South African Miners Get Boost from the Plummeting Rand

Rand falls

South African gold miners seem to be breathing a sigh of relief amid the draught in the precious metals markets. Precious metals have dropped to significantly lower levels in 2015, and most mining companies have been adversely affected by the fall in the metals prices, as lower prices negatively impact profit margins. However, that is not the case for South African miners because the South African rand has reached a record low in the current year. The rand has lost about 23% in 2015 so far.

The mining companies based in South Africa like AngloGold Ashanti (AU), Sibanye Gold (SBGL), and Gold Fields (GFI) earn their revenues in US dollars, as the precious metals are priced in dollars. However, these companies pay expenses in their local currency, which is the rand.

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Gains for African miners

These three companies increased significantly on Thursday, December 10. Sibanye, Gold Fields, and AngloGold Ashanti surged 14%, 7.7%, and 11.6%, respectively, on a five-day-trailing basis. They have also seen positive returns over the past month. These three stocks together determine 10.6% of the price fluctuations in the VanEck Vectors Gold Miners ETF (GDX). The GDX indicator has gained 4.1% on a 30-day-trailing basis. The performance of the mining sector overall has been better than expected amid the sharply falling precious metals.

Another mining ETF, the Sprott Gold Miners (SGDM), gained 4.7% on a 30-day trailing basis. Overall, the performance of the mining companies seems to have detached itself from falling prices.