The South African mining strike that began on September 10th has continued to spread throughout the country. As the strike has picked up momentum, investors have begun to worry about the impact on commodities. South Africa is one of the most resource-rich nations on earth, as its soil is home to an abundance of hard assets, especially precious metals. The current strike first impacted the platinum and palladium industry, but quickly spread to the gold industry as well. Dozens have been killed in the protests that involve a fight for better working conditions and more fair wages.
But for as long as this strike continues to hold out, there will be a major impact on the hard asset world, as South Africa dominates production of some of the world’s most prized metals. Below, we outline three ETFs to make a play on the mining strike afflicting the nation [for more commodity ETF news and analysis subscribe to our free newsletter].
Market Vectors TR Gold Miners (GDX)
South Africa accounts for roughly one-tenth of the world’s gold output, so a strike of this magnitude will certainly have some kind of impact on the yellow metal. It was reported last week that all of Anglo Ashanti’s (AU) gold mines had halted production due to the labor disputes. But the strike does not stop with just the production crews, as transportation workers are also abstaining from work, making it next to impossible for big companies to move their bullion. GDX tracks global miners from all around the world with more than $10 billion in total assets. AU accounts for more than 5% of the fund, with other names like Barrick Gold and Newmont Mining making an appearance in the top holdings. The fund also allocates 13% of its assets to South African firms.
Physical Palladium Shares (PALL)
While South Africe is known for its gold production, it is the nation’s output of the platinum group metals that put it on the map. South Africa holds the vast majority of the proven reserves of such metals, meaning that a strike has the potential to swing palladium prices in a big way. This ETF has just under $500 million in assets and trades nearly 100,000 times each day. PALL has lost just under 3% this year and has been extremely active in the past month, making it a good fund to keep an eye on as the strike progresses [see also 5 Effective ETFs to Hedge a Frothy Stock Market].
Physical Platinum Shares (PPLT)
Workers for the world’s largest platinum producer, Anglo American Platinum (Amplats), have been engaging in an illegal strike for the past few weeks, causing a major headache for the company. “Four of Amplats’ Rustenburg mines, accounting for a quarter of group output, have been idle for more than two weeks, costing the company at least 20,000 ounces in lost output to date – $33 million at current spot prices” writes Ed Stoddard. This physically-backed ETF will be especially important to watch as it has surged more than 9% in the the trailing month and is up over 18% YTD.
Disclosure: No positions at time of writing.