South Africa: Soaring Gold Price Tempts the Desperate Underground

Charlotte Mathews

16 March 2009

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Johannesburg — LACK OF job opportunities and a soaring rand gold price are tempting more people into the hard and dangerous world of illegal mining.

The rand gold price has surged to unprecedented levels of more than R320000/kg this year, largely because the rand has weakened about 25% against the dollar since mid-September.

In the past months 20 illegal miners have died at the Consort mine, part of Pan African’s Barberton Mines, when a fire broke out underground. Sapa reported that at the company’s nearby Sheba Mine, 86 illegal miners were arrested a few days ago after a police raid. At Harmony Gold Mining’s Free State operations, 114 people were arrested in a raid last week, including about 90 illegal miners and some of Harmony’s own and contractor employees.

Illegal mining takes place wherever criminals are able to get into disused shafts, and the problem is not confined to SA. Illegal mining is widespread in Africa, often because local communities, warlords or crime syndicates were making a living for decades out of deposits near the surface where ownership was unclear, until increasingly politically stable governments started to grant licences to foreign companies.

A report two years ago by nongovernmental organisation Communities and Small-Scale Miners (CASM) suggested there were between 6-million and 8-million illegal miners in Africa. CASM, which is sponsored by the UK’s Department for International Development and the World Bank, was working with multinationals to draw up guidelines on how to tackle illegal mining.

Harmony CEO Graham Briggs said part of the problem was legitimate employees aiding and abetting the criminals by lending them passes or breaching security measures. Although Harmony also had some illegal mining in other operations, in the Free State the abandoned working areas were not particularly deep, and trespassers were able to get access through a network of tunnels between both Harmony’s and other mining companies’ operations. Harmony has taken measures to improve security.

Briggs said like any criminal activity, illegal mining was driven by the lack of employment opportunities and by the price of the product. Until recently, theft of copper cable was widespread because of the high copper price. That had come down and theft of gold was more attractive.

Pan African CEO Jan Nelson said illegal miners in SA tended to concentrate on high-grade areas, where there was visible gold. The Barberton Mines are more than 100 years old with multiple entry points. “We plug what we can and patrol, but illegals still get in.”

For mining companies, illegal mining is not just about the theft of ore and equipment. It is also a public relations headache as the mine owners are sometimes depicted as responsible for the deaths of the trespassers, despite systems to protect their own employees.

Nelson said the recent incident at the Barberton Mines had created a difficult situation for Pan African, which is listed in SA and London. Although South African shareholders understood more of the issues around illegal mining, UK and US investors did not.

For illegal miners, the dangers of entering disused shafts, mining at depth in unsafe conditions and inhaling mercury and cyanide fumes from primitive refining methods are not necessarily fully compensated by a high gold price as the labourers are often employed by crime syndicates.

“There is a whole chain, and as you move up the chain, people are paid more,” Nelson said. “I feel sorry for the illegal miners because they are being exploited. It is not just that they are paid very little but they are also working in very dangerous conditions.”