UPDATE 2-South Africa's AMCU union refuses to sign mining pact
* Questions hang over latest effort to bring peace to shafts
* South African mining unrest rooted in union turf war
* Extremely tough wage talks loom as commodity prices fall
PRETORIA, July 3 (Reuters) - South Africa's Association of Mineworkers and Construction Union (AMCU) refused to sign a government-brokered stability pact on Wednesday aimed at defusing tensions in the mining industry ahead of tough wage talks.
The mining companies have been shaken by unrest for the past 18 months, which is rooted in a turf war between AMCU and the National Union of Mineworkers (NUM), a political ally of the ruling African National Congress party.
The ANC is keen to bring stability back to the sector ahead of elections next year, but the failure to get AMCU on board at this stage means unrest could flare again.
Mines minister Susan Shabangu said she believed the industry remained, "on the right track. This is part of the building blocks for stability in the mining industry."
Gideon du Plessis, the general secretary of the Solidarity trade union which represents mostly skilled workers, said AMCU wanted a set of preconditions to be met before it would sign.
"It is clear is there is a problem in the mining industry, and from our point of view AMCU is the problem. If AMCU is not prepared to commit itself unconditionally to peace and stability, then they are the problem," he said.
AMCU officials made no comment after leaving the meeting.
Deputy President Kgalema Motlanthe, the government's point man on the unfolding mining crisis, played down the significance of AMCU's not signing, telling journalists the union wanted to consult its members first before signing.
"Investors are not interested in this document. They are interested in a stable mining industry which operates within the framework of the law," he said after the meeting.
Questions hang over the prospects for the latest government effort to bring peace to the shafts after an earlier pact was roundly ignored and as worker militancy rises, commodity prices fall and company margins are squeezed.
More than 50 people were killed in mining unrest last year, which cost gold and platinum producers billions of dollars in lost output and led to downgrades of South African sovereign debt ratings.
President Jacob Zuma and the government were widely criticised for their handling of the unrest, in which police shoot dead 34 striking miners in a single incident at the Marikana mine of platinum producer Lonmin.
The industry is now on edge on a range of fronts.
AMCU has emerged as the dominant union in the platinum belt - home to 80 percent of known reserves, a trillion dollar resource - and its members could down tools again at Lonmin over its failure to reach a recognition agreement with the company.
Wage talks in the gold sector start next week, and NUM is seeking a 60 percent hike for entry-level workers, which would bring their basic wage to 8,000 rand ($810) a month. Inflation is currently running at 5.6 percent.
Not to be outdone, AMCU, has made a "living wage" its battle cry under its charismatic president, Joseph Mathunjwa. The union says it is seeking an increase of 150 percent to 12,500 rand.
It has made a similar demand to Anglo American Platinum , the world's biggest producer of the precious metal.
Low wages and wide income disparities are behind such demands, but companies are widely seen to be in no position to come remotely close to meeting them.
The price of gold is near three-year lows, and according to Thomson Reuters data, major South African gold producers have among the weakest pretax profit margins in the industry.
Harmony Gold is the hardest hit, with more than 90 percent of production in South Africa, and is keeping less than 10 percent of its total sales as pretax profit, according to Thomson Reuters data.
Things hardly look better in platinum. Amplats has said it aims to cut 6,000 jobs as it tries to restore profits after falling into a loss last year, but the move that has met with a backlash from the ANC and from labour unions, notably AMCU.