BENGALURU – Gold prices rose for a second straight day on Thursday as risk averse sentiment amid weaker oil prices drove up the demand for the metal, with a softer dollar and weakness in US Treasury yields also lending support.
Spot gold rose 0.5% to $1 252.41/oz at 0812 GMT. It rose 0.3% in the previous session, its largest intraday percentage change since June 6.
US gold futures for August delivery rose 0.6% to $1 253.30/oz.
“A softer US dollar and a risk-off bias following the recent declines to crude saw gold turn higher during Asian hours on Thursday,” MKS PAMP trader Sam Laughlin said in a note.
Oil turned lower on Thursday after posting gains earlier in the session as traders look ready to test new lows for crude prices with worries persisting over a global glut. [O/R]
“The uncontrolled oil price spill in the futures markets may have seen some traders pushing the risk aversion button and buying gold,” said Jeffrey Halley, senior market analyst at Oanda.
“The primary driver appears to be the flattening of the longer-dated US Treasury curve.”
The US Treasury yield curve flattened to almost ten-year lows on Wednesday as investors evaluated the impact of hawkish Federal Reserve policy on the economy even as inflation measures are deteriorating.
US home resales unexpectedly rose in May to the third highest monthly level in a decade and a chronic inventory shortage pushed the median home price to an all-time high.
Gold is highly sensitive to rising rates and yields, which increase the opportunity cost of holding nonyielding assets such as bullion while boosting the dollar, in which it is priced.
“Investors are waiting for any clues on whether the timing of the next rate hike is September or December,” said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.
Spot gold may bounce more into a range of $1 257 to $1 261/oz, as it has cleared a resistance at $1 251 according to Reuters technical analyst Wang Tao.
The US dollar index, which measures the greenback against a basket of six currencies, retreated from a one-month high of 97.871 set on Tuesday.
Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.04% to 853.98 tonnes on Wednesday.
Among other precious metals, silver gained 1% to $16.61/oz. Platinum touched its highest in a week during the session and was up 0.6% to $929.20/oz, while palladium slipped 0.8% to $880.99/oz.
Anglo American recently announced that it would be shedding more than half of its global workforce over the next few years. South Africa, as the historic home of the mining company, is set to bear the brunt of these cuts.
At the end of 2014, Anglo American employed roughly 72,000 South Africans, which represented just under half of the miner’s global workforce. Anglo American Platinum Ltd, which is majority owned by Anglo American but listed as a separate entity in Johannesburg, accounted for 49,763 of that number.
Anglo American commented that most of the job reductions will be connected to asset sales as the group adjusts to weather the recent commodities slump. The miner is also considering selling coal-based assets.
Chief Executive Mark Cutifani recently commented that South Africa “still remains our highest returning jurisdiction across the globe. We will continue to manage those challenges going forward, but it will be a relatively lower footprint.”
Anglo American Platinum (Amplats) had already planned to sell its Union mine and is in talks to exit joint ventures that operate its Pandora and Bokoni mines. Current restructuring plans at the Bokoni facility are expected to lead to 2,500 job losses including employees and contractors.
At the end of last year, the mining sector employed about 5.5 percent of South Africa’s entire workforce; minerals make up almost 60 percent of the country’s exports.
Platinum mining in the country is facing numerous challenges wage negotiations and greatly increased energy prices as Eskom struggles to maintain capacity. The recent downturn in platinum prices has only exacerbated these issues.
Contributing 19 percent to its GDP, mining is essential to the economic prospects of South Africa. Chris Griffith, CEO of Anglo American Platinum, tells World Finance how platinum can be extracted in a sustainable way.
Although mining is the backbone of South Africa’s economy, its success is not without consequence; and only by considering environmental and social wellbeing alongside financial performance can leading companies pave the way for sustainable growth. As the country’s mining industry enters into the modern age, it is essential that companies work responsibly and, in doing so, benefit all corners of society.
Looking to the example set by Anglo American Platinum, it’s clear that key industry names can bring a greater measure of sustainable prosperity by focusing on matters aside from profit-making potential. We spoke to Chris Griffith, CEO of Anglo American Platinum about the country’s mining industry and the importance of corporate social responsibility in shepherding it on to greater things.
What’s the current economic environment like in South Africa, and how is this affecting the mining industry?
The South African economy is diverse with a number of activities contributing to the economy. However, mining is still a significant contributor to the South African GDP. Here at Amplats, we develop socio-economic programmes such as agricultural programmes and contribute significantly to South African education and health by building schools, clinics, roads etc. We see ourselves as an integral part of the society.
We are also encouraged by the manner in which stakeholders such as unions, employees, the government, businesses, investors and NGOs collectively agree that we have to work together to develop sustainable solutions in the mining industry. Labour unrest affects all sectors of the economy especially small businesses within mining towns. We have seen how a labour strike in one sector can negatively affect other sectors that are stable.
[M]ining is still a significant contributor to the South African GDP
Environmental, social and governance risks are fundamental to our business, we see financial risk as an integral part of the business, the same way we see environmental, social and governance risks, and we continue to identify risks in all areas of our business to ensure a holistic approach to business sustainability. We are encouraged that the South African economy is steadily improving.
How has that affected Anglo American Platinum and how has the company adapted to it?
