Cyril Ramaphosa may be good for miners' credit ratings, Moody’s suggests
The credit ratings of South African mining groups may improve under President Cyril Ramaphosa, Moody’s said in a note on Monday morning.
"Mr Ramaphosa, who was a successful mine labour union leader early in his career and has a strong understanding of the mining sector, said he intends to revitalise the sector and is determined to work with mining companies to attract new investment," Moody’s said.
Under revisions to the Mining Charter proposed under former president Jacob Zuma’s administration, mines would be required to raise their black economic empowerment shareholding to 30% from 26%.
New mining rights would come with a requirement to pay 1% of turnover to empowerment shareholders.
Moody’s repeated warnings that it had given in past reports that these requirements would make South African mines unattractive to foreign investors.
Moody’s listed three mining groups it rates: AngloGold Ashanti at Baa3, which is one notch above junk; Gold Fields at Ba1, which is one notch into junk; and Sibanye at Ba2, which is two notches into junk.
The rand’s "Ramaphosa rally" since November has been largely offset by rising commodity prices, Moody’s said.
"International investor optimism since Mr Ramaphosa was elected leader of SA’s ruling party on December 18 has contributed to the South African rand’s 11.5% appreciation versus the US dollar to date. A stronger rand negatively affects South African gold and platinum group metals mining companies, because their production and operating costs are mainly denominated in rand, but their revenue is earned in US dollars," the report said.
"The net effect, however, appears not to have had too much a damper on profitability for AngloGold Ashanti’s remaining South African gold operations, Gold Fields’ South Deep gold mine and Sibanye’s South African gold and PGM operations.
"Over the same period, the US dollar gold price along with platinum and palladium prices have appreciated as the South African rand has appreciated. This has led to prices in South African rand being broadly stable."