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» Gold price will explode, says Pollitt


Tide turned for SA gold producers
David McKay
Posted: Sun, 30 Apr 2006

[miningmx.com] -- THERE are signs of sunnier times for South Africa’s gold mining industry, which is set to finally benefit from the higher US dollar gold price.

The March quarter is usually a difficult period for the industry to tackle, owing to the Christmas and New Year holidays that disrupt gold output.

While that’s likely to be repeated with production estimated to be a full 5% lower, free cash flow margins are expected to turn positive – in fact, showing a 2,5% turnover to +0,7%, according to analysts. The reason for the turnaround is the hefty 10% increase in the rand gold price.

However, there may be problems. Harmony Gold is forecast by RBC Capital Markets to produce a headline loss of $8m after exceptional items. On the positive side, Gold Fields is likely to lead the group of frontrunners. For example, it will include new gold production from its El Choco mine in Venezuela.
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Harmony’s acquisition of a 29% stake in Western Areas and how AngloGold Ashanti intends to grow – particularly following the hefty placement of shares by itself and parent Anglo American – will dominate corporate-related questions.

Meanwhile, economic conditions could get even better for the gold producer in the current (June) quarter. Last month, the rand gold price reached levels not seen since the slumped to $1/R13.

Said Steve Shepherd, an analyst at JP Morgan: “We note that the current dollar spot price is a further 13% above the March quarter average, so the outlook for the June quarter is promising.”