Wage Hike Demands Affect African Gold Miners



Sibanye is diversifying

Sibanye Gold (SBGL), the biggest gold miner in South Africa, is most likely pursuing expansion plans. To expand its asset base, the company has raised a debt of $350 million. On Thursday, September 3, the company confirmed that it’s currently in negotiations with Amplats (Anglo-America Platinum) to acquire its platinum mines in Rustenburg.

As you can see in the above chart, we can compare the company’s performance with the performance of the VanEck Vectors Gold Miners ETF (GDX).

Prices for platinum have dropped more than 40% since August 2011, reducing the margins of higher-cost and aging mines in South Africa. Platinum has fallen ~18% on a year-over-year basis.

The platinum figures, however, are far better than their palladium counterparts. Palladium has fallen a whopping ~27% on a year-over-year basis. The trading price of platinum and palladium futures on COMEX (Commodity Exchange) are $992.40 and $577.15 per ounce, respectively, as of September 4.

ETFs like the Sprott Gold Miners ETF (SGDM) and the iShares MSCI Global Gold Miners ETF (RING) fell 0.8% and 1.13%, respectively, on September 4. Both ETFs have performed similarly on a year-over-year basis, falling ~29%.

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Wage talks affect miners

In addition to falling metal prices, ongoing wage talks in Africa have also negatively affected gold miners. Gold prices have fallen close to 6.7% since wage negotiations began in June. This comes on the heels of higher output costs for companies, leaving them struggling.

Affected companies include Harmony Gold Mining (HMY), Sibanye Gold (SBGL), and AngloGold Ashanti (AU). The companies offered a wage hike of about 17% on Wednesday, August 12. However, it was rejected by the Association of Mineworkers and Construction Union (or AMCU) and the National Union of Mineworkers (or NUM), the two biggest union representatives.

Together, SBGL, AU, and HMY make up approximately 7.8% of the VanEck Vectors Gold Miners ETF (GDX).


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