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South Africa gold firms get lift from weak rand, but risks lurk

Section: Daily Dispatches

By Ed Stoddard
Monday, March 7, 2016

JOHANNESBURG, South Africa -- A sinking rand has sparked a buying spree and rerating of South African gold mining shares which have doubled in value in 2016, but the volatile currency is a double-edged sword that could cut the gains back down to size.

The crumbling currency is the main driver behind the rally. It has shed 15 percent against the dollar since October and its decline has coincided with a spike in spot gold, pushing the rand/bullion price to record highs of almost 20,000 rand an ounce.

The result: South African gold producers which were struggling are now suddenly flush with cash. ...

But what the rand gives, it can take away. The sudden change in fortune highlights just how marginal South African gold operations are and how exposed they are to fluctuations in the rand and gold price.

"These mines are so marginal and geared. If the price goes in your favor, it is a multiple increase. Harmony was losing money and now it is just a cash machine," said Peter Major, fund manager at Cadiz Cadiz Corporate Solutions. ...

... For the remainder of the report:


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