Great results for gold mines
PRODUCTION: BIGGER ONES MEET OR EXCEED TARGETS
Good news for shareholders: earnings per share set to more than double.
Gold mining companies (and their shareholders) haven’t had it so good in years. The gold price scaled new highs during the last few months and the rand was quite weak, while all the bigger gold mines said they met or exceeded their production targets for the reporting period ended December 2020.
The trading statement from DRDGold this week gave shareholders the excellent news that earnings per share is set to more than double in the six months to December compared to the same period in 2019; while AngloGold Ashanti told shareholders towards the end of December that it expects to post its strongest annual free cash flow performance in almost a decade.
AngloGold Ashanti also said shareholders can expect a “sharply higher dividend payment” compared to the previous year.
Recent operating updates from other gold mines – not all of which included earnings figures – show an increase in gold production which should translate into significantly higher earnings given the high gold price.
Companies are not allowed to supply more information at the moment while preparing their final figures for 2020. However, shareholders can expect good figures. Not only did the gold price reach a record high in August last year, it was also consistently higher in 2020 than in 2019.
Second half of 2020 be er
The gold price fluctuated around $1 100 (about R16 400) per ounce in the first six months of 2019 and increased to between $1 600 and $1 800 per ounce in the first half of 2020. The second half of 2020 was even better: gold remained between $1 800 and $2 000 per ounce compared to around $1 500 in 2019.
The rand was much weaker during 2020 too, benefitting local investors who receive dividends in rands and thus focus on the rand price of gold shares on the JSE. The rand started 2020 at around R14 per dollar and weakened to above R19 by April. It spent most of the year above R16 per dollar, compared to the 2019 levels of R12 to R14.68 per dollar.
The higher gold price and weaker rand will have boosted profitability significantly, as the recent trading updates from gold mines confirm.
DRDGold
DRDGold noted in its trading update that shareholders can expect earnings and headline earnings to increase to between 106.2 cents and 115.8 cents per share for the six months to December, compared to 48.5 cents per share for the comparable six months in 2019.
“The expected increases in EPS [earnings per share] and HEPS [headline earnings per share] are due mainly to movements in revenue, cash operating costs and the weighted number of ordinary shares. Revenue increased by R866 million (41%) to R2 977 million (2020: R2 111 million),” according to a press release accompanying the trading update.
Harmony Gold
Harmony Gold’s Sens update last week did not include specific earnings figures, but nevertheless creates the impression profit will show a substantial increase.
Management informed shareholders half-year production to end December was in line with targets and that the mine is on schedule to meet its annual gold production target of between 1.26 million and 1.3 million ounces for the year to June 2021.