[miningmx.com] — South Africa’s top three gold producers are expected to report strong earnings for the December quarter, boosted by higher output and a rise in the bullion price, a Reuters survey showed on Friday.
The price of gold in the three months averaged a record $1,367 per ounce, up $141 per ounce or 12% on the previous quarter.
South African gold producers, including AngloGold Ashanti, Gold Fields and Harmony Gold, sell their gold in dollars and pay their costs in rand. “The better gold price should, in most cases, combine with increased production to deliver higher average earnings quarter-on-quarter,” RBC Capital Markets analyst Leon Esterhuizen said in a research note.
Expectations for gold’s performance have risen sharply, with a survey of 65 leading analysts, traders and fund managers predicting gold will average $1,450 an ounce this year, well above its record high of $1,430.95 an ounce.
POWER WORRIES
South Africa’s gold production has been dwindling, and fell by 5.8% in 2009, pushing the country to the third spot after China and Australia.
The country was the world’s largest gold producer for most of the last century up until 2006, but output has been hit by dwindling grades and stoppages of mines and shafts for safety-related reasons as companies mine ever deeper.
Some South African gold mines reach depths of around 3.8 km.
Analysts and companies say rising power prices and the threat of power shortages in coming years may dampen future earnings.
“We believe the main risk to share price upside to be related to the possibility of the power situation in South Africa deteriorating further,” Esterhuizen said.
Power utility Eskom said that supply of electricity would be tight until 2015, and especially over the next two years, until its new power plants come on stream.
The national grid nearly collapsed in 2008, forcing mines to shut for days and costing South Africa billions in lost output.
AngloGold said output for the fourth quarter would be 1.14 million ounces, down from 1.16 million oz the previous three months, at a total cash cost of $640 per ounce.
A poll of seven analysts forecast an adjusted headline earnings of 66 US cents per share for the December quarter. AngloGold, which has around 20 operations across four continents, posted an adjusted loss of 321 US cents in the September quarter.
Gold Fields is expected to post adjusted earnings per share of 169 South African cents, up from 144 cents the previous quarter.
Gold Fields earnings are adjusted to exclude the effects of financial instruments and foreign debt.
Gold Fields said its attributable production during the December quarter is expected to be around 900,000 ounces, down from 908,000 ounces the previous three months, while cash costs were expected to rise to $730 an ounce from $697.
Harmony is expected to report headline earnings per share of 33 cents for the quarter, unchanged from the previous three months.
The company expects production for the December quarter to drop by as much as 5 percent from the previous three months after an accident at one of its mines disrupted production.
