Precious metals, precious lives

November 2006 Access Control & Identity Management

Steve Conradie, head of asset protection at Anglo Gold Ashanti, explains the ­difficulties faced by mines, and the ­importance of controlling the access of people into the mines – for safety as well as security reasons.

Conradie makes it very clear that it is vitally important to protect the assets of the local mines, but that the safety of the miners is right up there on a par with that priority.

"We are dealing with deep-level mines in South Africa, which bring different and difficult safety challenges to the table. These include things like methane and rock conditions. We mine underground and blast underground, so one of the important roles of access control is to indicate that there are no people in the area and it is then safe to blast."

Another problem is that of 'illegal miners' who do manage to breach the access control systems and get underground. These people are not trained miners, but merely thieves. "Imagine if one of them lights a cigarette underground and there is a huge methane explosion... hundreds, or even thousands, of lives could be lost."

These 'illegal miners' gain access to the mines to mine for their own benefit, stealing precious metals and also cables. These activities have an immense socio-economic impact, from miners losing their jobs to the government losing out on tax payments.

In 2001 the Institute for Security Studies published a book by Peter Gastrow, called "Theft from South African Mines and Refineries" which states that: "The only existing estimate of the extent of the theft of gold from mines and refineries in South Africa is the figure provided by the Chamber of Mines of 30 tons valued at approximately R1,58 billion that is estimated to have been stolen during 1996."

Chapter 5 of the book looks at the effect of gold and platinum theft:

Product theft of gold

* The Diamond and Gold Branch of the police recovered a total of 1,4 tons of stolen gold valued at about R69,3 million between 1994 and 1998. The highest levels were recorded in 1998 when 374 kilograms of gold valued at R18,7 million were recovered.

* Gold mines recovered approximately 483,7 tons of stolen gold-bearing material worth about R88 million during the five years from 1994 to 1998. The lowest levels were recorded in 1998 when gold-bearing material valued at about R8,7 million was recovered.

* The mass and value of gold stolen from refineries are insignificant when considering the overall figures of gold stolen or smuggled in South Africa. Between 1994 and September 1999, Rand Refinery recovered 8,779 kilograms of stolen unwrought gold valued at R438 950.

* The total value of stolen gold recovered by the SAPS, gold mines and refineries between 1994 and 1998 amounted to approximately R157,6 million or an average of about R32 million per year.

* The mass of stolen gold recovered by the SAPS, gold mines and refineries between 1994 and 1998 amounted to approximately 3 tons or an average of 603 kilograms per year.

* Arrests of suspects by both the police and mines declined during 1997 and 1998. Both recorded a five-year low in 1998.

* The average of 603 kilograms of gold that were stolen, detected and recovered per year during the period 1994 to 1998 constitutes only a portion of the actual undetected theft of gold per year.

* It is estimated that the undetected theft of gold from mines during the five years from 1994 to 1998 amounted to approximately 175 tons or an average of 35 tons per year.

* In total, the detected plus the undetected theft of gold from mines amounted to an average of 35,6 tons per year between 1994 and 1998 (,6+35). Of this total, the police and mines recovered an average of 603 kilograms per year.

* The 603 kilograms of stolen gold recovered by mines and the police per year do not constitute a loss to South Africa's gold production as they were returned to mines and are reflected in production figures.

* The estimated 35 tons of gold stolen and unrecovered per year constitute a direct loss to South Africa's gold-mining sector. If the average London gold price over the period 1994 to 1998 (R53,39 per gram) is used as a basis for calculation, the loss to South Africa's gold-mining sector will have been R1,9 billion (R1 868 650 000) per year or R9,3 billion (R9 343 250 000) for the five years from 1994 to 1998.

Product theft of platinum group metals

* The PGM mining sector should anticipate that the industry will increasingly be targeted by local as well as sophisticated national criminal groups with international links.

* The Diamond and Gold Branch of the Police recovered PGM material valued at approximately R7,1 million during the five years from 1994 to 1998. The highest levels of seizures were recorded in 1998 when PGM material valued at R3,8 million was recovered.

* Amplats, Implats and Lonmin together recovered PGM material valued at approximately R54 million during the period 1995 to 1998. The highest levels were recorded in 1997 when PGM material valued at approximately R23 million was recovered.

* The total value of detected stolen PGM material recovered by the police, Amplats, Implats, and Lonmin during the four years from 1995 to 1998 was approximately R60 million or an average of R15 million per year.

* It is not possible to estimate the value of undetected thefts of PGM material from plants during the past four or five years. Insufficient information is available to do so. The main reason for this is the lack of effective investigations and prosecutions of the sophisticated top syndicate members who deal in PGMs on national and international black markets.

