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Gold/Mining/Energy : Bema(Bgo) and Arizona Star -- Ignore unavailable to you. Want to Upgrade?

To: DennyKrane who wrote (10480)	9/22/2006 9:26:47 PM
From: DennyKrane	Read Replies (1) \| Respond to of 10482

mineweb.net Rand’s plunge boosts gold and platinum miners’ margins. By: Mineweb Reporter Posted: '22-SEP-06 07:00' GMT © Mineweb 1997-2006 JOHANNESBURG (Mineweb.com) --The SA Rand’s plunge to three year lows against the greenback has suddenly made mining in South Africa a lot more profitable with gold and platinum miners particularly now enjoying mouthwatering margins. Spooked by a scary current account deficit amounting to more than 6% of gross domestic product and two recent legal victories by the country’s controversial former deputy president, foreign currency dealers have dumped the local currency, making it one of the worst performing currencies in the world this year. On Thursday alone, the Rand shed around 3% to R7.60 versus the dollar. But, after having shed around 20% against the dollar since January, the sharply weaker Rand has done wonders for mining margins with gold miners now receiving around R156,000 a kilogram and platinum miners enjoying a spot price of around R270,000/kilogram. Typically, gold miners costs in Rand are between R70,000 and R90,000 a kilogram, so current gold prices are giving them exceptional margins despite the gold price having retreated to below $US600/ounce in recent weeks. With profit margins now so attractive, marginal miners such as Harmony Gold and DRDGold should start to benefit as their mines are highly geared to the Rand gold price. Harmony has reported several consecutive years of losses after comprehensive restructuring of its operations and DRDGold has also revamped its local mining interests. When the Rand strengthened to around R5.70 against the dollar last year, some of Harmony and DRDGold’s most marginal shafts were making losses – now they should be reasonably profitable. “The Rand’s plunge has definitely improved mining profitability in a big way, but it’s not all good news as there’s bound to be upward pressure on local input costs going forward,” said a mining industry analyst who asked not to be named. “However, if the Rand’s weakness continues and the dollar price of gold edges up, even the most marginal miners should make tidy returns over the next year or so,” the analyst said. Meanwhile, the Rand’s plunge over the past few days is likely to have an effect on Gold Fields’ attempt to gain full ownership of the rich South Deep gold mine. While it has reached agreement with Barrick Gold for its 50% of the mine, it may have to pay up if it wants to fully control the other 50% owned by Western Areas. Bernard Swanepoel, Harmony’s CEO, was quoted Thursday as saying South Deep made a better fit within the Gold Fields stable than the Harmony stable, but hinted that Harmony would not easily part with its 29% stake in Western Areas. South Deep is situated immediately next to Gold Fields’ Kloof mine. “The Rand’s recent sell-off makes South Deep’s potential appear that much more lucrative so it makes sense that Harmony will want to get as much as possible for its Western Areas’ stake which gives it access to almost 15% of South Deep’s reserves,” said the analyst. mineweb.net