ARTICLES

Gold and Harmony

In our last Confidential Report, published on 6^th March 2024, we drew your attention to the fact that the US dollar price of gold was about to break up through a critical resistance level at $2060. Gold has now moved up to $2166 so this observation provided an opportunity for private investors to make a significant capital gain, either in actual gold or in specific gold shares.

Over the long term, gold has always offered an excellent hedge against the weakness of paper currencies and international political risk. The rand’s steady decline against the US dollar over the past 32 years is reflected in the rand price of gold which has gone from less than R1000 per ounce in August 1992 to current levels above R41000. Consider the chart:

One of the ways to capitalise on the steady rise in the rand price of gold is to buy krugerrands and they have performed very well as mechanism to protect your wealth against all the uncertainty and mismanagement which have become endemic features of the South African economy over the past three decades.

For those investors who have more risk appetite, there was always the option of buying the shares of those gold mining companies with good prospects. One such company is Harmony Gold. This mine used to be one of South Africa’s most marginal gold mines and the share was whip-lashed back and forth as the gold price went up and down.

Then in 2021 it bought the Mponeng gold mine for R4,2bn. Mponeng has the dubious distinction of being the deepest mine in the world – which obviously made it relatively risky. The benefit is that the deeper the mine in South Africa, generally the higher the recovered grade. This is because South African gold exists in conglomerate form as part an ancient sea-bed. Being a heavy metal, gold tended to sink to the bottom of that sea – so the best grades are found at the deepest levels. 

Clearly, the directors of Harmony took a huge risk in buying Mponeng gold mine - which the late Brett Kebble once described as the “...the world’s most expensive long-drop.” Their gamble has paid off handsomely, especially in the last year because the recovered grade from Mponeng is reaching 9 grams per ton, resulting in a 30% increase in gold production. Harmony’s headline earnings per share (HEPS) in their latest financials for the six months to 31^st December 2023 was up 226%.

We added Harmony to the Winning Shares List on 16^th November 2023 at a price of 9920c per share. It closed last Friday (22-3-24) at 14829c – a gain of 43,97% in just over 4 months. Consider the chart:

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PDSNET ARTICLES - JULY 2017

Market Overview

Over the past few weeks there have been a number of interesting developments. There have been more revelations coming out of the leaked Gupta e-mails which show just how far state capture has gone, but as yet there is no action from the government or even an official position on this matter. It is as if their attitude is that if they ignore it for long enough it will disappear. The Zuma camp is struggling to progress any of their

The Disconnect

An interesting disconnect is going on in South Africa. On the one hand, you have economists who are almost universally negative, reducing their estimates of GDP growth and pointing to falling consumer confidence and lower production. On the other hand, you have rising share prices, which imply higher company profits in the future, and that implies improved consumer spending and

The Rand

The currency of a country is like the shares of a listed company. If the company is expected to do well and make profits, then its shares will go up and vice versa. The same applies to a currency. If the country is perceived as being well-managed and doing well, then its currency will strengthen against other currencies and vice versa.
The rand is unusual among emerging market

The JSE�s Island Formation

With all the turbulence on the South African political scene it has been difficult to discern the direction of the JSE over the past year. The JSE Overall index has moved sideways while the markets of the world, and especially Wall Street have been making new highs.
Consider the chart:

JSE Overall Index October 2016 to July