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Johannesburg - The index of gold-mining stocks fell to the lowest since April 2001 after the precious metal slid to a five-year low and local producers battle rising costs.
The five-member FTSE/JSE Africa Gold Mining Index dropped as much as 5.5%, Harmony Gold [JSE:HAR] Mining led the decline, losing as much as 7.3% to the lowest since January 1998.
The metal sank as much as 4.2% as the Federal Reserve gets closer to raising US rates for the first time since 2006, strengthening the dollar and reducing demand for haven assets such as gold.
READ: Gold cuts losses after dive to 5-year low
Mining companies are struggling with lower output from aging ore bodies and labour costs that have more than doubled since 2001. The country is the world’s sixth-biggest producer, down from No. 1 in 2007.
“We will probably see interest-rate hikes in the States before year-end, and the US economy is showing that it’s growing,” Sibonginkosi Nyanga, analyst at Imara SP Reid, said by phone from Johannesburg.
“With a stronger US economy and a strong dollar, we expect the gold price not to strengthen.”
READ: Dollar firm in Asia, focus on Fed rate hike timing
Sibanye Gold [JSE:SGL] dropped 6.1% to R18.38 by 10:21 in Johannesburg. Harmony retreated 6.9% to R12.81. AngloGold Ashanti [JSE:ANG] decreased 5% to R89.75, heading for the weakest closing level since November 2000.
Unions representing workers from the three companies have rejected the producers’ offer to raise entry-level pay for underground workers by as much as 13% in wage negotiations that began last month.
The organisations are demanding increases of at least 08% while the inflation rate was 4.6% in May. Talks are continuing.
