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Rand Gains as Yields Fall to Two-Week Lows on Mining Optimism

The rand strengthened and bonds gained, driving yields to two-week lows, after South Africa’s mineral resources minister said the government hasn’t decided whether to raise mining taxes and won’t nationalize mines.

South Africa’s currency advanced 0.4 percent to 8.8791 per dollar by 4:25 p.m. in Johannesburg, rallying after a 0.4 percent fall in earlier trading. Yields on 6.75 percent bonds due March 2021 dropped 3 basis points, or 0.03 percentage point, to 6.47 percent, the lowest close since Jan. 23.

The government will act in “a responsible way” toward mining companies to overcome challenges facing the industry, Susan Shabangu, the mineral resources minister, said in an interview. Mining companies in Africa’s largest economy are battling to contain rising production costs after a series of strikes last year led to above-inflation wage increases. Metals and other commodities account for about 60 percent of South Africa’s exports, according to government data for 2012.

“There was some positivity” in Shabangu’s remarks, indicating that “the temperature of the comments coming from government has come down a notch or two,” Mohammed Nalla, head of strategic research at Nedbank Group Ltd. in Johannesburg, said by phone. “They seem to be friendlier.”

Nine platinum-mine shafts were shut in the second half of 2012, according to the Department of Mineral Resources. Anglo American Platinum Ltd., the world’s largest producer of the metal, announced plans on Jan. 15 to idle four shafts and fire as many as 14,000 workers. It put those plans on hold for two months, after Shabangu warned the company may lose some of its mining licenses.

Euro Rallies

The rand extended gains as the euro rallied after a purchasing managers’ index showed services output in the euro area, South Africa’s biggest regional trading partner, shrank less than initially estimated, boosting demand for riskier assets, Nalla said.

Standard & Poor’s GSCI Index of raw materials climbed as much as 0.7 percent and South Africa’s benchmark stock index erased declines. Commodities and the rand declined in earlier trading after renewed concern about Europe’s debt crisis damped demand for higher-yielding assets.

South Africa’s Treasury sold 2.1 billion rand of bonds due 2026, 2031 and 2048 in the weekly central bank auction today. Investors bid for 2.9 times the amount of debt on sale, compared with a bid-to-cover ratio of 3.2 at the previous auction on Jan. 29.

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