Gold producers’ fortunes rally
The value of JSE-listed companies - particularly gold producers - has boomed since January.
|||Johannesburg - JSE-listed companies, particularly gold producers, are “printing money” on the back of an upswing in gold prices.
The value of gold JSE-listed companies has boomed since January and by Friday, the market capitalisation for AngloGold Ashanti, which returned to the JSE Top40 index in March, doubled to R106 billion (from R52bn in January). South Africa’s biggest gold producer Sibanye Gold, was valued at R45bn (from R23bn), Gold Fields at R54.76bn (from R33bn), while Harmony Gold was valued R24.6bn (from R10.9bn).
Rene Hochreiter, a mining analyst at NOAH Capital Markets, said the rise in commodity prices had risen in January, and by March, share prices, particularly those of gold companies, were 200 percent higher.
“Gold companies are printing money. Gold is sold currently at R592 821 a kilogram… The all-time high price for gold was on February 29 this year, when it reached R641 421 a kilogram,” Hochreiter said.
The spot price of gold has risen almost 20 percent compared with last year, signalling a bull market, to $1 266 (R19 245) an ounce.
A PwC report on mines said gold and diversified firms had been the biggest beneficiaries of the strengthening with market capitalisation and share prices soaring since the beginning of the year. The report noted market capitalisation growth among top 40 mining houses had risen by 30 percent at the end of April from a 37 percent slump last year.
Platinum firms are also benefiting from the commodity prices. Bloomberg data showed the platinum price was 11 percent higher in the year to date, trading at $994.49 an ounce on Friday. Hochreiter noted that the platinum group metal (PGM) basket (6E) is selling at R377 750 a kilogram. “It (the PGM basket price) is a long way behind gold in terms of revenue. It is getting better… but the platinum sector is not out of the woods,” he said.
On Friday, the market capitalisation of Anglo American Platinum was R101bn from R44bn in January, while Impala Platinum had a market share of R33bn from R20.5bn in January.
The market capitalisation for Lonmin was R11.23bn from about R2bn, when it announced news of a capital raise late last year, and R5bn in January.
Improved commodity prices have helped breathe new life into companies, including diversified global mining house Anglo American and Lonmin.
Anglo, the market capitalisation of which grew to R179bn from R79bn in January, not only disposed of non-core assets due to low prices last year, but its credit rating was downgraded to junk as it grappled with debt.
Lonmin faced going under last year until shareholders agreed to a lifeline, with a R5.7bn equity raise, which helped change its fortunes.
However, the share prices of Lonmin and Impala Platinum were low relative to their peers on three-year forecast costs and at current revenue, Hochreiter noted.
The prospects for iron ore, copper and nickel were low, and depended very much on the health of the Chinese economy, which might stay flat for some years to come, he said.
“Even though Australia, South Africa and Brazil have dropped their currencies versus the US dollar, it does not mean iron ore, copper and nickel dollar prices are going to rise anytime soon,” he said.
BUSINESS REPORT