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Top gold miners expect big drop in quarterly earnings as output falls
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James Macharia
Business Day
Wednesday, May 05, 2010
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Africa's top three gold producers will see a big drop in their March quarter earnings largely due to lower output and rising costs against a marginal rise in the dollar and rand price of bullion.
AngloGold Ashanti, Gold Fields and Harmony Gold are in for a tough ride in the June quarter due to higher electricity tariffs and a new revenue-based royalty that will pile on to their cost base.
SA’s gold production has been dwindling, and fell by 5,8% last year, pushing the country to the fourth-biggest producer after China, Australia and the US.
SA was the world’s largest gold producer for most of the previous century until 2006, but dwindling grades and stoppages of mines and shafts for safety-related reasons as the companies plunge deeper in search of gold, have hit the sector.
The price of gold in the March quarter rose $10/oz, or 1%, to an average of a record $1110/oz from $1100/oz in the December quarter.
Local gold producers, which sell their gold in dollars and pay their costs in rand, saw little benefit from a record gold price after the rand gold price gained 1% to R267300/kg from R264500/kg.
“Production start-up post the holiday break was seasonally slow for most of the South-African operations. AngloGold, Gold Fields and Harmony management have guided lower gold production quarter on quarter,” JP Morgan said in a note. “Looking ahead, the South African revenue-based royalty of 2%-3%, introduced from March 1, will impact fully in the June quarter and the power tariff increase of 24,8% will hurt from 1 April, affecting costs by 10%-15%.”
AngloGold, the world’s third-biggest and Africa’s top gold producer, has said its first-quarter output would fall 9% to 1,07-million ounces, while total cash costs would jump 10% to $660/oz.
An average forecast by four analysts forecast an adjusted headline earnings of $0,20c per share for the March quarter. AngloGold, which has about 20 operations across four continents, posted adjusted earnings of $1,45c in the December quarter.
Gold Fields, with operations in Africa, South America and Australia, was expected by a consensus of four analysts to return adjusted earnings per share of 67c in its third quarter to March against 145c in the December quarter. Gold Fields earnings are adjusted to exclude the effects of financial instruments and foreign debt.
Harmony, ranked number three in Africa with most of its mines in SA, has said output in the third quarter to March would fall by up to 42000oz due to shaft closures, the holiday break and lower grades. Reuters
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