for diesel-fueled vehicles.  And platinum’s main industrial use is for the catalytic converters of these cars.  It’s estimated automotive sales in Europe are on pace to hit a 20-year low this year.  Knowing these facts, it makes sense why platinum has been on a steady decline. But things might get worse for the industry before they get better.  That’s because not only are platinum prices closely tied to the ups and downs of Europe’s automotive industry, South Africa controls 80% of the world’s platinum reserves.   And it’s estimated that over half of listed platinum miners doing business there are either taking on losses or are on the verge of doing so.  In other words, however rare platinum is in nature, there’s too little demand for it in our current market environment, leaving too much of it to go around.  Mining.com also reveals a number of new mining projects outside of South Africa that could further add to the supply glut over the next two years, especially if Europe’s fiscal crisis continues.

The Globe and Mail at this link has a full and gloomy analysis of the implications for profit and share prices of the killings.  Read it if you are considering buying, or more likely selling your shares.  Most of us long ago gave up on Africa as a place to invest, even in platinum mining. 

Things will, in my opinion, only get worse.  The chairman is very ill in hospital; platinum demand is falling; militant trade unions advance; living conditions are reportedly poor; wages are low; tribal enmity is rife;  police are incompetent; the workers muti-fed and fed-up.  This is an unsustainable situation by any definition of the term. 

Something must give and something will give.  Let us hope it is not more death and destruction.  Let us hope it is meaningful discussion and compromise.  I am pessimistic.  How do you discuss and compromise London-based capitalism & imperialism, militant advancing unions, falling market prices, Malema, tribalism, untrained police, and indecisive ANC dithering. 

It is tempting to think that doubling pay scales, building new houses for the miners, training the police, silencing Malema, and having the president fly back from jaunts in Mozambique will solve these problems.  I doubt it. 

Malema is intent on power.  He is younger than the rest who will pass and leave the stage to him.  The ANC is all-powerful and corrupt.  The militant unions want the mines as their personal money pots and have succeeded in persuading most poor blacks it is to their benefit.  Although as always when the Left takes over, dictators and tyrants will take over, and turn the populace into slaves.   More police, more brutal than before, will quickly still dissent.   Zimbabwe will descend on South Africa.  Malema is their Mugabe. 

South Africa produces nearly eighty percent of the world’s platinum, most used to clean the environment.  It would be a nasty environmental impact if this product were to be shut up behind socialist doors.  But what can the world do? 

Clearly a salary increase is in order.  One cannot live decently on the reported incomes of the strikers.  And if that means we have to pay more for clean air, so be it.  Most car buyers would not notice the increase in car cost, is my bet.

Clearly an improvement in miners’ living conditions is essential.  How can we demand clean air from our cars at the expense of the health of those who mine the platinum that makes it possible? 

Share prices will fall more if these actions are taken.  But they have already fallen lots, and we can have no sympathy with those who profit from workers’ misery and death.  They should have invested with more concern for decency and ethics in the first place. 

So we will watch this unfolding of what I believe is a key turning point in South African mining and politics.  And refrain from share purchase in Africa and other places where there is blatant exploitation.