HomeGoldAfrica's top gold producers face big drop in earnings

Africa’s top gold producers face big drop in earnings

Kopanang mine
Johannesburg, South Africa — MININGREVIEW.COM — 05 May 2010 – Africa’s top three gold producers will see a big drop in their March quarter earnings largely due to lower production and rising costs against a marginal rise in the dollar and rand price of bullion.

Reuters reports that AngloGold Ashanti, Gold Fields and Harmony Gold Mining Company “’ the continent’s three largest producers “’ are in for a tough ride in the June quarter due to higher electricity tariffs and a new revenue-based royalty that will pile onto their cost base.

South Africa’s gold production has been dwindling, and fell by 5.8% in 2009, pushing the country down to the fourth-biggest producer after China, Australia and the United States.

It was the world’s top gold producer for most of the last century until 2006, but dwindling grades and stoppages of mines and shafts for safety related reasons as the companies mine deeper in search of gold, have hit the sector.

The price of gold in the March quarter rose US$10 an ounce or 1% to an average of a record $1 110 an ounce, from US$1 100 an ounce in the December quarter. South African gold producers saw little benefit from a record gold price after the rand gold price gained 1% to R267 300 a kg from R264 500 per kg.

“Production start-up post the holiday break was seasonally slow for most of the South-African operations. AngloGold, Gold Fields and Harmony management have guided lower gold production quarter-on-quarter,” JP Morgan said in a note.

"Looking ahead, the South Africa revenue-based royalty of 2 to 3%, introduced from 1 March, will impact fully in the June quarter, and the power tariff increase of 24.8% will hurt from 1 April, affecting costs by 10 to 15%."

AngloGold “’ the world’s third biggest and Africa’s No. 1 gold producer “’ has said that its first-quarter output would fall 9% to 1.07 million ounces, while total cash costs would jump 10% to US$660 per ounce.

Gold Fields “’ the second-biggest producer in Africa “’ revised its production guidance for the March quarter downwards twice to 800 000 ounces, down 11% from the December quarter. It said total cash costs would soar 13% to US$695 an ounce.