Perhaps the best place to begin a story about the death throes of a once-proud gold mine is somewhere far underground, with the grim-faced miners, say, going numbly through the motions of their last work shifts.
But when it comes to high-grade pathos here at East Rand Proprietary Mines, you don’t need to dig that deep. A rich vein of melancholy, shot through with high-grade irony, runs smack through the vacant chief executive’s office.
There, all last week, sitting beneath the vaulted ceiling and oblivious to vintage photos of bowler-hatted miners and a century’s worth of other mining memorabilia, three government-appointed lawyers pored over bankruptcy papers for South Africa’s oldest and most storied gold mine.
“Don’t ask me about gold,” muttered the lead attorney, a brusque man with a cell phone glued to his ear. “We’re just the liquidators. Today we’re selling the assets of a gold mine. Tomorrow it might be cows. To us, it’s all the same.”
That his name was Paul Kruger–just like the 19th Century Boer president immortalized by the world’s most famous gold coin, the South African Krugerrand–only seemed a gratuitous cruelty.
Hammered by nose-diving prices and by gold’s deepening reputation as a stodgy, perhaps even irrelevant way to measure wealth, marginal mines are shutting down on virtually every continent. Thousands of geologists, engineers and miners are being chucked out of work.
In South Africa, the world’s largest gold producer, the latest blow came two weeks ago when East Rand, a sprawling complex of ore hoists and tailing piles that employs nearly 5,000 workers, announced it could no longer pay its debts and was applying for bankruptcy. A frantic injection of government cash bought the mine a brief reprieve last week, with the desperate hope that new investors could be lined up soon.
East Rand is just one of six ailing South African mines set to lay off a total of 11,700 workers against a global backdrop of plummeting gold prices. A further 80,000 mining jobs are at risk this year, the government says.
“Gold goes up and down and we’re used to that, but this is the worst I’ve ever seen,” said Virgil Petersen, 35, a lanky foreman at East Rand’s Far East Vertical Shaft, a hole bored two miles into the yellow bedrock on the outskirts of Johannesburg. “What happens if we lose our jobs here? Go to another mine? After a year, that one will close too.”
Like other grizzled East Rand miners, who labor in tunnels so hot and deep they must be cooled by ice pumped through hundreds of miles of cooling ducts, Petersen said there were “1001 rumors” behind gold’s waning fortunes, from simple mine mismanagement to ruthless speculators in rich countries.
The only certainty, he said, is that he and thousands of his colleagues stand to lose not only their jobs but years of accumulated pension benefits–“Just my life,” said one man, bitterly.
The rumors, actually, probably are as good an explanation as any as to why the value of the precious metal–once the very benchmark of monetary value and the only suitable ransom for kings– has tumbled so badly that some gold exploration companies have taken to selling cheap wines or on-line pornography to stay afloat.
In essence, the flickering glow of a stockbroker’s computer screen now outshines the tangible, time-honored luster of gold.
Individual investors and nations alike have embraced more abstract, speculative ways of getting rich, such as playing the currency markets, rather than accumulating hoards of bullion. Because of this economic shift, few countries still peg their currency to the gold standard. Indeed, some industrialized nations have even begun hawking portions of their gold stores to invest that capital elsewhere.
Two weeks ago Britain announced the sale of 25 metric tons of its reserves in order to funnel money into the currency markets.
Though that quantity of gold was minuscule–some 1,000 metric tons of gold are traded daily on the London bullion exchange alone–the psychological effect of a major power publicly shedding even a fraction of its gold reserves dealt a body blow to awobbly market. The price per ounce dipped below $257, a 20-year low.
That faraway decision, analysts in South Africa assert, drove the last nail in the coffin of East Rand, which already was limping by on massive government loans.
Within a day of Britain’s announcement, thousands of blue-overalled South African miners were cashiered. They now toil at the mine on week-by-week emergency contracts. South Africa is scrambling, so far without success, to interest foreign investors in rescuing the troubled mine, which is prone to flooding.
“The negative ripple effect with gold–bad news spreading–is notorious,” said Greg Hunter, a Johannesburg gold analyst who noted bleakly that several other countries, including France, Germany and Australia, are planning to sell gold later this year.
Switzerland intends to auction the most: about 1,300 metric tons to pay back Nazi Holocaust survivors whose funds it held in its banks since World War II.
“In reality, there’s been a global deficit in the supply of gold for jewelry and industrial uses for about three years running now,” Hunter said. “Logic says the price actually should be going up, but that’s how negative perceptions can depress the market.”
Speculators also have played havoc with gold’s real value, he said, by cynically “short selling” the metal–a complex ploy that involves arranging future gold sales, hoping its price will drop, thus pocketing the difference by buying it cheaply at the future date and then selling it at the earlier, and higher, prenegotiated price.
Of all the forces that are turning gold to lead, however, none has been more surprising than the International Monetary Fund’s recent plan to relieve poverty by selling some of its gold reserves. The proceeds would pay off the foreign debt of impoverished nations such as Mozambique and Vietnam.
“The objective is very noble, but the mechanism is questionable,” said Jan Bredell, deputy director general of South Africa’s Ministry of Minerals and Energy Affairs. “I don’t think anybody calculated the real costs to the world’s gold producers, many of whom are very, very poor.”
The IMF plan’s reception in Africa, in particular, has veered from initial, stunned bemusement to an angry dash for the barricades.
South African President Thabo Mbeki, a strong supporter of Third World debt relief, at first guardedly supported the move. But since the British gold sale, a stream of front-page stories about East Rand going belly up, and marches in the streets by unprecedented coalitions of unions, mine owners, and their employees, he has backpedaled briskly.
Africans must come up with their own strategies for debt relief, Mbeki declared at the Organization of African Unity summit in Algiers last week, “otherwise you get these strange proposals to destroy some African economies in order to free others from debt.”
South Africa won’t be the worst-hit country if gold prices don’t inch up soon–at least, experts say, a bit closer to $300 an ounce.
Though tens of thousands of jobs could be lost, adding to the half-million South Africans already unemployed, gold generates only 4 percent of the country’s gross domestic product. Instead, poorer African producers such as Mali, Ghana, or Zimbabwe, which depend far more on precious metal mining for revenue, would bear the brunt of gold’s devaluation.
“There are sad ironies here,” said Bredell. “Almost half of our mine workers come from outside South Africa, places like Lesotho and Mozambique, the very places the debt relief initiative was designed for. They’ll absorb a lot of the pain.”
The historic East Rand claim, staked in 1893 during the South African gold rush, is a case in point.
Forty percent of the men drilling in its deep tunnels (the first physics experiments identifying neutrinos were conducted here in 1965) are from Mozambique. They sleep on mattresses in cavernous “hostels,” and earn a starting wage of about $200 a month, food and accommodation included.
“If they give me my pension, I’ll just go home to Mozambique and plant my fields,” said Alberto Uctimane, 49, an 18-year veteran at the mine who supports five children. “If they don’t give it to me, I don’t know what I’m going to do.”
