Assessing the State of Financial Distress of Listed Gold and Platinum Mines in South Africa.

Abstract

The main objective of this study was to assess the state of financial distress of listed gold and platinum mining companies in South Africa during the period 2011 to 2015. Mining has been the driving force of the economy in South Africa, and has played a vital role in the country′s economic development. Most studies conducted on financial distress in South Africa focussed on manufacturing companies, and none could be found that focussed on mining companies. Out of a population of 8 listed gold mining companies and 11 listed platinum mining companies, only 5 gold mining companies and 5 platinum mining companies were selected to form a total sample of 10 gold and platinum mining companies. Standardised financial statements of the sampled gold and platinum mining companies was downloaded from iNET BFA database and analysed making use of Altman Z-score and Altman Z′ (EM) score models as proxies to predict financial distress. The results revealed that gold mining companies are more financially distressed than platinum mining companies. It is recommended that management in gold and platinum mining companies should conduct regular ratio analyses and take corrective action where necessary to improve the financial health of the companies.