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Gold/Mining/Energy : Precious and Base Metal Investing -- Ignore unavailable to you. Want to Upgrade?

To: russwinter who wrote (780)	12/12/2001 1:41:07 PM
From: pater tenebrarum	Respond to of 39344

as i've explained before, the Rand is used as a hedge against emerging market currency risk in general. that puts pressure on it that is not warranted based on SA's fundamentals. furthermore, the Reserve Bank has made the mistake of restricting certain types of transactions, which has led to a thinner market more susceptible to big price swings. as the article you posted correctly states " The rand dropped from under R10 to a new low of R11,28 to the United States dollar, since the beginning of December 2001 - for no clear reason and despite it being generally accepted that South Africa has among the best economic fundamentals of any of the emerging markets." as to the issue of the emigration "brain drain", that is admittedly a big problem. but foreign investment in SA is actually doing well, and i disagree that the situation is bearish for SA miners. on the contrary, the weak Rand means that they will all report record profits this quarter. you may have noticed that Harmony's share price is breaking out to new highs for the move in both Rand and dollar terms. i for one think that SA gold mining shares are very much undervalued vs. their North American peers, as they all have vast reserves and sharply falling input costs, and that's not really reflected in their share prices due to the 'plitical discount'. how many majors outside of SA are reporting record earnings? not a single one as far as i know. there are only mid tier producers like GG, AEM and MDG , all of which have only recently begun to exploit new orebodies or opened up new mines, which makes comparisons with past earnings performance meaningless. another thing that appeals to me is the fact that SA gold miners pay fat dividends. that's also a unique feature, and while one waits for gold to awake from its slumber one gets at least a decent pay-out. note also, Goldfields and Harmony are completely unhedged and have basically pristine balance sheets. furthermore it's not entirely true that they are 'stuck in SA'. all of the SA majors are buying assets outside of SA, mainly in Australia, but also in other African countries like Ghana. however, i also believe NEM to be a good buy here...the new NEM after the Franco/Normandy transaction has concluded will have a much improved balance sheet (debt/equity falls to 18% from 41% for instance) a great asset base and the deal-making prowess and royalty stream of Franco. it will also be large enough to attract more of an institutional following, so i would expect a rerating of the stock once the transaction concludes. IMG is not one i have followed so far, but i'll take a look at it. generally i believe that the gold sector, which has been the best performing sector this year (using the HUI as the yardstick) will continue to outperform next year, so one should imo buy the pullbacks. i agree with you that one should concentrate on non-hedgers.