S.Africa orders Glencore to shut coal mine over job cuts

* Glencore (Xetra: A1JAGV - news) mine shut over job cuts process

* Firm starts business rescue on S.African mine (Adds Anglo American comment on coal supply contracts)

By Zandi Shabalala

JOHANNESBURG, Aug 4 (Reuters) - South Africa's mines minister has ordered Glencore to suspend all operations at a coal mine because of the way it planned to carry out job cuts.

The country's mining industry is battling sinking commodity prices, rising costs and labour unrest. Glencore announced in July it would cut 380 jobs at Optimum and shut part of the mine due to lower coal prices. It added on Tuesday the mine's finances were strained because it was supplying state power firm Eskom with coal at prices lower than the cost of production.

Job losses are a politically and socially charged issue in Africa's most advanced economy, where the unemployment rate stands at about 25 percent - although some analysts say the figure is higher.

Mines Minister Ngoako Ramatlhodi said on Tuesday the 10 million tonne-a-year mine should be shut because Glencore did not follow legal procedure in the process of cutting jobs.

"The retrenchments ... were inhumanely conducted and disregarded all the legal prescripts which govern the process of retrenchments," he said a statement from his ministry, without being more specific.

Ramatlhodi later told Reuters the government was suspending operations at the mine until the issue was resolved.

Glencore, Eskom and the department of trade and industry will meet later on Tuesday with the mines ministry to try to find a solution, the minister said.

"BUSINESS RESCUE"

Glencore said it had complied with all legal requirements relating to job cuts, including consultation with government and unions for an extended period of time.

It said an agreement signed in 1993 to supply 5.5 million tons of coal a year to Eskom was unsustainable and that it had initiated a "business rescue" at Optimum.

Business rescue, similar to chapter 11 in the United States, allows a financially distressed company to temporarily delay creditors' claims against it or its assets.

Global coal prices have fallen by around 10 percent this year, partly due to oversupply, extending losses from a bearish trend since 2011. This is particularly concerning for South Africa as it contributes more than any other mining commodity towards its gross domestic product

Eskom spokesman Khulu Phasiwe said it was in the process of renegotiating its supply contracts with coal companies because it was paying too much given softer commodity prices. It did not comment on Glencore's operations.

Anglo American (LSE: AAL.L - news) , a major supplier of coal to Eskom, said it had started talks with the power utility regarding coal supply contracts.

"The discussions are informed by Eskom's intention to review its cost structure," Anglo said, adding it welcomed the process. (Additional reporting by Peroshni Govender; Editing by Pravin Char and David Evans)