South Africa once became the world's largest gold producer in 1970, having more than 75% of global reserves. The well-known industry entices immigrants from every parts of the world paying for roads and railroads constructions that made South Africa's economy the biggest in the continent. But now, the rubble seems in despair.
According to the Washington Post, South Africa's economy has been holding off. The rand fell by 30% against the dollar in the past two years. China's demand for minerals has declined. The mines that made a lot of people rich are now closed after reserves became exhausted faster than anticipated. A group of less fortunate South Africans and migrants now ventures into them and illegally search for what's left behind.
Durban Deep is where these miners illicitly mine. It was nicknamed 'Grand Old Lady' and was founded in 1896 which became one of the most lucrative mines in the world, creating more than $20 billion worth of gold before its shut down in 2001.
The collapsing currency is the major reason behind the rally. It loses 15% against the dollar since October and its descend has linked with a spike in spot gold, upping the bullion/rand price to record highs of R20,000 rand per ounce. This in turn make South African gold producers who once struggle are now equipped with cash.
South Africa provides Harmony Gold a production of 90%. It has a recorded of R74 million last year in the quarter of December after it loses R523 million in the last three months. In the year to date, its recorded share price has surged 230%, Mine Web reports.
"There has been a rerating of gold stocks but the South African gold stocks certainly stand out. We can put this down to the impact of the weaker rand," Hanre Rossouw, portfolio manager for the Investec Global Gold Fund, told Reuters.
As cited by TheStreet, the April gold delivery has recessed 0.7% to $1,261.80 per ounce on the COMEX. TheStreet Ratings Team rates the stock with "Sell" and a D score. It is propelled by various weaknesses providing more impact than any force making it harder for investors to get positive results liken to most of the enclosed stocks.
Closure of gold mines in South Africa left poor natives even poorer with no descent jobs and less food to eat. Without the basic commodities they are forced to resort to mine illegally even if it is dangerous. Illegal miners risk their lives because of no maintenance, no access to oxygen, no supervision from professional mining companies and no safety equipment.
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