South African Mining Companies Prefer Stable Rand, Chamber Says

Mining companies in South Africa, the biggest producer of platinum and fifth-largest of gold, prefer a stable exchange rate because a weaker rand stokes inflation, Chamber of Mines Senior Executive Roger Baxter said.

“Mining companies have never advocated weak currency to support industry,” Baxter told reporters in Johannesburg yesterday. “If you have weak currency, you end up with a whole bunch of imported inflation. What we would like to see is a more stable currency.”

The rand depreciated for an 11th day against the dollar today, the longest losing streak since the 11 days through Feb. 12, 1988, according to data compiled by Bloomberg. Stocks and currencies in emerging markets declined as data showed Chinese manufacturing is contracting and as speculation grew the U.S. Federal Reserve will cut back stimulus, curbing demand for riskier assets.

Mining companies in South Africa are struggling for profit as metal prices drop and costs outpace inflation, which was 5.9 percent last month. A weaker local currency can boost their earnings from the sale of gold and platinum priced in dollars.

The currency of the continent’s biggest economy dropped 0.9 percent to 9.6615 per dollar by 10:30 a.m. in Johannesburg, extending its drop this year to 12 percent, the worst performance among 24 emerging-market currencies tracked by Bloomberg. Gold climbed for the first time in three days, adding 0.9 percent to $1,381.90 an ounce and paring the drop this year to 18 percent.

Challenging Situation

The average rand gold price was 469,914 rand ($48,680) per kilogram in the fourth quarter of 2012, Gold Fields Ltd., which spun off most of its South African operations in February this year, said in a May 10 statement. The price was 428,151 rand today, according to data compiled by Bloomberg.

“That’s a huge fall in the top line of the industry and that includes the fact that the rand has depreciated,” Baxter said. “It’s a challenging situation.”

AngloGold Ashanti Ltd. (ANG), the world’s third-biggest producer of the metal, has operations in South Africa. Anglo American Platinum Ltd. (AMS), the largest producer of the metal used in catalytic converters that help reduce harmful emissions from cars, gets most of its output from the country.

To contact the reporter on this story: Ana Monteiro in Johannesburg at amonteiro4@bloomberg.net

To contact the editors responsible for this story: John Viljoen at jviljoen@bloomberg.net; Amanda Jordan at ajordan11@bloomberg.net

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