Out of Rand Crisis, Opportunity for World’s Costliest Gold Mines – by Kevin Crowley (Bloomberg News – December 14, 2015)


South African President Jacob Zuma is causing turmoil in financial markets and accidentally throwing a lifeline to his country’s struggling gold industry.

Zuma’s decision to fire respected Finance Minister Nhlanhla Nene drove the rand to a record low, instantly reducing labor and other costs in the local currency for mining companies, relative to the U.S. dollars they earn by selling gold.

Shares of Harmony Gold Mining Ltd., the highest-cost major miner of the metal, are up 25 percent since Zuma’s decision Dec. 9. AngloGold Ashanti Ltd. gained 12 percent and Gold Fields Ltd. 11 percent.

A weak rand offers relief to an industry plagued by labor unrest, aging mines and power shortages. Companies as recently as six months ago were saying they needed to cut costs to survive as they lost money on 35 percent of local production.

“Local mines have gone from being very troubled to highly cash-flow generative in many instances,” said Andrew Lapping, deputy chief investment officer at Allan Gray Ltd., which oversees $28 billion of assets in Cape Town. “It certainly provides a temporary respite.”

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