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Finding Investment Opportunities in Gold after the Rate Hike

PART:
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Part 8
Finding Investment Opportunities in Gold after the Rate Hike PART 8 OF 8

What’s in Store for South African Miners after the Fed’s Rate Hike?

South African miners and their performances

South African miners can be categorized as senior miners or intermediate miners. However, there are unique factors driving their performances that merit special attention.

South African mining stocks had a bad year in 2015 due to falling gold prices and geography-specific problems such as labor unrest and power issues. The first half of 2016 reversed these miners’ fortunes, only to turn around later.

What’s in Store for South African Miners after the Fed’s Rate Hike?

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South African miners’ prospects

AngloGold Ashanti (AU) stock has been under pressure in 2017 and is down 2% year-to-date (or YTD) through March 16, 2017. All its South African peers have gained in 2017. AU stock fell even after reinstating its dividend after reporting increased cash flows and earnings.

AU’s CEO, Srinivasan Venkatakrishnan, sold some shares of the company that had been acquired through a profit-sharing program. Although the stated purpose of the sale is to cover a related tax liability, investors did not take this lightly.

Harmony Gold (HMY) stock has shown a positive YTD trend, but its gain is lower than that of the benchmark. Its stock has risen only 2% YTD. HMY is much more exposed to South Africa than any other miners, and it’s the highest-cost gold producer. These factors have made the company much more leveraged to rises in gold prices. Under a weaker gold price environment, it could be the one to fall the furthest.

Sibanye Gold (SBGL) has risen 11.0% YTD, which is the highest gain among South African miners. Sibanye Gold has recently acquired Stillwater Mining, which could provide it with an upside if palladium prices remain buoyant due to strong year-to-date demand.

Gold Fields (GFI) has returned 7.0% YTD. Its guidance on South Deep should be a key catalyst for GFI stock.

These four South African companies make up 6.1% of the VanEck Vectors Gold Miners ETF (GDX). For more updates on precious metal mining stocks, keep checking in with Market Realist’s Precious Metal Mining page.

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