Johannesburg - If you owned all three of South Africa’s major gold mining companies from June last year, you would have lost about R100bn by now.
That’s the drop in the market capitalisation of AngloGold Ashanti [JSE:ANG], Harmony [JSE:HAR] and Gold Fields [JSE:GFI] (including the unbundled Sibanye Gold) since the gold price’s peak last year.
The companies were worth a collective R240bn back then.
When the JSE closed on Friday, they were worth R137bn.
International gold companies with no assets anywhere near South Africa’s have done as bad, or worse, on the world’s stock exchanges as the gold price’s continual decline last week briefly became a free fall.
Gold experts were doing a roaring trade last week, trying to explain the drop from $1 550 (R14 200) to $1 350 in two days.
There are widespread suggestions someone bombed the market intentionally.
The amount of gold traded in those two days, about 300 tons, far exceeds South Africa’s annual production.
Chris Hart, a senior economist for Investment Solutions, told City Press’ sister publication Miningmx: “I’m not into conspiracy theories, but you’d have to be naive not to think the markets are being manipulated.”
On Friday, the gold price recovered to back above $1 400 an ounce, but only barely.
The speed of the drop was unusual. The last time the gold price fell by so much, in so short a space of time, was at the end of the previous gold boom in 1982.
What followed then in South Africa was the eventual culling of many of the gold mines.
This is again a very real risk if the price remains below $1 400 for any length of time.
AngloGold’s average costs were approaching $1 300 per ounce, while Harmony’s total costs per ounce were around $1 460.
The huge KDC and Beatrix mines that Gold Fields recently spun off as Sibanye Gold are in danger, with their expenditure per ounce reaching $1 395 in the last quarter of 2012.
Since then, a fire has made much of Beatrix unmineable.
South Deep, the one South African operation Gold Fields has kept, is still developing, but will now be an increasingly large drain on the company’s cash.
Gold Fields as a whole, excluding the strike-hit mines in South Africa, spent $1 365 mining every ounce.
These numbers were inflated by the strikes late last year, but a number of major mines cannot maintain production and capital expenditure at last week’s gold prices, even if things go well.
In addition, the most treacherous wage negotiations of the democratic era are scheduled to begin within weeks, and a new militancy among workers is sure to collide with panicked cost-saving schemes among employers.
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