R478bn market cap for top 10 miners
THE market capitalisation of the Top 10 JSE-listed mining companies is R478 billion – a 48 percent jump thanks to the firmer gold price.
Despite the subdued outlook for the mining industry this year the strengthening of the gold price since the beginning of the year had bolstered the market capitalisation of these companies, according to the 8th annual PwC mine report on trends of the South African mining industry.
The report, which was published yesterday, said the market capitalisation of the top 10 companies rose by R155bn to R478bn, as at June 30, gaining a further R30bn to August 30.
The report indicated that AngloGold Ashanti had the most notable increase and since June last year, the company’s market capitalisation had grown 148 percent to R65bn.
“The increase in the price of gold, as a result of investors seeking a safer haven in gold, resulted in the market capitalisation of gold companies (included in the top 10 of the companies analysed) increasing by R137.6bn since June 2015,” the report said.
The gold price had risen 26percent since the beginning of the year as the market sought a safe haven amid fears that the US Federal Reserve would hike interest rates.
Safe haven
However, the report indicated that, market capitalisation among diversified companies continued to be subdued with a decrease of R9.2bn since June last year.
South Africa’s biggest iron ore producer, Kumba Iron Ore declined the most to R13bn a 27 percent decline, although it did claw back some of the losses after June.
This as the 2016 financial year saw an increase in market capitalisation predominantly as a result of the notable increase in the market capital of gold mining companies and a small increase in the market capital of platinum mining companies.
On the whole the market capitalisation of 31 companies analysed in the publication increased to R560bn, or by 45 percent, as at 30 June – compared with R386bn as at 30 June last year. Market capitalisation grew further to R578bn as at 31 August, resulting in an aggregate increase of R192.6bn, which is 50percent more than 30 June last year.
The report based its findings on the financial results of mining companies with a primary or secondary listing on the JSE and which have their main operations in Africa. Only companies with a market capitalisation of more than R200 million at the end of June were included.
The report comes against the backdrop of yet another challenging year for the industry.
Challenging year
Performance has been affected by a slower-than-expected rate of economic growth, a prolonged and continuing downswing in commodity prices, an increase in short-term volatility, increased pressure on operating models and regulatory uncertainty.
“Adding to the challenge is the increased difficulty in raising capital due to a loss of confidence by investors and capital markets being seen as a last resort. South Africa’s possible credit ratings downgrade has also created some uncertainty within the market.”
Adding to the challenge is the increased difficulty in raising capital due to a loss of confidence by investors.