The future for SA golds

The future for SA golds
David McKay
Posted: Thu, 06 Jan 2005

[miningmx.com] -- INTERNATIONAL investors could skip investment in the South African gold industry this year, according to gold analysts covering the sector. The primary reason is the uncertainty created by the effects of the strong rand on revenues, and the takeover row between Gold Fields and Harmony Gold. These two companies? valuations, which comprise 49% of Johannesburg?s gold index, have been skewed by the $7bn takeover offer.

?South African gold mining stocks may have taken themselves out of the picture for most of 2005,? said Victor Flores, an analyst for HSBC in New York. ?I think there?s alot of truth in that,? said Georges Lequime, an analyst who covers South African gold producers for RBC Capital?s London office. ?There?s not a great deal of interest in South African gold shares at the moment,? Lequime added. Both analysts agree investors could find safer places than South Africa to put their money.

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An analyst had positive remarks about the South African gold sector. The battle between Harmony Gold and Gold Fields served to bring some profile to the South African gold sector. ?It?s certainly put South Africa on the front page,? he said. However, analysts have complained the takeover battle has been unnecessarily ugly and occluded investment in those companies. ?It?s been a black eye in a sector replete with black eyes. This one is particularly ugly,? said Pollitt.

However, the improvement in the value of South Africa?s currency, the rand, against the dollar has taken some of the country?s gold stocks to fresh lows in the last two months. Earlier this week, Harmony touched a new three-year low of R50.25/share and is expected to post a headline loss in the December quarter. DRDGold, which is also struggling to produce cash from its South African mines, is half its value 12 months ago.

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