Glint of the gold price soaring gives hard-pressed producers a temporary reprieve

GOLD reached a 2019 high yesterday, giving South Africa’s listed gold producers a temporary reprieve from the gloom surrounding depleting reserves associated with deep-level mining.

The gold price soared 0.72 percent to $1 338.23 an ounce, above the $1 300 an ounce level since May 31 when the US trade war with China reached boiling point, resulting in an equity markets slump.

The weak rand-dollar exchange rate coupled with the higher gold price has lifted local producers of the precious metal.

Gold producers have rallied, led by Gold Fields, which leapt 23.55 percent in the past five days, and AngloGold Ashanti up 21.57 percent this week.

Harmony Gold jumped 16.05 percent this week, Sibanye-Stillwater up 16.22 percent, and Pan African Resources 12.57 percent higher.

Gold is useful in periods of higher uncertainty as it attracts institutional investors due to its ability to act as a hedge against systemic risk and strong stock market pull-backs.

Seleho Tsatsi, an investment analyst at Johannesburg-based Anchor Capital, said yesterday that the gold price in rand terms was 8 percent stronger at R640 000 a kilogram.

“The gold price is at a three-year high and has not done much over the past five years as costs have gone up by 7 percent a year.

“With the exception of Pan African Resources, a low-cost producer, it will be difficult for companies to maintain the price,” said Tsatsi.

Pan African is South Africa’s lowest-cost gold producer, which said last month that the all-in sustaining costs of its Evander 8 would be $900 an ounce.

South Africa’s gold industry is buckling under pressure, with the Minerals Council previously warning of a further jobs bloodbath in the ailing industry that has been on life support.

The council previously said more than 90 000 gold mining employees would lose their jobs in the next three years due to the above-inflation electricity price hikes given to Eskom and economic challenges.

Sibanye-Stillwater on Wednesday said it had cut 3 450 jobs at its Driefontein and Beatrix mines, which have been in intensive care since 2017.

Africa has the world’s steepest production costs in terms of gold mining, according to the World Gold Council.

The council said in a report last month that South Africa remained the most affected by a rise in mining costs as electricity disruptions and lower production pushed total cash costs up by 10 percent to $1 107 an ounce.

The rising input costs and depleting reserves saw Top 40 company AngloGold announcing plans to leave South Africa last month. AngloGold said it was reviewing options to sell Mponeng, the world’s deepest gold mine, as it plotted to focus elsewhere for growth prospects.

Harmony shares closed 3.12 percent higher at R28.42 on the JSE yesterday; AngloGold shares gained 1.4 percent to close at R220.26; Gold Fields closed 1.25 percent lower at R75.05; and Sibanye shares were 1.49 percent lower and closed at R14.95.