South Africa's Sibanye declares war on illegal gold miners


* Sibanye aims to clear out illegal miners by January 2018
    * Thousands of "zama zamas" mine gold illegally in South
    * Biometric access part of security roll out
    * Costs to industry, state coffers estimated at $1.5 bln

    By Ed Stoddard
    WESTONARIA, South Africa, April 21 (Reuters) - Illegal gold
mining has plagued South Africa's mining companies for decades,
robbing the industry and state coffers of billions of rand
through smalltime pilfering as well as networks run by organised
    Now, with unmined output dwindling and proving more diff
cult to extract, one firm has had enough: diversified precious
metals producer Sibanye Gold <SGLJ.J> says that it will clear
all illegal miners from its shafts by the end of January next
    "We will have them out then," Sibanye's Chief Executive Neal
Froneman told Reuters. His campaign slogan is "Zero Zama", after
the Zulu for illegal miners, "zama zamas" or "taking a chance".
    A Gold Fields <GFIJ.J> spin-off formed in 2013, Sibanye is
the first company to set itself a deadline to stop the practice
and has laid out 200 million rand ($15 million) to make it
    The challenge is immense, however. Sibanye may win most of
the battles but it will lose the war in a country beset by
joblessness, poverty, crime and porous borders, experts say.
    Most zamas are undocumented immigrants from neighbouring
countries that have long provided migrant labour for South
Africa's mines who are now being laid off. The syndicates who
support them and traffic the illegal metals are well-funded,
well-established and highly dangerous, security experts say.
    "Sibanye can get it down by 90 percent, but they will never
eradicate it completely," Louis Nel, a security consultant who
works on the fertile mining West Rand area near Johannesburg,
told Reuters. "You must never underestimate the ability of an
illegal miner."
    The stakes are high.
    Illegal gold mining costs South Africa's government and
industry more than 20 billion rand ($1.5 billion) a year in lost
sales, taxes and royalties, the Chamber of Mines estimated in an
unpublished document submitted to parliament in March.
    Areas around both abandoned shafts and working mines are
also made unsafe by the theft of copper, power cables and other
infrastructure, it said in the document, which was provided to
    The operational security budget in Sibanye's gold division
alone is 400 million rand in 2017, equal to almost 20 percent of
its headline earnings last year.
    "If they are able to resolve the issue, it will be a
positive," said Hanre Rossouw, a portfolio manager with
Investec, which holds shares in Sibanye.

    Sibanye's strategy for eradicating the problem is
multi-pronged: a tip-off and reward system to encourage
employees to report suspicious activity, tactical security units
that can go underground to make arrests, and access checks such
as biometrics, also used by rivals such as Harmony <HARJ.J>, to
ensure only authorised personnel gain entry.
    The tip-off system is aimed at employees who may be on the
take, providing the zamas access to working shafts, the
biometrics prevent zamas from gaining access and the tactical
units are there to arrest the illegals if they do get through.
    A decade ago, virtually none of these systems existed.
    One front in Sibanye's war is the Masimthembe mine 70 km (40
miles) west of Johannesburg, its most profitable gold operation,
helping it offer a dividend of 4.856 percent compared to an
local industry average of 2.1 percent, much to the envy of its
    Masimthembe used to be the gateway to other shafts at nearby
operations through a network of linked tunnels. Now it has been
effectively cleared of zamas, Sibanye says.
    To gain access to elevator cages going down to the mine,
visitors must negotiate a series of high-tech turnstiles which
require a biometric reading of your index fingers and can trap
you if you are not authorised to pass.
    This last is an upgrade from older models, which allowed
illegal miners to "piggyback" behind employees.
    Underground, Sibanye miners and security workers showed a
Reuters reporting team the kind of spot favoured by illegal
miners, an area where ore blasted in legal mining operations has
been scraped away from the rockface.
    There, zamas wash rocks that have been left behind over a
metal plate wrapped in carpet. The gold-bearing material gets
caught in the carpet, which is then washed out in a bucket of
water. After mercury is added, presto: a nugget that may be 50
percent gold.
    The work is dangerous and hazards include rock falls. The
chamber submission to parliament said the bodies of 76 zamas
were recovered underground in 2016, compared to 73 fatalities in
the country's legal mining industry.
    The zamas can spend weeks underground, supported by criminal
networks who provide tools, food and water.
    These syndicates plug into a murky network of buyers who,
according to the Chamber of Mines and a U.N. report last year,
pass the illicit gold to local and international distributors.
Dubai and India are believed to be key end markets.
    Sometimes rivalries break out into violence. In March, 14
bodies of illegal miners shot or bludgeoned to death were
uncovered in Benoni, a suburb east of Johannesburg, which is
home to scores of abandoned shafts.
    "We believe this was part of a turf war over illegal
mining," police spokeswoman Athlenda Mathe told Reuters.

    Nel, formerly in the South African military, has had
hair-raising experiences. On one recent job for liquidators to
clear a derelict mine, he and his teams regularly had gun
battles with zama zamas on the surface.
    "In a five-month period, I was narrowly missed by bullets
seven times," he said. He said they cleared the vast majority of
the illegal miners from the area but when his contract ended,
they returned en masse.
    Nash Lutchman, Sibanye's head of security, said the problem
of illegal mining only became a priority with the mass lay-offs.
Industry data shows employment in South Africa's gold sector has
fallen to 116,000 in 2016 from a peak of over 540,000 in 1987.
    "Employees were stealing for themselves and are probably
still stealing for themselves. Security was on the take, shift
bosses were looking the other way, the mine overseer did not
really worry," Lutchman told Reuters.
    "When people started losing their jobs, then it started
becoming (known as) 'illegal mining'," he said.
    Returning to the surface at Masimthembe, visitors are
frisked by security guards who do a thorough pat-down and check
the inside of the big rubber boots worn underground, something
that was not regular practice in the past.
    During a recent visit to one Sibanye mine, two foreign
investors who innocently plucked rocks as keepsakes were
startled when mine security tried to detain them, according to a
company source who asked not to be named.
    Managers defused the situation. But it showed the upgraded
security - to some extent - was working.

 (Editing by Sonya Hepinstall)
 ((; +27 11 775 3160; Reuters


This article appears in: Stocks , World Markets , Politics , Oil
Referenced Symbols: GFIJ , HARJ , SGLJ

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