Gold melts on the JSE with no respite in sight
JOHANNESBURG – A plunge in gold output in November saw the gold index bleed 2.5 percent on the JSE on Tuesday as no respite for the sector seems in sight.
Statistics South Africa said yesterday that production for diamonds tanked 21.7 percent, while output for the long-suffering gold industry dropped 14 percent, continuing its free-fall that stretches back seven years.
This saw mining production fall 5.6 percent year-on-year in November from a muted 0.2 percent rise in October and missing the market consensus of a 0.75 percent rise.
Sibanye Gold stock lost 4.04 percent to R9.99, while peers AngloGold Ashanti shed 1.90 percent to R173.06 and Gold Fields stock softened 2.64 percent to R49.13
Investec economist Lara Hodes said domestic mining activity continued to be hindered by operational inefficiencies and rising costs of fundamental inputs, including climbing electricity and water tariffs.
“We are, however, anticipating an increase in both policy and political certainty post the 2019 national elections,” Hodes said.
“This, together with a more transparent mining charter and an expected moderate up-tick in growth to around 1.7 percent year-on-year for the year should propel a lift in confidence. This would assist in attracting much-needed investment into this significant sector of the economy.”
The gold price declined by more than 8 percent between 2016 and 2017. The gold mining sector has also shed jobs at an alarming rate.
According to the Minerals Council SA, employment in the gold sector had continued to decline since the 1980s with around 112 200 workers currently employed. The council last year warned that 75 percent of the country’s gold mines were unprofitable.
South Africa will next month host the Mining Indaba, an event that annually attracts more than 7 000 participants from all over the world.
Petrus de Kock, Brand South Africa’s general manager for research, said:
“At this event (Mining Indaba), developments in the Mining Charter and opportunities for investment and business in the sector will be shared with fund managers, mining executives and decision-makers.”
The World Bank last week cut South Africa’s 2019 growth forecast from the 1.8 percent it had projected last year to 1.3 percent.
The Washington-based lender said that growth in 2019 was likely to remain subdued because of challenges in mining production, low business confidence and policy uncertainty.
NKC African Economics economist Elize Kruger said the mining sector had completely wiped out the hesitant recovery evident in October.
“Protest actio vember and intermittent load shedding by Eskom were among the reasons for the dismal performance,” Kruger said.