Bloodletting in SA gold stocks and some opportunity

The performance of the JSE’s mining counters since the Marikana massacre of August 2012 can, at best, be described as flat if one uses the FTSE/JSE Resources 10 index as a proxy, but it would belie the extent of especially gold stocks’ downward spiral and limited prospects of a nearby turnaround.

The Resources Index closed at 47,941.06 points on August 16 2012, the day of the massacre and again stood at 46,084.04 points on Thursday, following a rally which climaxed on February 13 at 53,995 points.

The fact that the index was able to keep within touching distance of its pre-Marikana levels at all could be attributed to the performances of BHP Billiton and Sasol, shares which respectively has very limited exposure to South Africa and whose core business do not resemble that of a typical mining company.

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According to financial services firm Satrix, provider of an exchange traded fund which tracks the FTSE/JSE Resources Index, Sasol and BHP Billiton had a collective weighting of 52.7% of the entire index on December 31, and have respectively gained 3.4% and 10.4% since August 16.

The only other group in the index of ten stocks to increase in value over the same period was its smallest member, diversified miner African Rainbow Minerals, with gains of 12.7%.

Others in the group include Anglo American, down 9.9%, as well as its platinum subsidiary Amplats, down 9.8%. Impala Platinum, the world’s number two producer of the metal, lost 2.8% in value.

Most of the blood shedding, however, took place among South Africa’s major gold stocks which were hammered by investors’ increasing scepticism over escalating costs; the quality of South Africa’s remaining ore body, labour disruptions and regulatory concerns.

AngloGold Ashanti (29.8%) , Gold Fields (32.3%, including Sibanye Gold) and Harmony Gold (35.9%) all lost around a third in value during the period and, with many analysts of the belief that gold’s prospects are fading, are seemingly destined for a prolonged time in the wilderness.

Diversified miners
BHP Billiton Date Price Movement (since 16 Aug 2012)
16 Aug ’12 R254.18

-

02 Jan ’13 R307.49

20.9%

04 Apr ’13 R263.07

3.4%

Anglo American 16 Aug ’12 R254.44

-

02 Jan ’13 R277.42

9%

04 Apr ’13 R229.18

-9.9%

Exxaro Resources 16 Aug ’12 R176.18

-

02 Jan ’13 R174.40

-1%

04 Apr ’13 R155.00

-12%

African Rainbow Minerals 16 Aug ’12 R161.00

-

02 Jan ’13 R191.00

15.7%

04 Apr ’13 R181.50

12.7%

Two stocks with potential upside are Lonmin and Anglo American.



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