Gold miners’ earnings likely to fall

SA’s top three gold producers are expected to report lower quarterly earnings despite increased output after a one-off boost in the previous three months from a tax deferment, according to a Reuters poll of five analysts yesterday.

Rising costs from climbing power rates and wages are also eating into the margins of SA’s gold mining companies, which had to contend with a lower spot bullion price.

Gold averaged about $1,611/oz during the quarter to the end of June, almost 5% down from its average in the previous three months. In rand terms, the price was little changed because of the currency’s depreciation against the dollar.

The world’s third-largest producer, AngloGold Ashanti, has already flagged that its earnings are expected to fall 40%-44% from the previous quarter, which could take adjusted headline earnings per share to as low as $0.62 from $1.11.

AngloGold said the lower gold price as well as the one-off tax credit from the previous quarter were behind the earnings decline despite a 9% rise in production.

Gold Fields, the world’s fourthlargest gold producer, said in a guidance update last week that output would be up by 4% in the quarter to end June from the previous one to 862,000oz.

Smaller rival Harmony said output would rise 13%-14%, driven by better grades, while cash operating costs rose 5%, mostly because of higher power rates.

The analyst consensus for Gold Fields’ earnings per share for the June quarter is R2.67, down from R3 the previous quarter.

Despite the drop in earnings, analysts expect Gold Fields to raise its dividend to about R1.48 from R1.

Harmony’s earnings per share are forecast at about R1.10 from the previous quarter’s R2.34. Its dividend is forecast to drop to about 47c from 60c. Reuters