Despite the challenging environment of the industrial action, the effect of business improvement initiatives is evident across all our operations. Our revised marketing strategy aimed at improving margins and increasing future demand for platinum group metals (PGMs) continues to have a positive impact. We prioritised all existing asset-optimisation, supply chain programmes and initiatives identified in the 2012 Platinum Review. We continue with our value-driven strategy, cost-reduction programmes and improving operating efficiencies.
Our focus remains on the restructuring and repositioning of our portfolio. We have the high quality assets to enable us to do this, and a new capital optimisation programme to ensure we allocate our scarce capital to the highest potential assets and projects.
What mechanisms does Anglo American Platinum have in place with regard to the environment?
We aim to create and extract maximum value from our full basket of metals in a safe, profitable, competitive and sustainable way, for the benefit of all stakeholders. We do this responsibly by ensuring that resources such as water and energy are optimised and saved. For example, our total new-water consumption decreased from 33.4 million metres cubed in 2013 to 27.1 million metres cubed in 2014. We have total basal energy expenditure of 61.3 percent against a 2013 target of 58 percent. Our safety has improved too. We believe that zero harm is achievable.
What has the company done to ensure it is socially responsible towards South Africa?
Social deficit is a fundamental issue not only for Anglo American Platinum, but for all sectors of society and governments in the developing nations, and South Africa is far from unique. Moreover, South Africa is still repairing wounds suffered as a result of apartheid, and most of our host communities still lack fundamentals such as schools, roads, health facilities, transport infrastructure and so on. Mining is seen as a source of employment and income, and the local economy still needs to be uplifted to improve access to facilities and other opportunities.
Mining contributes significantly to the GDP of South Africa and other countries where we operate. In figures, mining creates 1.35 million jobs, accounts for about 19 percent of GDP and is a critical earner of foreign exchange – typically greater than 50 percent. The industry also accounts for 20 percent of private investment, 12 percent of total investment, attracts significant foreign savings of around ZAR 1.4trn ($121.4bn), has approximately ZAR 440bn ($38.1bn) in annual expenditure, spends ZAR 93.6bn ($8.1bn) on wages, ZAR 4bn ($346.9m) on skills development and ZAR 2bn ($173m) on community investment.
In 2014, Anglo American Platinum trained 49,763 employees, with 4.9 percent of total payroll spent on training and development. With regard to sustainability indicators; in healthcare 16,875 community members received primary healthcare by company funded mobile clinics. In education 79.4 percent of the company bursary fund for communities was awarded; and there was the completion and handover of a ZAR 40m ($3.47m) school for the local community in Bizana. We also invested in skills training, with 1,320 employees, community members and contractors benefitting from adult basic education and training programmes.
We believe our social contribution is notable and significant. However, our host communities and citizens require more and there is still a lot to be done, which is why, as a company, we have developed Alchemy. Alchemy – Anglo American Platinum’s ZAR 3.5bn ($303.8m) social development framework model for shared ownership – is a community based empowerment scheme. The sole aim of Alchemy is simply to develop and empower our host communities beyond the life of mine. We believe that this is the right thing to do and that overtime, communities will benefit immensely from this strategic initiative.
Anglo American Platinum was recognised as Best Performer in 2013 and 2014 by the Johannesburg Stock Exchange’s Socially Responsible Investment Index.
What main governance structures and processes has the company put in place and what impact are they having?
The board regards governance as fundamental to the success of the company’s business and is committed to principles of good governance in directing and managing the company to achieve its strategic objectives. The board conducts its business in accordance with the principle of King III, which includes the exercise of independent discipline, responsibility and transparency, and also the accountability of directors to all stakeholders setting out its role and responsibilities.
Through proactive stakeholder engagement, not only do we integrate media views but, specifically, engage minority shareholders because we believe that they provide useful and important views and strategies to ensure that the business remains sustainable.
Stakeholders are engaged in groupings and on an individual basis. That is why we have developed an ESG communication strategy that will ensure that every stakeholder’s view is taken into consideration and addressed.
In short, structures such as a Safety and Sustainable Development Committee, Social Ethics and Transformation Committee, Audit and Risk Committee, Executive Committee and a Business Integrity Committee ensure that the whole system operates within local and international good governance frameworks.
What are Anglo American Platinum’s key policies with regard to sustainable development more generally?
Sustainability is not an isolated phenomenon but an integral part of the business. Everything we do is done through lenses of sustainability, and our policies are reviewed and tested against best international sustainability practices and standards. The anti-competitive policy is a practical example: our reputation as a business may be negatively affected if we do not identify employees and contractors who are exposed to antitrust risk, and ensure that they all receive appropriate training. As a company we subscribe to the principles of International Council on Mining and Metals, which means that we must mine responsibly. We ensure minimal environmental impact and eliminate other factors such as noise and dust.
What challenges do the company and wider industry face?
As the company develops so too do social needs. Land and housing is a challenge, and the two represent a high risk to employee health and safety. As a company, we build houses and ensure employees have a living-out allowance when choosing to live outside of identified accommodation. Some of the challenges have come as a result of undeveloped infrastructure, such as public roads, and while this is not entirely within our control, we see this as a challenge because our employees are exposed to unsafe roads. In response to these challenges we partner with local, provincial and national government in initiatives focused on improving infrastructure. We build roads, provide safe transport and provide accommodation.
What is Anglo American Platinum’s overall vision for the future in terms of the wider platinum industry?
Our vision is to be a global leader in PGMs, from resource to market, as we work towards a better future for all.
Source: World Finance
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