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South Africa: November Mining Disappoints, USDZAR Trades Sideways

South Africa: November Mining Disappoints, USDZAR Trades Sideways

Walker England, Kara Dailey,

Talking Points:

  • Mining Production decreases by 0.4% in November while sales fall at a rate of 3.2% in October
  • Northam Platinum endures a week-long strike at their largest mine
  • USD/ZAR trades sideways

The latest survey conducted by the Department of Mineral Resources indicates that mining production decreased by 0.4% (y/y) in November 2014. Without meaningful growth, the industry is doing little to aid South Africa’s subpar GDP. Furthermore, investors will likely remain weary given the recent news of a week-long strike at Northam Platinum. Taken together this weak data lends aid to the case for a more dovish Reserve Bank.

In accounting for November’s 0.4% decline, the largest year-over-year negative growth rates belonged to the following mineral groups: PGM (-14.3%), diamonds (-14.2%), gold (10.1%) and copper (10.1%). Year-over-year mineral sales also slowed, declining at a rate of 3.2 percent. The most substantial contributors to the loss: iron ore (-14.8%), copper (-13.5%), and coal (-10.9%).

Furthermore, after two months of positive growth (0.6% in October and 7.3% in September) month-over-month production decreased by 1.2%. On the same monthly basis mineral sales remained unchanged in October after increasing by 5.7% in September.

When factored into the 3 month period September-November, mining production increased by 6.2% when compared to the previous 3 months. Of the 6.2 percent increase, 4.7 points came from the 34.5 percent increase in the production of PGMs. Similarly, mineral sales increased by 5.5% for the three month span ending in October.

Looking forward, the negative year-over-year production/sales data from November 2014 may be reprised in January. At present, 5K National Union of Mineworkers members have halted production at Northam Platinum’s Zondereinde mine. Each day the strike remains in place it costs the company 900-1000 ounces of PGM—a substantial figure given that the mine accounts for 65% of Northam Platinum’s output.

USD/ZAR Daily Chart

dailyfx USD/ZAR daily chart January 2015

Chart Created by Walker England Using MarketScope2.0

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