South African resource sector stocks are struggling amid revolting labourers and a dwindling in relied-upon Asian markets. While most companies are seeing a drop in share-prices, luxury goods producer Richemont is one of only three resource sector leaders to see gains in Johannesburg, alongside AngloGold Ashanti and Gold Fields, it reports in its five-month group results.
Mining and resource sector stocks have taken a big hit following the highly-publicised, on-going, violent strike at the Lonmin platinum mine in Marikana, which has already caused Lonmin itself to suffer a share price drop of five percent, to 71.70 rand ($8.71) – a nine-year low for the company. Miners at Lonmin are demanding a wage increase, calling for a near doubling of current wages, bringing their monthly salaries to 12,500 rand ($1, 519). With the demand not yet met – commentators suggest the mine simply cannot afford to make such concessions -, the striking miners are causing chaos with recurring violent marches, and attacks on all those who do report for work.
Unrest has spread to other South African mines as well, with Gold Fields recently having been forced to resolve a wide-spread strike when 15,000 labourers failed to report for work stopping production. Impala Platinum has also confirmed repeat wage demands have been made to the company. With such spreading revolt among resource sector workers, it is no surprise that share prices are reflecting the dubious status of resource production. Commentator Rigardt Maartens, a Portfolio Manager at PSG Securities in Johannesburg explains: “Resources and mining shares are just going one way, down, because of these strikes… Due to the volatility and uncertainty, nobody really wants to touch the resources”.
This has definitely been the case at the Johannesburg Stock Exchange, with Anglo-American Platinum prices dropping 1.5 per cent to 399.09 rand ($48.51), and Impala Platinum edging down to 125.60 rand ($15.27) – a 0.6 percent drop.
It is only the top three gold producers that have managed a rise in prices, with AngloGold Ashanti and Gold Fields both holding on to a 2.9 percent increase last week. Richemont secured a gain of 1.7 percent with prices rising to 52.71 rand ($6.40).
This comes hand-in hand with Richemont announcing strong group sales figures for the five-months ended August 2012, reporting a 23 percent increase in sales at actual exchange rate. Executive chairman and Group CEO Johann Rupert declared: “We can confirm that operating profit for the six months should be some 20 to 40 percent higher than last year”.
The other source of worry for the resource sector is the much-documented apparent lack of appetite for resources from the previously prolific customer: China. Many reports have claimed a dwindling in Asian demand for metals in particular, and China has indicated that it is in no hurry to compound its resource-related interests that initially helped propel the resource sector in Africa. However, Richemont was able to report a stable sales pattern in the Asia-Pacific region for the past five-months, and confirmed that Japan had also remained a reliable consumer – as such none of the Asia-based fears were apparent in Richemont’s five-month results.
