Theshold rates of return on new mining projects as indicated by market investment results

Rates of return realized on investments in the gold mines of the newer goldfields outside the Witwatersrand were calculated and analysed over various time intervals and on various bases. It is shown that these rates of return are strongly correlated with changes in the gold price and cannot be equated with the returns that are expected when investments are made, and that the changes in gold price also affect the rates of return on the Johannesburg Stock Exchange as a whole. These correlations are used, together with a limited application of the Capital Asset Pricing Model, to suggest the expected levels of threshold returns in real terms for new mining projects, for projects on existing mines, and for share valuations.