UPDATE 3-S.Africa gold miners set to strike

Wed Jul 27, 2011 1:21pm EDT

Related Topics

* Gold miners to strike from Thursday

* Fuel sector strike set to end

* Strikes tough balancing act for ruling party (Recasts with closing S.Africa prices)

By Agnieszka Flak and Ed Stoddard

JOHANNESBURG, July 27 (Reuters) - Tens of thousands of South African gold miners will down tools on Thursday as strikes spread through the country's vital mining sector at a time when commodity prices are red hot.

Shafts at AngloGold Ashanti , Gold Fields and Harmony Gold and a junior miner will go quiet after 1800 local time (1600 GMT), shutting about 16,000 ounces or $25 million of output a day.

"There will be a total shut down of the entire gold mining industry tomorrow for it is inconceivable how the industry could want to give workers an increment of 7 percent when the gold price is at record high," the National Union of Mineworkers, which is seeking a 14 percent raise, said in a statement.

The companies have offered hikes of between 7 and 9 percent.

Around 100,000 gold miners are expected to go off the job and join striking coal workers who are meeting producers again on Thursday in a bid to resolve that wage dispute.

Workers across the country have gone on strike in recent weeks, or are threatening to do so, seeking pay rises of double or triple the 5 percent inflation rate in mid-year bargaining known as "strike season".

The labour strife imposes a delicate political balancing act on the ruling African National Congress. The ANC is trying to woo investment while maintaining an alliance with organised labour that delivers much of its voting base.

One strike that looked set to end was an almost three-week one in the petroleum sector that had sparked panic buying at the pumps. Union leaders are expected to meet the industry on Thursday to say whether a revised offer had been accepted.

GOLD SHARES DOWN, RAND UP

South African gold shares extended their losses on Wednesday despite bullion's surge to a new record high above $1,625 an ounce on U.S. and European debt woes which enhance its appeal as a safe haven.

AngloGold fell over one percent after skidding three percent in the previous session. But South Africa's rand scaled a two-month high against the dollar and domestic bonds rallied as investors sought new debt holdings, suggesting the strikes have not completely rattled market confidence in the country.

Outside South Africa, stoppages in production in the world's fourth-largest gold producer are unlikely to have an immediate impact on spot prices but could become a supportive factor if strikes are prolonged, analysts have said.

They said the gold mining companies could maintain some output by turning to stockpiles, but Harmony said its plants and mining operations would be shut during the strike.

Ripple effects in Africa's largest economy will engulf other sectors including retailers who will be hit as striking workers miss pay cheques, and the earnings of big listed miners for the quarter will also be squeezed.

South African strikes typically last up to a few weeks with the average recent settlements being about 8 percent annually.

The well-above-inflation settlements have eroded South Africa's global competitiveness. Its workers already earn more than in other emerging markets -- about six times more than the average Chinese worker -- and are less productive.

Employers, who regard the wage deals as a cost of doing business, usually try to ramp up production after reaching new labour deals to make up for lost production.

Analysts say the biggest threats to the economy would be posed by strikes that stretch into mid-August or work stoppages that hit state-utility Eskom or the platinum industry.

Eskom provides almost all of South Africa's power, while platinum is a vital industry, as South Africa is the world's largest producer of the precious metal.

In another labour dispute, coal miners walked off the job from the overnight shift on Sunday. Eskom relies on coal for almost all of its power plants but said it had enough in store to last about five weeks.

Employers, already struggling with labour laws seen as some of the most rigid in the world, have been slashing jobs in recent years to reduce personnel costs, making it more difficult for South Africa to cut into its 25 percent unemployment rate. (Writing by Ed Stoddard; Editing by David Dolan)

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