Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

South African Gold Shares- A Good Place to Invest?

Commodities / Gold & Silver Stocks Jul 03, 2008 - 01:13 PM GMT

By: Julian_DW_Phillips

Commodities We have been asked whether South African gold shares remain a good investment? Our stock answer will be from now on, yes, in the longer term . How could we say that when it is becoming apparent to all that the political and economic climate of South Africa is decaying and looks likely to continue to decay as far as one can see ahead?

Take a look at Randgold Resources. Many think this is a South African company, but it is not. It is active in Mali and West Africa, two thoroughly African economies with all the negatives that Africa brings with it. And yet the company is successful and has the competance to remain so, because of its management and their ability to overcome “African problems”.

What are these problems that make that continent so different? Primarily it is the inability to provide reliable infrastructure in the form of reliable electricity, water and sometimes roads. Apart from that, Africa, like other poorer countries, has governments, who believe that although they could not possibly bring resources out of the ground themselves, believe they have a right to a good portion of the profits, if not to the entire mine, once in production. This points the way to difficulties down the road for such companies. So how does Randgold Resources do so well?

Firstly, it is because it accepts that these problems are part of life on the continent and must be overcome by the mining company itself. It does not have an attitude of reliance on government run and built infrastructure. It is in a position to provide these for itself, treating any infrastructure already available, as a bonus. As a result it can only blame itself for any shortcomings and then overcomes these, itself .

And South Africa, what's the problem there?

South Africa in the past had a well developed infrastructure that was professionally planned built and run, then this stopped and we have witnessed the first of the problems of African decay, namely insufficient electricity to run present, let alone future, requirements of the mining industry as well as everybody else there. The mining companies had learned to depend on the reliability of these supplies so much, they were caught by surprise when the decay reached them. Now they are rushing to ensure initially partial reliance on themselves to shore up the early shortfalls of electricity supply. Eventually no doubt they will ensure toatal self-reliance so that if South Africa were to drop to the level of their sub-Saharan neighbours, the mines like Randgold Resources, would have adjusted their resources and supplies of all sorts, to a self-sufficient or alternative source base. And let's be very clear on one point, South Africa has amongst the world's most competent, self-reliant, tough and innovative of miners on this planet.

A classic example of this has been shown by Goldfields, who have just announced that they would spend a total of R200 million ($25.52 million) to install emergency power supply to be able to withstand a total power blackout at its mines. Gold Fields said it planned to install the equipment by year-end to generate 50 megawatts of electricity in case the country faced a national power blackout. The equipment had been purchased and was being tested in the U.K.

However, it will take some time before the full adjustements are made to achieve such independence as Randgold has on all the mines, but it will come.

So why do we have longer term faith in South African mining companies as investments? Take a mine like Goldfields [that has just seen the departure of its CEO Ian Cockerill to balcker, coal pastures encompassing perhaps a better near term future for that company [Amcoal], than more difficult and expensive deep level gold mines], which has the most gold resources of any gold mine we know, with perhaps more than a 55-year life. But half its electriity is used to keep the mine workable and the other half to produce gold, so it suffered this year at the hands of Escom, the local electricity supply monopoly. Not only will it take some time for the company, through its other mine, Kloof to bring these resources in to full production, but it will now have to develop a far greater self-sufficiency in all fields where they are dependent, at the moment, on government supplies. We believe that at great cost and in time it will get there and be able to produce gold at a good profit from then onwards. It will also harness the abilities of its management in applying themselves to these new conditions and techniques to ensure far more production per $ invested.

Meanwhile the share price has dropped back considerably to reflect the “Africanization” process, providing a good entry point where dividends will be higher than their peers overseas. As these adjustments are made, so we feel the company will rise in price to reflect this, lowering the dividend yield. Consequently, Total Returns, over the medium to long-term will prove extremely attractive to long-term funds such as Pension Funds. The company continues to be a growth company in South Africa and aims to achieve 50% of its cash flow outside South Africa still.

If it should eventually succeed in relocating to somewhere like Denver, as per earlier plans, it will also be able to see a much greater appreciation of its efforts and future in its share price, giving one the basis for a long-term growth company producing a commodity whose price is sure to rise considerably in time. It reputation and current competance level will ensure an easy access to future capital too.

Subscribers will be briefed again on this subject in our weekly newsletter. For our regular weekly newsletter, please visit

By Julian D. W. Phillips
Gold-Authentic Money

Copyright 2008 Authentic Money. All Rights Reserved.
Julian Phillips - was receiving his qualifications to join the London Stock Exchange. He was already deeply immersed in the currency turmoil engulfing world in 1970 and the Institutional Gold Markets, and writing for magazines such as "Accountancy" and the "International Currency Review" He still writes for the ICR.

What is Gold-Authentic Money all about ? Our business is GOLD! Whether it be trends, charts, reports or other factors that have bearing on the price of gold, our aim is to enable you to understand and profit from the Gold Market.

Disclaimer - This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Gold-Authentic Money / Julian D. W. Phillips, have based this document on information obtained from sources it believes to be reliable but which it has not independently verified; Gold-Authentic Money / Julian D. W. Phillips make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold-Authentic Money / Julian D. W. Phillips only and are subject to change without notice.

Julian DW Phillips Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in