China’s gold data surprises
CHINA surprised markets on Friday. This time, it was in gold. China, the world’s biggest producer and consumer of bullion, said that it owns about 1 677.4 tons of the metal.
The previous update came in July after China had been silent on the size of its hoard for six years. Most analysts expected the next report would take about five years, said Ross Norman, chief executive officer of Sharps Pixley, a Londonbased gold dealer. Instead, it happened in 29 days.
The unexpected update of China’s reserves adds to a week that had already seen the first major devaluation of the yuan since 1994.
More regular gold reporting from China shows a shift to transparency as the country improves data quality, increases its presence in commodities trading and promotes the yuan on the international stage.
“It was quite surprising,” Mark O’Byrne, the executive director of Dublin-based brokerage GoldCore, said.
“It looks like they may start reporting on a monthly basis.”
China increased its gold reserves by 1.1 percent in July, or about 19 tons, according to data from the central bank. On July 17, it said it owned 1 658 tons, roughly 600 tons more than when it last updated in 2009.
China has adopted stricter International Monetary Fund norms for its foreign reserves and debt data as it pushes for inclusion of the yuan in the Special Drawing Rights basket.
The changes included monthly release of reserve data rather than quarterly.
“Publishing their gold reserve data for the second month in a row shows they’re becoming more transparent,” Georgette Boele, a currency and precious metals strategist at ABN Amro Bank NV, said in Amsterdam.
MINERS from global giant Barrick Gold to small-cap Golden Star Resources are grappling with the same dilemma as the gold rout deepens: how to rein in labour costs without sacrificing too much output and revenue.
Barrick is looking at how to do “more with less” as it targets $2 billion (R25.61bn) in spending cuts, co-president James Gowans told analysts last week. Toronto-based Golden Star is working to reduce labour costs further, while Kinross Gold, Yamana Gold and Newmont Mining are also reviewing headcounts as prices hover around five-year lows.
“It’s everything, it’s holistic, it isn’t one particular area,” Golden Star chief executive Sam Coetzer said. “That’s just the nature of the game.”
The industry has already reduced its workforce by more than a third since 2012, when gold was trading about 30 percent above today’s levels, according to data compiled by Bloomberg. While gold is unlikely to witness the kind of mass firings seen in harder hit industries such as coal and oil, more cuts may be coming with labour accounting for as much as half of their expenses.
“They really are trying to cut to the bone,” Kenneth Hoffman, a mining analyst with Bloomberg Intelligence, said. “The next step is the mines themselves, and that will be the next big wave of cuts.”
Cutbacks so far have included corporate office staff and local contractors, Omar Jabara, a spokesman for Newmont, said. While there’s still room to cut corporate jobs, companies can’t go “very far” with reducing mine workers, said Pawel Rajszel, an analyst at Veritas Investment Research in Toronto.
Opted to close
“If they still want to mine at the mines, it’s hard to imagine how they are going to achieve that,” Rajszel said. “Unless, they start bringing in robots.”
In Ghana, Golden Star has opted to close its refractory business to focus on easier-to-process deposits, chief executive Sam Coetzer said on Thursday.
The company plans to cut 300 jobs in the next quarter and is looking to further reduce expenses, including on exploration and suppliers, he said.
Workers are paying the price of a commodity rout as a slowdown in Chinese demand fans oversupply concerns. Prices for raw materials measure by the Bloomberg Commodity index dropped to the lowest since 2002 this month.
Glen Mpufane, a director of mining at Industri ALL Global Union, which represents about 50 million workers in the mining, energy and manufacturing sectors across the globe, said wage reductions would be a more “responsible” alternative to dismissals. Few companies were considering that, he said.
Complex
That was because negotiations could be a complex process that might not always save jobs, according to Hoffman. “Sometimes the unions will say flatly ‘No’ because they know that if they take a wage cut, everyone will have to take a wage cut,” he said.
Wage talks in South Africa were perhaps the most telling example, he said. The country’s largest miners have been locked in negotiations with worker unions for more than a month, trying to avoid slashing 10 000 jobs as companies grapple with the higher costs and plunging prices for their output.