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Could South African Gold Miners Catch Up with Gold?

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South African gold miners’ issues

South African miners, which can be categorized as senior or intermediate miners, are driven by unique factors. In 2Q17, South Africa was downgraded to “junk” by Fitch Ratings and Standard and Poor’s. The South African mining industry has been riddled with political, infrastructure, and labor issues.

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Stock performance

In 2017, Gold Fields (GFI) and Sibanye Gold (SBGL) gave positive stock returns. As of February 12, 2018, of the four major South African gold stocks (GDX), only AngloGold Ashanti (AU) had risen this year, by 0.3%. Gold Fields, Sibanye, and Harmony Gold (HMY) had fallen 6.3%, 13.9%, and 2.1%, respectively.

Harmony Gold released its earnings for the six months ended December 31, 2017, on February 12, 2018. Its headline earnings per share rose 49% year-over-year.

On February 1, 2018, several workers at one of Sibanye’s mines got stuck underground. They were later rescued. As three workers have died at the Sibanye-Stillwater mine in February 2018 alone, concerns over miners’ safety and contingency plans are rising.

Gold Fields reported a loss in 2017. CEO Nick Holland stated that 2017 was expected to be a tough year due to huge cash outflows linked to high project capital expenditure. In 2018, the company expects production of 2.08 million–2.1 million ounces. Production is expected to be slightly lower than last year’s because the company has sold one of its Australian mines. To learn more about analysts’ views on these companies, read Wall Street’s Vision of Gold ahead of the 2Q17 Earnings.

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