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How Are South African Gold Miners Doing Post-Brexit?

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Nov. 20 2020, Updated 1:25 p.m. ET

Exceptional start for South African miners

This year has been exceptional so far for South African gold miners, with stocks soaring since the beginning of the year. The uptrend has been driven by gains in gold prices due to its safe haven bid and the weakness of the South African rand.

This combination has been accentuated by the recent Brexit vote, which further drove gains in gold and further weakened the rand compared to the US dollar (USDU) (UUP).

Investors made a dash to safe-haven assets such as gold and the US dollar in a risk-off sentiment triggered by the United Kingdom’s vote to leave the European Union and the uncertainty that followed.

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South African miners’ outperformances

As of June 28, 2016, Harmony Gold Mining (HMY) has risen a staggering 217% year-to-date. The company is much more exposed to South Africa than other miners, and it’s the highest-cost gold producer. As such, it’s much more leveraged to the increase in gold prices and the depreciation of the rand.

To read more about Harmony Gold’s extraordinary gains, please see Defying Gravity: Decoding Harmony Gold’s 2016 Rally.

AngloGold Ashanti (AU) and Sibanye Gold (SGBL) have also risen considerably, with year-to-date gains of 130% and 107%, respectively.

This growth dwarfed the gain in the VanEck Vectors Gold Miners ETF (GDX), which has risen 89% in the same period. Gold prices rose 22%. Gold Fields (GFI), another South African miner, rose 53% in the same period. These gains follow a multiyear losing streak.

In this series

In this series, we’ll see if the outperformances of South African miners can continue in light of recent developments. We’ll look at analyst opinions for these miners as well as their current valuation in order to identify which miner could provide value compared to the others.

Let’s start by seeing which South African Gold Miner can benefit from the weak rand.

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