South African gold miners were among the most punished stocks last year. However, if you don't think that the world of gold is coming to an end, you might consider adding companies like AngloGold Ashanti (NYSE:AU), Gold Fields (NYSE:GFI) and Harmony Gold Mining (NYSE:HMY) to your portfolio. Here's why.

Strike threats are most likely priced in
South Africa is notorious for its powerful mining unions who use strikes as their favorite way of negotiation. Back in September, these unions accepted an 8% rise in the entry-level salary. One union, the Association of Mineworkers and Construction Union (AMCU), is still demanding to more than double the base salary.

This union is threatening a strike. Both AngloGold and Harmony Gold Mining have already confirmed that they have received a strike notice from the AMCU. However, it is clear that with the current level of gold prices such a raise is impossible. The pressure that different unions are able to put on gold miners is no news for investors, and this has already been reflected in miners' stock prices.

Costs are falling
South African gold miners were a bit slow to react to the falling price of gold. However, they were able to show meaningful improvements in the third quarter. Gold Fields reported an all-in sustaining cost of $1,089 per ounce. AngloGold stated that its all-in sustaining cost was $1,155, down 11% from the previous quarter.

Only Harmony Gold Mining is in a danger zone, as its third-quarter all-in sustaining cost was $1,264, higher than current gold prices. It's worth noticing that the South African rand continues to fall against the U.S. dollar, which helps overcome wage increases, as wages are paid in rand.

Despite the above-mentioned strike threat, I believe that unions' ability to push wages higher is limited. Typically, they start with an outrageous wage increase demand, but then agree to a modest raise, just as it happened last September.

Financial positions remain robust
These miners have entered a period of weak gold prices with a reasonable amount of debt on their balance sheets. Harmony Gold is in the best position, as it owes just $285 million. What's more, the level of cash on miners' balance sheets remained healthy and stable throughout 2013, which means that miners have some room for maneuver.

You should be aware that the year-end reports will most likely bring some asset impairments. For example, Gold Fields' previous year resources and reserves were calculated at $1,500 per ounce. The company stated that it will calculate them at $1,300 per ounce, which will lead to the downside revision of the value of its assets. Again, this is no big news for investors, as share prices take into account current gold prices.

Bottom line
Adding South African gold miners to the portfolio is not for the faint-hearted. Their shares have proved to have significant volatility, and this is not going to change in the short term. However, the companies have been punished more than their businesses deserve.

You can expect more cost-cutting measures from those miners, like optimizing their existing operations, selling non-core assets and cutting back on capital expenditures. All in all, I believe that the shares of AngloGold, Gold Fields, and Harmony Gold have significant upside potential once gold prices stabilize.

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Vladimir Zernov has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.