AngloGold Ashanti Limited (ADR) (AU), Gold Fields Limited (ADR) (GFI), Harmony Gold Mining Co. (ADR) (HMY): Will a Drop in the Rand Help These South African Miners?

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What these gold miners offer to investors?

AngloGold Ashanti Limited (ADR) (NYSE:AU) is down 46% year-to-date. It trades at a 6.4 forward P/E and pays a dividend that yields 1.2%. Besides its South African operations, the company has projects in Colombia and the Democratic Republic of Congo. Both countries are known as unstable, so this presents certain risks too.

Gold Fields Limited (ADR) (NYSE:GFI) trades at an 8 P/E and pays a dividend that yields 2.3%. Its stock is down 43% year-to-date. The company operates mines in South Africa, Ghana, Australia and Peru.

Harmony Gold Mining Co. (ADR) (NYSE:HMY) has all its major operations concentrated in South Africa, so it wins the most from the depreciation of the rand. It does not seem to help the stock, which is down 54% year-to-date. The company trades at a 6.6 P/E and pays a dividend that yields 2.4%.

I would like to mention that, given the current gold-price environment, dividends should not be seen as rock solid. They could be cut anytime if the companies feel the need for extra cash.

Bottom Line

In my opinion, South African miners are too risky. They operate in the country where the government fails to prevent violence during labor unrest. The costs are rising, and there are always risks of production stops. The dividends are small if compared to the risks of stock depreciation. The drop in the rand did not help the stocks so far, and would not help them for the remainder of this year.

The article Will a Drop in the Rand Help These South African Miners? originally appeared on and is written by Vladimir Zernov.

Vladimir Zernov has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Vladimir is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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