The gold mining index has slumped 15%

Feb. 2, 2012 - PRLog -- The gold mining index has slumped 15% lower since its April 2010 highs. This is despite a slightly weaker Rand, while the Dollar gold price has appreciated. South African gold mines are old and deep which contributes to the costs, while production is affected by mine worker fatalities. The Chamber of Mines recently said production in the gold mining industry had consistently declined and it faced pressure from the high costs of electricity, water and fuel. The push to nationalise South Africa's mines by the Youth League is also hurting the gold mining industry. The National Union of Mineworkers (NUM) and the Chamber of Mines are currently in wage negotiations, where the chamber is offering 5%, while the NUM wants 14% wage increases.

The platinum mining industry has also been severely hit by the global recession. Anglo American Platinum is the world's largest producer of platinum group metals (PGMs) and is 80% owned by Anglo American. None of the other big five diversified miners, including BHP Billiton, Rio Tinto, Vale or Xstrata, have any meaningful PGM assets (although Xstrata is trying to build a portfolio). Anglo American Platinum also sits on the largest proven platinum reserves of any of its peers, which puts the group a strong position to maintain and even increase production without requiring large capital expenditure to start new mines. At current production rates, the life of its current proven and probable reserves is at least another 60 years. As the automotive market and industrial sectors continue to improve, so too will demand for PGMs used as catalysts in these industries. The share price of Anglo American Platinum is trading below its moving averages and the trend remains bearish. The share price, however, seems to be forming a falling wedge chart pattern. Usually the share price breaks out quite sharply above the falling resistance trend line to present a short-term buying opportunity for the astute trader.

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