* Both the police and senior mine security officials concur that, despite more effective steps taken by mining groups, the incidents of theft of PGMs from plants and refineries are increasing.

* Arrests relating to PGM thefts remained more or less constant between 1994 and 1998.

* Despite the robust competitive spirit that exists between mining groups in the PGM sector, there is a need for greater co-operation and co-ordination between them on matters relating to product theft of PGMs. Information relating to the activity of members of syndicates needs to be shared between mines and the police.

Threat posed by product theft of gold

The loss through theft of an estimated 35 tons of gold during 1998 amounts to a loss of total gold revenue to the industry of approximately R1,9 billion. It constitutes a major threat to the gold-mining industry and has far-reaching ramifications for the viability of gold mines, dividends paid to shareholders, the number of jobs that are threatened, and the amount paid in taxes to the state. To quantify this threat remains a major problem in the absence of the relevant statistics from all gold producers in the country. The statistics that have been made available relate to those gold producers that are members of the Chamber of Mines of South Africa. It is therefore possible to provide indications of how the theft of gold impacts on them. They are responsible for approximately 90% of the country's total gold production.

Gold mining companies (members of the Chamber)

Out of the total mass of 464 391,2 kilograms of gold produced in South Africa during 1998, members of the Chamber produced about 90%, or 421 652 kilograms. If the estimate of 35 tons applies to the industry as a whole, it would follow that those producers that are members of the Chamber would have lost about 31,5 tons of gold production through theft. Some of the consequences for producers that are members of the Chamber can best be illustrated by the following examples:

* It is estimated that a loss of 31,5 tons of gold during 1998 resulted in total working revenue of 6,8% less than it should have been. The working revenue of R24,302 billion during 1998 could therefore have been R25,946 billion, a difference of R1,644 billion.

* The working costs of retrieving gold during 1998 amounted to R46,444 per kilogram. If the estimated 31,5 tons of gold had not been stolen it would have reduced the working cost per kilogram of gold to R42,738. Product theft therefore contributed to an increase in working costs per kilogram of 8%.

* Total working profit for 1998 would have been 33,3% higher than it was if an estimated 31,5 tons of gold had not been stolen. The working profit of R4,935 billion would have been R6,579 billion.

* Total dividends would have been increased by approximately 33,3% during 1998 if the gold had not been stolen. Instead of the R1,9111 million that was paid out, the amount could have been R2,548 million. This is on the assumption that the dividends would have been increased in the same proportion as the profit increase.

Employment levels

It is estimated that, without the theft of about 31,5 tons of gold, the number of marginal mines during 1998 would have been four instead of five. The number of jobs that were at risk at marginal mines during 1998 were 27 661. This figure would have been 6,2% lower, or 25 949, if only four mines were categorised as marginal. It needs to be borne in mind that it is estimated that every worker in the gold-mining industry has between seven and 10 dependants who would be directly affected by retrenchments.

State revenue

Total taxation paid by gold mines that are members of the Chamber would have increased by approximately 13,4% from R910 million to R1031 million.

Threat posed by product theft of platinum group metals

Although the total value of PGMs recovered by Amplats, Implats, Lonmin and the police amounted to approximately R20,6 million in 1998, this did not amount to a loss of production as the quantities recovered constituted part of the overall production figures of the mines. Insufficient information is available to provide an estimate of the value of undetected PGM theft. A reasonable analysis of the threat posed by product theft from plants in the platinum industry can therefore not be provided.

(www.issafrica.org/Pubs/Monographs/No54/Chap5.html, republished with permission from the ISS).

So what access control system does Anglo Gold Ashanti have in place?

"All our mines have perimeter fencing around them with a controlled access point," says Conradie, "but the workers that go underground use access cards and enter through turnstiles. The cards have been working for years. We have tested other biometric solutions such as fingerprint and iris recognition, but they all proved to be too slow in this high-volume situation and sometimes inaccurate too. When 100 workers come up from underground at a time, and they are tired, they want - and need -to get out as quickly and as smoothly as possible.

"I would describe the perfect access control system for mines as a completely remote solution with no human intervention, but until such a possibility is available, the cards are the answer for us. They are also linked to the time and attendance solutions in place so there is that control as well.

"There has been a lot of progress made in the prevention of theft from mines since Peter Gastrow's report was published and fewer incidents occur now, but we continue to strive for even lower levels of crime and higher levels of safety at the mines," Conradie concludes.

For more information contact Steve Conradie, Anglo Gold Ashanti, +27 (0) 11 637 6564, sconradie@anglogoldashanti.com





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