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. Last Updated: 07/27/2016

Last-Ditch Rescue Fails to Stop Gold Mine Closing

JOHANNESBURG, South Africa -- One of South Africa's oldest gold mines, East Rand Proprietary Mines, closed Thursday following the failure of a last-ditch rescue effort by the government and the country's biggest mining union.

ERPM fell into final liquidation after a South African court rejected requests by the National Union of Mineworkers and the government to keep the loss-making mine operating while they implemented a survival plan. It is the country's first marginal mine to succumb to record low gold prices since Britain rocked world bullion markets in May with a plan to sell more than half its gold reserves.

"ERPM is now in final liquidation. The mining operations have ceased today due to a lack of funds. The workers will be out of work tomorrow," said Laurence Pereira, a spokesman for the liquidators.

ERPM, which started mining on the famed Witwatersrand basin in 1893, fell into provisional liquidation in early July after warning that weak gold prices could force it to close.

The mine employs about 4,500 workers, many of them from neighboring countries like Mozambique, Swaziland and Lesotho.

Government and union officials were unavailable for comment.

ERPM was one of the highest-cost gold producers in South Africa and was losing about 7 million rand a month. Gold was trading at $259 an ounce late Friday, well below ERPM's cash operating costs of about $300 an ounce.

"It's running at one hell of a loss and so we have decided to stop mining operations," Pereira said. He added 200 workers would still be employed to pump water out of the mine shafts until ERPM is liquidated. Pereira said the assets would be advertised both locally and internationally, but he said there would be no fire sale. "The bargain hunters can forget about coming to us."

Durban Roodepoort Deep, which has experience with marginal mines, is the only South African company to express interest in ERPM, although only for its surface operations.

If gold stays at these low levels, the industry says 100,000 mining and mining-related jobs are threatened, which in turn affects up to 1 million family dependents.

In a desperate bid to save jobs at ERPM, the government and NUM had urged the court to put the mine under judicial management, which would have placed a moratorium on the mine's creditors. They had been working on a rescue plan that would have closed the mine's costliest shaft and devoted men and resources to other, more profitable areas of the mine.

The government holds an 18 percent stake in the mine and has poured millions of rand of water-pumping subsidies into the mine in recent years. But Pretoria has refused to give ERPM a bailout package.