ARTICLES

Gold and Harmony

In our last Confidential Report, published on 6^th March 2024, we drew your attention to the fact that the US dollar price of gold was about to break up through a critical resistance level at $2060. Gold has now moved up to $2166 so this observation provided an opportunity for private investors to make a significant capital gain, either in actual gold or in specific gold shares.

Over the long term, gold has always offered an excellent hedge against the weakness of paper currencies and international political risk. The rand’s steady decline against the US dollar over the past 32 years is reflected in the rand price of gold which has gone from less than R1000 per ounce in August 1992 to current levels above R41000. Consider the chart:

One of the ways to capitalise on the steady rise in the rand price of gold is to buy krugerrands and they have performed very well as mechanism to protect your wealth against all the uncertainty and mismanagement which have become endemic features of the South African economy over the past three decades.

For those investors who have more risk appetite, there was always the option of buying the shares of those gold mining companies with good prospects. One such company is Harmony Gold. This mine used to be one of South Africa’s most marginal gold mines and the share was whip-lashed back and forth as the gold price went up and down.

Then in 2021 it bought the Mponeng gold mine for R4,2bn. Mponeng has the dubious distinction of being the deepest mine in the world – which obviously made it relatively risky. The benefit is that the deeper the mine in South Africa, generally the higher the recovered grade. This is because South African gold exists in conglomerate form as part an ancient sea-bed. Being a heavy metal, gold tended to sink to the bottom of that sea – so the best grades are found at the deepest levels. 

Clearly, the directors of Harmony took a huge risk in buying Mponeng gold mine - which the late Brett Kebble once described as the “...the world’s most expensive long-drop.” Their gamble has paid off handsomely, especially in the last year because the recovered grade from Mponeng is reaching 9 grams per ton, resulting in a 30% increase in gold production. Harmony’s headline earnings per share (HEPS) in their latest financials for the six months to 31^st December 2023 was up 226%.

We added Harmony to the Winning Shares List on 16^th November 2023 at a price of 9920c per share. It closed last Friday (22-3-24) at 14829c – a gain of 43,97% in just over 4 months. Consider the chart:

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PDSNET ARTICLES - FEBRUARY 2020

Corona Correction Part II

Since our article “The Corona Correction” at the end of January 2020, the disease has progressed significantly, spreading to Europe and particularly to Italy where 10 cities have been quarantined and there are now 1146 confirmed cases.
As a private investor, you need to consider just how serious this pandemic is likely to become and exactly how much impact

Silver Ready to Go

An article by one of our customers, Koot Jordaan:
At the moment, the JSE is not a good place to be, despite all the bargains. Nobody is bargain hunting in ANC country lately. The only sectors that are booming are gold and PGM’s, due to the extraordinary performance of palladium. These are out of the starting blocks already, but silver, another precious metal, is just getting ready

Grit

Private investors in 2020 are faced with a domestic economy that is performing badly. South Africa is missing out on the world-wide boom in commodities because of our penchant for “shooting ourselves in the foot” economically.
In this environment it is quite natural for investors to seek solid safe investments that offer a decent return – preferably in a hard currency.
One

The Future of Inflation

Throughout the world, especially the first world, inflation is subdued. In the G7 countries, inflation remains stubbornly under 2% despite the efforts of central bankers. At the same time, in most first world economies, unemployment rates have fallen below the level that most economists consider to be “full employment”. Central banks world-wide are all focused on getting inflation back above 2%

A Story About Focus

The sale of CNA by Edcon, as part of its rationalisation and re-focus, is long overdue. There has really never been a good reason for Edcon to own CNA because there are no synergies between the two businesses. Edcon is in the clothing and fashion business – what has that got to do with what CNA does?
CNA itself seems to us to be completely defocused. What business is it in? Do they sell stationary? Because, if they

The Rebosis Saucer

Rebosis (REB), the first substantially black-owned real estate investment trust (REIT) on the JSE, over-extended itself and ended up with a loan to value ratio (LTV) of over 64%. Any REIT with an LTV above 40% is considered too highly geared, especially in an economy like South Africa’s that is in difficulties. It has had to retreat from its R1,2bn investment in New Frontier in the UK for a miserable R700m – and blamed