World's Highest-Cost Gold Miners Surge on Rand's Meltdown

Updated on
  • Harmony, Sibanye rise as gold reaches record priced in rand
  • Rand hit record low versus dollar after finance minister fired

Deep Dive: December Rate Increase, S. African Gold Miners

South African gold miners, the world’s highest-cost major producers, surged in Johannesburg as the rand plunged against the dollar after President Jacob Zuma fired his finance minister.

Harmony Gold Mining Co. advanced as much as 25 percent, the most in 16 years, while Gold Fields Ltd. and AngloGold Ashanti Ltd. climbed more than 9 percent and Sibanye Gold Mining Co. gained 5.7 percent.

The rand reached a record low against the dollar on Wednesday and is down 23 percent this year. That benefits South African companies because they get their revenues from gold sales in the U.S. currency, while their costs are in rand. Zuma fired Finance Minister Nhlanhla Nene yesterday after just 19 months and replaced him with a little-known lawmaker.

“The producers are now strongly levered to movements in emerging-market gold prices,” Andrew Byrne, a London-based analyst at Barclays Plc, wrote in a note Thursday. “With leaner corporate structures, we expect this to translate into cash generation of either deleveraging or a return of dividends.”

Gold climbed to a record 16,389.66 rand an ounce on Wednesday and traded at 16,198.22 rand by 12:32 p.m. in Johannesburg, data compiled by Bloomberg show. The metal for immediate delivery was little changed at $1,027.33 an ounce in London, after reaching a five-year low last week.

Harmony is the world’s highest-cost major gold producer, according to data compiled by Bloomberg Intelligence. It last traded 16 percent higher at 13.16 rand.

Anglo American Platinum Ltd., which is the world’s biggest producer of the metal and has the majority of its operations in South Africa, rose 4.1 percent. Impala Platinum Holdings Ltd., the second-largest, climbed 6.2 percent.