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Gold producers’ profits eroded

Kopanang – a typical
South African gold
Johannesburg, South Africa — MININGREVIEW.COM — 30 July 2009 – Profit at AngloGold Ashanti Limited, Gold Fields Limited and Harmony Gold Mining Company “’ Africa’s three biggest producers “’ is being eroded by a surge in the rand that cut the local value of the metal by the most in 23 years.

While gold is rising for a ninth year in dollar terms, its value in South African rand has fallen, slumping 14% in the second quarter “’ the most since 1986, reports Bloomberg News. The drop “’ along with a jump in local wage and energy costs “’ probably cut earnings at the companies by as much as 50% in the three months.

“The rand’s gains would have hit them hard and there’s been no respite from major cost items such as electricity and labour as these increased,” said Paul Theron, head of fund management company Vestact.

Gold tumbled in the second quarter in rand terms as a recovery in commodities and emerging markets pushed the currency up 23% against the dollar “’ the best performance among the 176 that Bloomberg monitors. Gold Fields, AngloGold and Harmony sell gold for dollars and pay costs mostly in rand in South Africa “’ the world’s third-biggest producer of the metal after China and the U.S.

Tomorrow AngloGold will report second-quarter earnings per share of R3.52 excluding one-time items, down from R4.14 in the prior three months, according to the median forecast of six analysts Bloomberg surveyed. Gold Fields will say on 6 August that profit fell 25% to R1.52 a share, while Harmony will report on 17 August that earnings shrank by half to 59 cents a share, the survey predicted.

Twelve of Harmony’s 13 operations are in South Africa, while Gold Fields has four sites in the country. AngloGold’s 21 mines are spread across 10 countries, including Argentina, Australia, Brazil, Ghana and the U.S.