Reports: Gold mine accident won't dent stocks
October 05, 2007
New York—The accident at
South Africa's Elandsrand mine, which temporarily stranded more than 3,000 workers underground on Wednesday, is not expected to have a major impact on bullion and gold-mining stocks.
According to a report from
Reuters, the accident's effect on markets will be minimal because the mine's production size is small relative to global supply. In addition, gold prices are currently driven by other market factors, including a weak dollar and robust investment demand—elements that are expected to offset supply concerns due to the accident, market experts reportedly said on Thursday.
Victor Flores, senior mining analyst of HSBC in New York, told
Reuters that the market impact of the Elandsrand mine accident would be very insignificant because the South African mine did not produce a large amount of gold.
The mine—one of Harmony Gold Mining Co.'s biggest—produced 51,666 ounces of gold during the quarter ending in June, about a tenth of the firm's total output during the period.
On Thursday, South Africa's Minister of Minerals and Energy Buyelwa Sonjica told
Reuters she had ordered the mine closed for six weeks to ensure that it is properly repaired.
Flores told the news service he expected the mine would remain shut for a couple of months, and about 60,000 ounces or 2 tonnes of gold could be lost.
According to the World Gold Council, total gold supply was about 850 tonnes during the second quarter of this year.
The last miner to be rescued was trapped for over 24 hours more than a mile deep before he was recovered from the mine by 1 p.m. EST on Thursday. More than 3,000 miners had been stranded after an electricity cable to the mine's main lift was severed on Wednesday.
Caesar Bryan, portfolio manager of the GAMCO Gold Fund in New York, which has about $450 million assets under management, said the accident should not hurt the global supply.
"Because all the gold that's mined is basically in circulation. So, any production, [even] one year's production, is a small addition to the gold that is out there in circulation," Bryan told
Reuters.
Yesterday, spot gold and U.S. gold futures erased early losses to finish sharply higher, largely because of the reversal of the dollar's strength, traders said.
Editor's Note: For earlier developments in this story, see
Miners rescued from South African gold mine.
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