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The Mining Industry is wounded

In April 2020, came under new management, articles published before this time, such as the below, may not reflect the views or opinions of the current team.

Gainers and Losers

All the markets around the world are in expectation because the severe problems in the European continent. Many indexes were truly hurt in the last couple of days. Specialised media has talked about all the ups and downs in the equity markets but the commodities are being ignored quite a bit.

Despite of this, the precious metals markets still have good news to share with the investors. Lately, RBC and its experts gave to the precious metals sector an “overweight” rating for this quarter. They also expected to be several seasonal demands for gold in the upcoming months. After a constant fall of the gold prices, this can be a good signal and become a path for investors who are afraid of equities or trembling currencies.

Besides the RBC’s rating, the market still have winners in the gold matter. Between Monday’s opening and Wednesday’s close, multiple companies went up. Golden Star Resources Ltd. added 0.25 cents, meaning a 0.8% gain. Energold Drilling Corp. also enjoyed a share price raise with an addition of 4.6 cents or 7.7%. These were fortunate cases. Other companies didn’t have the same luck.

Iamgold Corp., was the biggest loser of the precious metals market, suffered a 29 cents drop, meaning a 15.3% fall. Is necessary to know that this huge lose is due the company’s announcement of the revised full-year 2015 guidance of its Westwood mine, located in Quebec. After an earthquake hit the region, the mine was restudied and was found that the deposit held a range of 780.000 to 815.000 ounces, correcting the past study which declared a range of 820.000 to 860.000 ounces.

The Golden Star Resources Ltd.’s winning streak came shortly after the announcement that the necessary permit to develop operations at its Prestea Mine Ghana was secured. The demand raised in an important way and, thanks to that, the gold prices maintained above the critical numbers.

Trouble in South Africa

AngloGold and other major mining companies with operation at South Africa are having troubles with the unions and the government. Numbers have not been too good in the last couple of years for profitability in mining business at the African country. Now that AngloGold have sold their United States mine, many share holders and analysts believe future profits are uncertain, as the shift towards future growth now relies more upon profits in South Africa.

But Goldman Sachs don’t see any serious problems about it. AngloGold has far less exposure in South Africa than any other major mining corporations with presence there. Mining company Harmony have 90% of its operations at South Africa and Sibanye Gold have a scary 100%.

At the present moment, the National Union of Mineworkers (NUM) and the Association of Mineworkers & Construction Union (AMCU) are make serious demands about wage raises, between 80% and 150% for entry-level workers. Also, the local government support these demands and will do anything in their power to protect the workers integrity. “There was a threat a few years ago in the platinum sector that some 10.000 jobs would be lost and that hasn’t happened because of the government intervention” said Mahlodi Muofhe, spokesman for the Department of Mineral Resources of South Africa.

Some disorder and turmoil is now expected of this sector of South Africa’s economy. But clearly there are some aspects that are being ignored by unions and government. With the current wages, the Rand vs. Dollar exchange rates and the actual falling price of the gold, companies are incurring in losses. If they add a wage raise in this scenario, many operations will be suspended.

Missed opportunities in the west

Far away Africa, Western Australia is having serious budget problems. The bearish market of iron brings bad news to the already troubled local government. This was shortly after the state’s debt ballooned.

Observers of the tense situation think that the state take awful decision in the financial matter. They come from an “iron bonanza” big enough to ensure the region’s economic future for a few years. Now, the state is looking for solve some of the problems selling assets like the Freemantle ports, three unoccupied school buildings, the Old Cottlesloe Cable Station and others.

Many are criticising these extreme measures but the state consider that is the only way to counter the consequences of the financial negligence. The Prof. Alan Duncan, director of the Bankwest Curtin Economics Centre thinks that it will only be useful for the budget position in a short term. Even the Standart and Poor re-evaluated them from AAA to AA+.

The state greatly failed at creating a saving fond for times like these when they had a strong iron market. As many of the mining sectors, iron suffered too of significant falls in the last months. With the massive selling of important assets for the region, things are going to easing but only for the convenient period of time, while the next elections come.

One Response to The Mining Industry is wounded

  1. […] this big plunge in gold mining stocks, the idea of having gold beyond the US$1,300-mark may seem unrealistic. But there are still experts […]

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