EQUITIES
Low quality of assets and high debt hit gold miners the most
The rush by JSE-listed gold miners to reduce exposure to SA and the scramble to grow international portfolios has not unlocked the value shareholders have hoped for, nor is the strategy in its current form likely to do so, Nedbank analysts argue. One of the persistent themes in valuing South African gold equities is the discount at which they trade relative to their international peers, a point Nedbank mining research analysts Leon Esterhuizen and Arnold van Graan explored in depth, considering the political risk discount and the quality of assets held by South African gold miners abroad compared with their multinational peers. "Although we have no doubt that politics is a contributing factor to the underperformance of SA’s gold equities, our analysis shows that a far bigger driver of this underperformance is the lower quality of this asset base, short mine lives, poor management and exceptionally bad capital allocation and project execution," they say in a detailed report. "We find...
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