Johannesburg - Resource-based stocks rose dramatically on the JSE yesterday as the rand sank to a record low amid the cabinet reshuffle that saw the appointment of a new finance minister.
Harmony Gold led the rout rising by 20.47 percent to R13.71; AngloGold Ashanti jumped by 3.47 percent to R72.54; Gold Fields was up 9.25 percent to R40.99 and Sibanye Gold rose 2.77 percent higher at R24.14 a share. The gold mining index gained 9.82 percent to 1 055.88 points.
Gold mining companies were not the only ones that benefited from the rand weakness, but companies with platinum mining interests also saw their share prices gain.
Anglo American Platinum added 4.01 percent to R177.33 a share, Impala Platinum gained 5.46 percent at R27.25 and Pan African Resources was 9.93 percent higher at R1.66 a share.
Peter Major, a mining analyst at Cadiz Specialised Asset Management, said yesterday’s strengthening of resource stocks was merely buying time for mining houses, which had grappled with plummeting commodity prices that had led to the mining companies to sell assets, shut operations and cut thousands of jobs.
“When you buy time it makes you think and plan,” said Major. “It is a plus for Harmony. Around 90 percent of costs are in rands. For Gold Fields a higher share price will help its South Deep operation. It also helps AngloGold Ashanti and companies like Pan African Resources, but it is only for the short term.
Rand tumbles
“You cannot build a stable mining company when the rand is going berserk.”
The rand was R15.08 to the dollar yesterday after plunging on Wednesday night to a record low after President Jacob Zuma fired Finance Minister Nhlanhla Nene to replace him with David van Rooyen. News on Nene’s dismissal caused the rand to weaken by 80c to R15.3857 before firming at R15.0813 by 9.10pm yesterday.
Sibonginkosi Nyanga, an analyst at Momentum SP Reid Securities, said a weak rand was good for local gold producers. “For the same gold products, producers are getting more in rands,” Nyanga said.
Despite the strengthening of the stocks, the fortunes of the mining industry were unlikely to change negative perception as a result of policy uncertainty and (the) negative business environment had made investors wary.
Markus Buchmann, the joint founder of Craton Capital, said yesterday that the sector was flawed.
“We think that the environment in mining and in the country is toxic, neither capital investors nor equity investors want to invest in South Africa.
“Just open any newspaper. Everything is toxic. You will not find overseas investors who will want to make investment here,” Buchmann added.
South Africa’s economy is already struggling and is expected to grow by 1.5 percent this year.
BUSINESS REPORT