South Africa?s loss-making platinum industry should have pushed through mechanization of mines years ago to avert its current problems with restive unions and soaring wage demands, the former boss of miner Lonmin said.
Brad Mills, chief executive of South Africa?s third-largest platinum producer until 2008, said firms had to start the effort now or remain confronted by a large, highly unionized workforce.
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?My view was, this is a 15-year process but you?ve got to get your head out of this trap,? Mills said, ?And the only way you?re going to do it is to convert, mechanize, as painful as that might be.?
Unlike coal and copper, transformed by automation and remotely controlled equipment, platinum mines remain labour-intensive. The rock is drilled, blasted and cleared by men.
As chief executive from 2004, U.S.-born geologist Brad Mills, 59, led a push to take machines into Lonmin?s narrow, sweltering shafts. But progress was slow, costs were steep and he was ousted in a boardroom coup.
His efforts were reversed and some mine analysts say the opportunity has now passed.
?Given what?s happened it was exactly the wrong decision. The whole disaster they?ve had has been with the rock drill operators, which is the guys you get rid of when you mechanize,? he told Reuters in an interview on Friday.
?Machines don?t annually come up and want 15 per cent more salary to do their job.?
Profits at South Africa?s platinum producers slid last year after a wave of strikes during which dozens of protesters were killed. Many companies are still struggling to resume generating cash, especially at a time of weaker prices for the metal used in autocatalysts and jewellery.
Mine companies are now locked in some of the toughest wage negotiations since the end of apartheid in 1994.
A new Association of Mineworkers and Construction Union has emerged as the dominant union on the platinum belt and reflects a mood among many black workers that they have been denied an adequate share of mineral wealth.
Potential in West Africa
Mills now runs a private investment vehicle involved in copper, gold and iron ore ventures.
He admits it is a difficult time, with share prices across junior miners taking severe hits this year as commodity prices cool. But a period of lower prices for assets has allowed private investment ventures like his to get into the game.
Mills is CEO at Mandalay Resources, with gold mines in Chile and Australia, and president of Cameroon-focused iron ore company, West African Minerals.
West African Minerals will give early outlines of resources in two of its exploration zones before the end of the year, he said.
Although West Africa has long been viewed as the next major iron ore region, a slowdown in China, volatile commodity prices and difficulty in raising cash have put projects in the region on ice.
West African Minerals shares have lost 88 per cent of their value since a peak in June last year.
But Mills still backs the region to become the next iron ore province, if not as soon as investors had expected.
?It?s probably more likely that it will take longer and it will be smaller chunks, but you certainly can look out 10 to 15 years from now and see Cameroon producing 20 to 30 million tonnes of iron ore.? That would be only 2 to 3 per cent of current seaborne trade, but significant for the emerging region.
Not all the juniors will make it that far, according to Mills, and consolidation is inevitable. There is a possibility that a steel or iron ore major will move in, but West African Minerals is also watching out for acquisition opportunities.
?I feel a number of major players are watching the space quite carefully, but they?re scared of showing interest because it will treble the price,? he said.
?There?s not a huge amount of urgency on their part.?
The great hope remains that the Chinese will invest in African mines to escape reliance on big iron ore exporters Vale SA, BHP Billiton Ltd. and Rio Tinto PLC.
Mills thinks this is a strong possibility.
?What the Chinese desperately need is 100 million tonnes of offshore iron ore production so West Africa remains appealing.?
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