Terry, with the rand at historic lows, the gold mines will turn in good profits (in rands) because their product is sold in US dollars. This is particularly advantageous to SA investors but not necessarily so to non-SA investors. A low rand certainly does not detract from the merits of gold mining investments until, in the longer term, inflation overtakes profitability which, inevitably, it will do.
I haven't heard anything new about wage demands lately so I can't confirm the pressure from the unions which you mentioned. Of course, every year there have been, and I'm sure will be, demands for wage increases but that's nothing new, it's merely par for the local course.
I don't know why the rand has taken such a hit lately. There's certainly nothing "in the air" to account for it. To my understanding all negative factors were already known and factored into the exchange rate eg Zimbabwe, AIDS, lousy local economy, affirmative action, incompetent ANC administration, emigration of skilled labor etc. The SA government does not seem overly concerned about the fall in the rand because they don't expect foreign investment anyway and exports do well(in rands).
I might add that the rand devaluation doesn't worry me because, as an investor, I have been able to hedge my position with offshore and commodity stocks including golds. Therefore, they can do what they like with the currency. The value of the rand may spring back somewhat as short sellers are forced to buy in but, in the long term, I don't see the rand going anywhere but down. For your information, the rate of depreciation of the rand vis-a-vis the USD for the past 20 years has been about 13% pa but it has, in fact, halved in value over the past three years.
I have never liked DROOY so I can't comment on whether it's a "sell". To me it was never a "buy"! As far as other SA golds are concerned, I think you should make your decision on the merits of gold investments, generally, and not on South African imponderables. There are certainly no particular political or social problems affecting SA gold mines. |
