ARM bears brunt of silicosis ruling

African Rainbow Minerals took the biggest hammering on the JSE on Friday after the South Gauteng High Court’s silicosis ruling.

Johannesburg - African Rainbow Minerals (ARM) took the biggest hammering on the JSE on Friday after the South Gauteng High Court gave mineworkers who had contracted silicosis and their families a green light to pursue a multimillion-rand class action against mining companies for contracting the disease while at work.

ARM stocks fell 3.08 percent, following Judge Phineas Mojapelo’s ruling, which said mining companies should shoulder the responsibility for the fatal pulmonary and respiratory disease that had claimed the lives of thousands of mineworkers. At the close of business, ARM was valued R20.5 billion.

Read: SA gold mines face major suit over diseases

Silicosis is an incurable progressive lung disease that is caused by the inhalation of silica dust, which is often associated with gold mining. It has blighted the industry since its inception.

A mining analyst said the decline in the ARM share price took the industry by surprise as most mining companies had largely shrugged off the ruling.

“It could be as a result of many other factors, but you cannot rule out its effect on the stocks,” the analyst said. “Some companies had already factored in the possibility of such a ruling in their bottom lines, while others are clearly battling to digest it.”

Most mining stocks retreated marginally from positive territory before the judgment to fall in the 1 percent range after Judge Mojapelo said mining companies should be held responsible for the fatal disease.

Read: Cosatu applauds silicosis ruling

The judge said workers who were still alive and families of those who had died of the disease could be included in separate suits against the mining companies.

“We hold the view that in the context of this case, class action is the only realistic option through which most mineworkers can assert their claims effectively against the mining companies,” Judge Mojapelo said in the unanimous ruling by a three-judge bench.

The National Union of Mineworkers (NUM) welcomed the ruling, saying it would bring a process that had taken many years to an end.

NUM spokesman Peter Bailey said the judgment had finally borne fruit for the sufferers of silicosis.

“We have been adamant with the industry that a negotiated settlement is the way to go and now the class action will open a flood of individual claims that could have massive consequences for the industry,” he said.

But economist Azar Jammine warned that the ruling could put further pressure on an industry that had already taken a huge knock as a result of the meltdown in commodity prices. “While I fully sympathise with the ruling, given our past, I think it will not help the sector one bit.”

He said: “It will most probably lead to more mine closures and job losses, because some of the affected companies will not be able to stomach the potential lawsuits.”

Mining companies spokesman Alan Fine said mining houses were still going to study the judgment.

“Obviously individual companies will have to make a call on the way forward,” he said.

Shares in the industry had slumped during the week, with some stocks loosing as much as 5 percent in the five-day inter-trade period. But on Friday, most had recovered and gained slightly after digesting the ruling.

AngloGold Ashanti gained 3.23 percent on the JSE, while Harmony Gold and Goldfields rallied 2.98 percent and 0.97 percent, respectively.

A mining economist said the reaction of the mining stocks showed that the mining companies had long factored the possibility of such an outcome into their bottom lines.

Budgeted

The economist, who spoke to Business Report on condition of anonymity, said companies such as AngloGold Ashanti had already budgeted at least R500 million.

“It is not that the industry has not prepared itself for the ruling,” the economist added. “So their reaction was in line with expectations and I think the market took the ruling pretty well.”

Cosatu said it would begin a process of identifying the exact number of victims to determine the extent of their claims against the mining companies.

Cosatu spokesman Sizwe Pamla said while the ruling was a huge victory for mineworkers who had contracted silicosis and pulmonary tuberculosis in the mines, the process was far from over.

“Cosatu encourages all affected miners and families of the deceased miners to ensure that they join this class action against these gold mining companies,” Pamla said.

The class action will be the biggest ever to proceed in South Africa, though many miners have already died from respiratory diseases allegedly caused by their jobs.

In March, AngloGold Ashanti settled almost R500m worth of claims filed by former mineworkers who suffered from silicosis.

But Judge Mojapelo said the families of the mineworkers who had died as a result of contracting the diseases could sue for compensation.

BUSINESS REPORT