Mining giants suffer
Rising precious metals prices haven’t seemed to relieve South African mining giants. The ongoing strikes in South Africa to raise worker wages have added to the woes of miners, who are already struggling due to rising production costs and a year of falling bullion prices. The members of AMCU (Association of Mineworkers and Construction Union), the second biggest union for South Africa’s gold-mining industry, are prepared to be on a continued strike to pursue better wages.
The mining companies that will be the most affected by these strikes include Sibanye Gold (SBGL), Harmony Gold Mining (HMY), and AngloGold Ashanti (AU). These three South African miners make up about 7.7% of the VanEck Vectors Gold Miners ETF (GDX). Below is a price chart of AngloGold Ashanti and gold futures. AU’s falling share price shows how brutally miners have been affected by retreating gold prices and the continued strikes.
Sibanye is a top bullion producer
Sibanye, the top producer of bullion in South Africa, is willing to continue negotiations with the unions and has required all four unions to sign the wage agreement for it to take effect. There are four major unions active in the country that are looking into the wage hike matter. The National Union of Mineworkers, UASA (United Association of South Africa), Solidarity (South African Trade Union), and AMCU are the four major unions. All of the unions except AMCU signed a three-year agreement on October 2 with AngloGold Ashanti and Harmony Gold. AMCU has demanded wages that are more than double the current figure.
With gold, platinum, and palladium prices shelling out 2.2%, 18.7%, and 11.4%, respectively, on a YTD (year-to-date) basis, miners’ profitability concerns are rising. The escalating production costs due to aging mines is another factor that adds fuel to the fire. ETFs that have seen steep drops in their prices include the SPDR Metals and Mining ETF (XME) and the SPDR Gold Shares (GLD).