World’s highest-cost gold miners surge on rand’s meltdown

South African gold miners, the world’s highest-cost major producers, surged in Johannesburg trading after President Jacob Zuma fired his finance minister, sending the rand to a record low against the dollar. Harmony Gold Mining Company rose as much as 22%, the most in seven years, while Gold Fields and AngloGold Ashanti climbed more than 10% and Sibanye Gold Mining Company rose more than 8%.

The companies get their revenue from gold sales in US dollars while their costs are in South African rand, which plunged as much as 5.2% on Wednesday to an all-time low of 15.3857 per dollar before paring losses in overnight trading. Zuma yesterday fired Finance Minister Nhlanhla Nene after just 19 months and replaced him with a little-known lawmaker.

Having cut costs in the past 12 months, gold producers are well placed to capitalise on the falling rand, according to Andrew Byrne, a London-based analyst at Barclays. “The producers are now strongly levered to movements in emerging-market gold prices,” he wrote in a note on Thursday. “With leaner corporate structures, we expect this to translate into cash generation of either deleveraging or a return of dividends.”

Gold climbed to a record R16 389.66 an ounce on Wednesday and traded at R16 087.93 at 10:33am in Johannesburg. In dollars, the precious metal rose 0.1% to $1 073.56 an ounce.

Harmony and Sibanye are the world’s highest-cost major gold producers, according to data compiled by Bloomberg Intelligence.

Anglo American Platinum, which is the world’s biggest producer of the metal and has the majority of its operations in South Africa, rose 5%, while number two producer Impala Platinum Holdings climbed 6.8%.

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