South Africa: mine strikes escalate

Strikes at South African mines have coincided with the sudden resignation of Aquarius Platinum's CEO. Stuart Murray has not offered any comments on his motives. But it seems clear that the situation in the country's mining sector is escalating, with production at Anglo American Platinum suspended last Friday, and the company firing 12,000 employees. Over 100,000 miners across the country are currently striking, with the 34 shot by police in August hailed as martyrs. Government expectations that protests would abate have not been met.

Despite the fact that in recent months the platinum price has recovered by approximately 20%, a great number of platinum producers are suffering unprecedented financial pressures. Exploding production costs and mining at ever-greater depths have already forced some mines to announce temporary production halts. One of the mines affected is Aquarius Platinum, which together with Anglo American operates the Marikana mine close to Rustenburg.

Shortly afterwards Eastern Platinum made a similar announcement, stating that it would not start production at a new platinum mine in the north of the country. Both platinum and palladium are precious metals that are often seen as industrial metals, as they are used extensively in the automobile industry. They serve as good barometers to measure the cycles in the automobile industry – and by extension the global economy.

Striking miners are asking for higher salaries and improved working conditions, but South African mining companies are struggling with rising production costs. Squaring this circle is not proving easy. January saw the resignation of David Brown, CEO of Impala Platinum (Implats), followed in July by Neville Nicolau of Anglo Platinum, who did not offer any specific explanations. Finally in August Ian Farmer of Lonmin resigned – supposedly for health reasons. According to the latest report by the German precious trading group Heraeus, the platinum price continues to benefit from these problems in South Africa.

Markets are increasingly worried about the situation in the world's largest platinum producing country. South African satisfies approximately 75% of global demand. But at Anglo American Platinum (Amplats) production was halted some time ago. The company's losses amount to 2,100 ounces of platinum per day. Protests have already spread to the Limpopo region, which could suffer production halts. On Friday Amplats announced its dismissal of 12,000 miners. Good reason to believe that platinum could soon testing the $1,737 resistance area if was probing earlier this year.