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Record bullion prices give gold miners a lifeline, risks remain

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Interviews with companies executives, analysts and fund managers show that higher gold prices could see some local miners bring their net debt to zero and pay healthy dividends over the next 18 to 24 months.

Shunned by investors due to mines that are old, deep, and difficult to extract, the country’s gold miners have traded at a discount to their global peers for years.

Higher prices, as spot gold roared past $2,000 an ounce for the first time, coupled with a weaker rand currency, comes as a lifeline. “Gold mining companies will spew a lot of cash in the next 12 months,” said Franco Lorenzani, an independent mining analyst. Sibanye Stillwater, which has battled high debt, said it achieved its leverage target in the first quarter, ahead of plan.

Its net debt, which stood at R20.964 billion in 2019, dropped 40% year-on-year in the first quarter. Higher prices have also made more marginal ounces profitable for Sibanye, spokesman James Wellsted told Reuters, adding the company was looking at other ways to benefit from favourable market conditions.

“Maybe mining secondary reefs ... might be viable at these prices,” said Wellsted. Pan African Resources is hoping to be net debt free by June 2021 and plans to increase its dividend payout to 5% from 1% last year, its head of investor relations Hethen Hira said.

 

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