South Africa Gold Miners Surge as Bullion in Rand Hits Record

South Africa’s Rand Weakens Post Finance Minister Change
  • Rand hits record low of 16.0543 against the U.S. dollar
  • Currency drop acts as a cost cut for mining companies

South African gold miners led by Harmony Gold Mining Co. surged in Johannesburg trading as the local currency fell to a record low against the dollar.

Harmony climbed as much as 45 percent Friday, the most since August 1990, while Gold Fields Ltd. rose 12 percent, AngloGold Ashanti Ltd. was 7.2 percent higher and Sibanye Gold Ltd. traded up 4.2 percent. The rand slumped to as much as 16.0543 versus the U.S. currency.

Rand weakness acts as a cost cut for the companies’ domestic operations because they receive their revenue in dollars while paying their expenses in the local currency.

South African gold miners are “strongly levered” to movements in the rand, Andrew Byrne, a London-based analyst at Barclays Plc, wrote in a note . “We expect this to translate into cash generation of either deleveraging or a return of dividends.”

President Jacob Zuma sent markets into chaos from Wednesday evening when he abruptly fired his respected finance minister and replaced him with an untested and unknown lawmaker. Fund managers and analysts warned the ruling African National Congress’s reputation for prudent financial management is in tatters.

While gold in dollars fell 0.7 percent to $1,063.90 an ounce at 1:19 p.m. in Johannesburg, the metal climbed to a record 17, 003 an ounce in rand.

Harmony traded up 33 percent at 18.27 rand by 2:04 p.m. in Johannesburg, the strongest since May 22. Gold Fields was 8 percent higher at 45.19 rand, AngloGold increased 2.7 percent to 110.86 rand and Sibanye rose 2.4 percent to 24.73 rand.

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