The global bubble has the side effect of a too strong rand and soon something will snap.
If we get a stock market crash we will see a much weaker rand, higher gold prices as gold is the only asset unloved by central banks, and maybe stable platinum prices. That may be the only chance for some SA producers.
But it is dangerous to predict the end of something that is going on for so long. Much more likely it will go on until the negative effects of speculation are felt.
The strong rand means that Lonmin has not made money since the last rights issue. They have essentially breached a bank covenant. Banks will want to stop operations for some time to get rid of excessive labour numbers before they take control. Other industry participants will want the Lonmin PGM production to vanish. So a company with lots of enemies.
If nothing changes we could see 33000 jobs supporting 300000 people vanish early next year. A direct results of central bank buying of risky assets and elevating currencies to levels where they do not belong. And that is just one example of things going wrong due to the excessive bubble. Apparently nowadays you cannot make money on 25 g/t reefs. South Africa still has the largest gold resources by far, vanishing for good. Below infrastructure is not reported anymore.
I expect the gold price to remain depressed for some more time, but it is a situation with a deadline.
Maybe Troy can close out some hedges if the gold price drops to 1200-1230?
TRY Price at posting:
8.4¢ Sentiment: Buy Disclosure: Held
