Gold tops $1,000. But South African miners not benefitting - here's why

ChristianScienceMonitor: The problem is that South African mining companies are hit hard by two economic trends: One, there has been 11 percent inflation, which means that the cost of tools and services have increased for the mining company's daily operations. Second, the falling value of the US dollar – which is the currency that all gold is bought and sold in world wide – means that mining companies here see almost no benefit from higher prices.

Over the past year, the price of gold has risen from $750 an ounce to more than $1,000 an ounce, but at the same time, the value of the dollar has dropped from 10 rand to 7.5 rand to the dollar. This means that in rand terms, the value of gold has not increased at all.

On top of that, South African mines are more expensive to operate than elsewhere.

"In South Africa, most of the gold is at very deep levels – up to 3 miles deep – where in other countries, including your own, many of the mines are much shallower," says Mr. Jammine. "The cost of producing our gold is much higher than it is abroad, so this is another reason why mining companies need to contain their costs."

SHOOT: Salary increases are not the answer. Once you increase salaries, inflation [the average price of food and everything else] will also increase. The painfulo reality is that today, in whatever industry you're in, you're working harder for less. We're approaching fundamental limits to growth, while the human population increases unabated. What can you expect but diminishing returns under these conditions, and increased unemployment.

clipped from news.yahoo.com But the joyous mood hides a serious problem. These workers are striking for a 13 percent salary increase. Food prices here are skyrocketing, and gold prices are hovering at more than $1,000 an ounce. "[DRD Gold] is paying us peanuts," says Juliet Sibanyoni, a plant operator, "but we are not monkeys. They should not pay us peanuts." But DRD Gold, which owns Crown Mines and two other facilities, says record gold prices don't make record profits. Even though gold prices are high globally, the value of the US dollar is weak. By the time DRD Gold converts its dollars into the strong South African rand, the company says that it sees almost no profit. For an industry that once defined South Africa's gold-rush economy, these are worrying times, and the growing bumptiousness of South Africa's unions is a sign of more trouble ahead. "The only thing you can do is work harder and work smarter, and who wants to hear that?" says Duncan. "I don't either, but that's the simple truth."