JOHANNESBURG – Gold and platinum companies strengthened on the JSE as the rand reached a two-year low against the US dollar after the country slipped into a technical recession.
Harmony Gold rallied 7.05 percent to R26.74 a share, and Sibanye-Stillwater rose by 7.7 percent to R9.79 a share.
The JSE Gold Index jumped 1.13 percent yesterday.
Platinum stocks also gained momentum with Northam Platinum strengthening by 5.15 percent to R40.20 a share at the close of trade, Impala Platinum closed 5.81 percent stronger at R19.31 a share, Royal Bafokeng Platinum closed 5.17 percent higher at R24.20 a share and Lonmin closed 4.45 percent firmer at R8.21 a share and Anglo American Platinum strengthened by 1.81 percent to R445.43 a share.
The JSE Platinum Index closed 3.77 percent higher yesterday.
South African mining houses benefit from a lower currency as their revenues are often based in dollars, while costs are rand-based.
Seleho Tsatsi, an analyst at Anchor Capital, said: “The weak rand is generally helpful to mining companies. As long as the rand stays weak, it will benefit them (mining companies).
“The million dollar question, of course, is how long the rand will stay weak.”
On Tuesday the South African economy contracted by 0.7 percent in the second quarter, indicating a technical recession.
Meanwhile Sibanye, which plans to buy platinum producer Lonmin, announced yesterday that it had concluded a tender offer worth up to $400 million (about R6 billion) to buy back some of its bonds.
Tsatsi said it was positive news that Sibanye-Stillwater had concluded the tender for convertible bonds.
“It’s a positive move towards alleviating the pressure on Sibanye’s balance sheet. That balance sheet risk and the safety record have concerned shareholders”.
Sibanye-Stillwater is grappling with a high fatality rate after 20 (miners) were killed in accidents this year alone.
Sibanye-Stillwater is South Africa’s largest gold employer and its operations south-west of Joburg include some of the deepest shafts in the world.
In terms of wage talks in the gold sector, the Minerals Council of South Africa said yesterday that discussion between trade unions, AngloGold Ashanti and Sibanye-Stillwater would continue.
It said producers AngloGold Ashanti, Sibanye, the Association of Mineworkers and Construction Union, Solidarity and United Association of South Africa met for gold negotiations in Joburg yesterday.
“The parties continued to engage in bilateral discussions and good progress was made,” the council said.