About 400 workers at the Navachab Gold Mine have until today to decide whether to accept an offer for voluntary severance or retirement, or face retrenchment.
Workers at all levels of the company informed The Namibian about two weeks ago of the mine's intention to roll out a retrenchment plan.
The workers have to make the difficult call of choosing between voluntary or induced retrenchment, with both choices bound to affect their only means of livelihood.
The town of Karibib, whose economy is heavily dependent on the mine, could also become a casualty of the development.
Over 750 people employed at Navachab live in the town of approximately 12 000 people, contributing to Karibib's economy.
The mine also owns close to 240 houses in the town, making it a significant ratepayer.According to the workers, an internal memo was issued to inform them of the company's plans to reduce costs.
The Namibian understands the company wants to cut its total salary bill by 20%. The workers have until end of business today to respond, after which Navachab's board will decide the way forward.
If the targeted 20% reduction goal is not reached, retrenchments could follow, The Namibian was informed.
A source told this newspaper that the mine, which Navachab QKR Namibia - a conglomerate of international and local shareholders - bought for N$1,2 billion from AngloGold Ashanti in 2014, has been running at a loss since.
In order to reach the gold shaft, which is about 100 metres underground, the company has to invest another N$800 million.
"Once it hits that ore body, the mine will have a good source for continual operation and profits," the source said.
Navachab's managing director (MD), George Botshiwe, explained that mining operations are mostly long term, and therefore the investment of additional funds is imperative should any mine wish to efficiently and sustainably operate its business.
"With this in mind, it is also necessary to make certain strategic decisions impacting the continued operations of the company," he said.
He added that the mine's biggest challenge is the historical high cost of production.
The offer of voluntary separation as well as voluntary early retirement packages to employees is part of this decision, the MD emphasised.
Asked how the mine got into the predicament, Botshiwe said it is a culmination of a few factors, some of which the company had no control over, such as international prices, exchange rates and inflation.
"As a responsible contributor to the socio-economic development of the region, we are now trying to navigate these as best we could so as to minimise the effects on our staff, the communities in which we operate, and the economy of the country," he noted.
Navachab Gold Mine is essentially a low grade mine, and highly sensitive to operating costs, inflation, and fluctuations in macroeconomic conditions, being the gold price and the exchange rate.
According to Botshiwe, the costs of production have "unfortunately" crept up over the years, while ore grades dropped.
In the immediate period after the purchase of the mine by QKR Namibia, the mine's management embarked on interventions which would eventually lead to a reduction of operating costs to sustainable levels.
However, those interventions did not provide sufficient positive cash flow, and continued capital investments by the shareholder did not totally offset the increasing costs of production while concurrently contributing marginally to the production volume, effectively leading to a higher unit cost of gold production.
"This state of affairs could not be allowed to continue as it was unsustainable, and therefore management last year embarked on a new interventionist strategy aimed at ensuring a turnaround for the mine," he continued.
Botshiwe said this strategy was shared with staff, and launched in August 2018 with employee participation, which has yielded significant results in a reasonably short period of time in some of its objectives that include savings on expenditure; improved productivity; and efficiencies through strategic realignment endeavours.
"We are confident of the success of our strategy," he added.
As for the impact on Karibib, Botshiwe said the strategic intervention is aimed at ensuring Navachab continues to operate as a going concern so that it remains a secure and reliable employer at Karibib and the region.
Acting president of the Mineworkers Union of Namibia, Allen Kalumbu, said the union was not aware of Navachab's plans, and that it was "shocking" that the company did not involve the union in the cost-cutting strategy which would affect its members.
"This is not fair, and the mine should have brought us to the table. We will have to look into this matter and consider the best way forward," he stated.