South African Gold Stocks: Is Nationalization a Threat?

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(List compiled by Andrew Dominguez. Data sourced from Finviz.)

Could the extensive, multi-national South African mining industry face nationalization? Apparently, yes, if Julius Malema of the African National Congress youth league had his way.

Exactly how big an “if” is this? Consider these facts reported by Mike Cohen of Bloomberg

- Nationalization “is not government policy,” according to President Jacob Zuma, Minister of Mines Susan Shabangu, and other senior cabinet members
- Claude Baissac, founder of Eunomix, thinks the possibility of significant changes to the official ownership policies for mines is higher now than it has been since the end of apartheid
- Baissac also believes the youth league is “an extremely powerful force” and calls Malema a “king-maker”.
- According to Cohen, the youth league helped Zuma replace Thabo Mbeki at the helm of the ANC in 2007
- Malema won a second term as the head of the youth league. He ran uncontested. 

The ANC has been conducting studies into the viability of nationalization since last November. Baissac believes the findings will be the “key political issue” in the ANC’s elections in December 2012.

Former president Nelson Mandela floated the idea of nationalization after his release from jail in 1990, although he rescinded his statements prior to his election in 1994. Since then, a law came into effect requiring mining companies to sell 26% of their local assets to black South Africans. The execution of this law was successfully overseen by the Mbeki administration (via Bloomberg).

Any new changes to the South African mining industry would likely have widespread effects.

“South Africa is the continent’s largest producer of gold, supplies European and Indian power plants with coal and depends on mining for half of exports. In April 2010, Citigroup Inc. valued the country’s mineral resources at $2.5 trillion, the most of any nation,” reports Cohen.

Many of the world’s largest miners have significant operations in South Africa. In the event of nationalization, these companies could see drastic decreases to their proven and unproven mineral reserve figures.

To help you with your own research, we have compiled a list of mining companies with exposure to South Africa. 

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List sorted by market cap.

1. Sterlite Industries (India) Ltd. (SLT): Copper industry with a market cap of $46.89B. It is headquartered in India. It is a non-ferrous metals and mining company. It is a subsidiary of Vedanta Resources plc (Vedanta). Its main subsidiaries are Hindustan Zinc Limited (HZL), Bharat Aluminium Company Limited (BALCO) and Sterlite Energy. It is engaged in copper, zinc, aluminum and commercial power generation. It owns Black Mountain Mines in South Africa.

2. Sasol Ltd. (SSL): Major Integrated Oil & Gas industry with a market cap of $31.58B. It is headquartered in South Africa. It is an integrated energy and chemicals company. It mines coal in South Africa and produces gas and condensate in Mozambique and oil in Gabon, and its chemical manufacturing and marketing operations span the globe. In South Africa it refines imported crude oil and retail liquid fuel products through its network of retail convenience centers.

3. AngloGold Ashanti Ltd. (AU): Gold industry with a market cap of $16.52B. It is headquartered in South Africa. It has 20 operations consisting of open-pit and underground mines and surface metallurgical plants in 10 countries on four continents. As of December 31, 2010 the Company’s ore reserves totaled 71.2 million ounces. During the year ended December 31, 2010, it had a gold production of approximately 4.52 million ounces. In addition to the six deep-level mines and one surface operation in South Africa, it has surface and underground mining operations in the Americas, Australia and the African continent.

4. Gold Fields Ltd. (GFI): Gold industry with a market cap of $11.56B. It is headquartered in South Africa. It is engaged in gold mining and related activities, including exploration, extraction, processing and smelting. It is a producer of gold and a holder of gold reserve in South Africa, Ghana, Australia and Peru. In Peru, it also produces copper. During the year ended December 31, 2010, it produced 1.983 million ounces of gold and gold equivalents.

5. Pioneer Natural Resources Co. (PXD): Independent Oil & Gas industry with a market cap of $10.39B. It is headquartered in USA. It is an exploration and production company with existing operations in the United States and South Africa. Its production operations are principally located domestically in Texas, Kansas, Colorado and Alaska, and internationally in South Africa.

6. Harmony Gold Mining Co. Ltd. (HMY): Gold industry with a market cap of $6.4B. It is headquartered in South Africa. It is engaged in underground and surface gold mining and related activities, including exploration, processing and smelting. As at June 30, 2010, its mining operations reported total probable reserves of 48.1 million ounces, primarily from South African sources. During the fiscal year ended June 30, 2010 (fiscal 2010), it processed approximately 19.8 million tons of ore. In fiscal 2010, 96% of its total gold production took place in South Africa. In fiscal 2010, approximately 91% of its South African gold came from underground mines, and approximately 9% came from its surface operations, which include the Kalgold opencast operation and the Phoenix operation.

7. Great Basin Gold Ltd. (GBG): Gold industry with a market cap of $985.86M. It is headquartered in South Africa. It is a mining company engaged in the acquisition, exploration and development of precious metal deposits. It has two material projects, one of which is at the test-mining stage, namely the Hollister gold project, which is located on the Carlin Trend goldfield in Nevada, USA and the other one the Burnstone gold mine, which is located in the Witwatersrand Basin goldfields in South Africa. In addition to its two primary projects, it holds interests in early stage mineral prospects in Mozambique and properties in Tanzania and Iturup (part of the Kurils Islands in the Russian Federation). It is also conducting early stage exploration on a number of other prospects, primarily in Africa.

8. Platinum Group Metals Ltd. (PLG): Industrial Metals & Minerals industry with a market cap of $305.44M. It is headquartered in Canada. It is a platinum focused exploration and development company conducting work on mineral properties it has staked or acquired by way of option agreement in the Republic of South Africa and in Ontario, Canada. Its Project 1 is located in Western Bushveld Complex of South Africa. Projects outside of Projects 1 and 3 include War Springs and Waterberg Projects on the North Limb of the Bushveld Complex in South Africa and on its Lac des Iles properties near Thunder Bay, Ontario. Projects 1 and 3 consists a platinum exploration and development project on combined mineral rights covering approximately 53 square kilometers on the Western Bushveld Complex of South Africa.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks

Referenced Stocks: AU , GBG , GFI , HMY , PLG , PXD , SLT , SSL

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