Despite a marginally firmer rand gold price, South Africa’s three major gold miners are likely to report that earnings remained under pressure during the March 2004 quarter, a survey of seven analysts shows.
On average, the rand gold price for the first quarter of 2004 was R88,88 a kilogram, up 4,8% from the average of R84,782/kg in the last quarter of 2003.
However, the marginally higher gold price would have been more than offset by lower production and higher costs, especially in the case of Harmony and AngloGold.
On Wednesday, AngloGold warned that its adjusted headline earnings for the three-month period ended March 31 2004 will be materially below adjusted headline earnings for the three-month period ended December 31 2003.
In the December 2003 quarter, AngloGold’s adjusted headline earnings per share amounted to 227 cents and the group is likely to report March quarter headline earnings per share of between 159 cents and 204 cents.
AngloGold is forecast to report adjusted headline earnings per share of 194 cents, down 15% from the December 2003 quarter, a consensus of analysts polled by I-Net Bridge shows. Forecasts ranged from 180 to 204 cents.
Unadjusted headline earnings per share is expected to come in at 226 cents, down 14% from 263 cents before.
AngloGold also announced that its gold production for the first quarter of 2004 will be 11% below that of the previous quarter, when the company produced 1,389-million ounces of gold. The company is looking at a production of 1,236-million oz for the first quarter.
The decline in quarterly gold production was due to the usual slow start to production during the first quarter of the year, following the Christmas break and the year-end shutdown of mining operations in South Africa, AngloGold said.
Gold Fields and Harmony’s production during the first quarter would also have been effected by the slow start to productivity on the mines after the Christmas break.
Lower grades at AngloGold’s Geita operation in Tanzania, following the unusually high grades reported in the last quarter of 2003, also knocked total output during the quarter.
Another reason for the reduction in AngloGold’s output was the fall in production at the Morila gold mine in Mali, as a result of lower ore throughput and grade.
However, ore throughput is expected to increase at Morila in the future once a new plant extension has been commissioned.
Finally, lower production at the Cerro Vanguardia mine in Argentina, due to a planned reduction in ore throughput, also lowered AngloGold’s quarterly output.
After a poor December, when its Driefontein mine’s production was knocked by a fire, Gold Fields is expected to show a very mild recovery in profit.
However, heavy rains at Gold Fields’s Australian operations could have knocked the group’s gold output from Australia marginally.
Gold Fields’s net earnings per share are expected to be 37 cents, up about 61% from 23 cents in the December quarter. Forecasts ranged from 29 to 57 cents.
The company’s headline earnings per share is expected to be 55 cents, up 8% from 51 cents before. Forecasts ranged from 40 to 61 cents.
Harmony, which is the most marginal gold miner, is expected to report a loss for the March quarter.
The company is expected to report a headline loss per share of 31 cents from 66 cents loss before. Forecasts ranged from a profit of 30 cents to a loss of 90 cents.
Harmony’s basic earnings per share in the December quarter of 92 cents is expected to shift to a basic loss per share of 45 cents in the March quarter.
As a result of the strong gold price, Harmony has commenced a process of restructuring its operations.
The company is currently looking at closing six of its marginal shafts, Welkom 1, Orkney 6, Eland in the Free State, and Merriespruit 3.
Masimong 4 shaft and Nyala shaft have also been given notice of a 60-day statutory review period.
Harmony’s Elandsrand mine is likely to have shown yet another loss during the quarter.
The implementation of Harmony’s continuous operations programme is likely to have had no material positive effect during the March quarter. — I-Net Bridge