admin“The current situation is unusual given that increases in gold prices are usually accompanied by appreciation of the Australian dollar and the South African rand relative to the US dollar,” JOHANNESBURG. — GOLD miners AngloGold Ashanti and Gold Fields will be among the few winners of the Brexit crisis, credit ratings agency Moody’s said in a note yesterday.Gold Fields jumped nearly 13 percent and AngloGold Ashanti nearly 10 percent on Friday, swimming against a flood which saw global stock markets lose $2-trillion after the UK voted to leave the EU.
The Brexit shock sent gold rallying 8,5 percent to a two-year high of $1 358/oz within a few hours of voting stations closing, gold’s biggest rally since the global financial crisis of 2008, Moody’s said.
At the same time, the US dollar strengthened as investors bought US treasuries, driving a 4 percent depreciation of the Australian dollar and a 9 percent depreciation of the rand relative to the US dollar.
“The depreciated Australian dollar and South African rand are credit positive for gold miners AngloGold Ashanti (Baa3 stable) and Gold Fields (Ba1 stable), whose free cash flow will increase with lower operating costs for their Australian and South African mines in US dollar terms, along with a higher US dollar gold price increasing revenues,” Moody’s assistant vice president Douglas Rowlings wrote in the research note.
According to Moody’s analysis, AngloGold Ashanti could generate an additional $120m in free cash flow in the second half of 2016, while Gold Fields could add an additional $50m in free cash flow thanks to the Brexit crisis.
This assumes a gold price of $1 300/oz and exchange rates of A$1,35 and R15 per US dollar.
AngloGold Ashanti derives around 14 percent of its gold production from Australia and 26 percent from SA, while Gold Fields derives 43 percent from Australia and 10 percent from SA.
“The current situation is unusual given that increases in gold prices are usually accompanied by appreciation of the Australian dollar and the South African rand relative to the US dollar,” Rowlings said.
“The contagion-related uncertainty that Brexit brings to the global economy is likely to continue to support demand for safe-haven asset classes, keeping gold prices high and the US dollar strong relative to the Australian dollar and South African rand as investors buy US treasuries.
“The next few months will likely be bumpy for the gold and currency markets as Brexit effects materialise.
AngloGold Ashanti and Gold Fields’ credit profiles remain well positioned to accommodate any volatility over this period given their deep liquidity sources and strong credit metrics,” the note concluded. — BDLive
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