Gold stock bullish after N Korea tests nuke

GOLD stocks surged on the JSE yesterday driven by a stronger gold price in the wake of fears that North Korea may launch further missile tests.

The bullion jumped 1 percent to $1 338.08 (R17 360) an ounce, after earlier touching its strongest level since late September at $1 339.47 after North Korea said on Sunday it had conducted a test of a hydrogen bomb.

The test, which reportedly led to an explosion creating a 6.3 tremor, drove jittery investors to buy safe-haven assets.

Seleho Tsatsi, an investment researcher at Anchor Capital, said gold was vulnerable to geopolitical tensions.

“All the gold miners are highly levered to the gold price, so any positive move in the gold price should see a greater than one-for-one increase in spot earnings, with share prices likely to follow suit,” Tsatsi said.

DRDGold, which focuses on processing tailing dams in Johannesburg through its subsidiaries Ergo and Crown Mining, was at R5.08 a share at noon after climbing 9.25 percent and closed 11.18 percent firmer at R5.17 a share.

DRD is scheduled to release its financial results for the year to June today.

AngloGold Ashanti, the world’s third biggest gold producer, firmed 5.05 percent to R137.33 a share before closing 5.24 percent higher at R137.58 a share.

Harmony Gold, where five mineworkers died in a seismic event two weeks ago, firmed 4.31 percent to trade at R27.36 a share and closed 6.37 percent higher at R27.90 a share.

Sibanye Gold, South Africa’s biggest gold producer was 3.13 percent higher at R21.10 a share to close 2.98 percent lower at R21.07 a share.

Strengthening Gold Fields, which operates the mechanised South Deep mine, traded 4.67 percent higher to R59.35 a share and closed at 4.80 percent stronger at R59.42 a share.

The strengthening of the gold price comes as local gold mining houses are under severe strain. “There have been a few difficult updates coming out of the sector recently. The rand strength isn’t helpful but investors may be more focused on what the US dollar gold price does,” Tsatsi said.

Sibanye swung to a R4.8 billion loss for the six months ended June compared to R88 million profit in the same period last year owing to non-recurring items, including a R1.1bn provision for a class action suit by mineworkers who contracted silicosis and a R2.8bn impairment relating to the cessation of its loss-making Cooke and Beatrix West mines.

AngloGold Ashanti reported a post-tax loss of $165m in the half year to June compared with a $61m profit a year earlier and an $80m profit at the end of its 2016 financial year. It paid no dividend.