SA gold miners reap price bonanza as earnings soar
JSE-listed gold heavyweights join their platinum peers in forecasting strong profits as metal prices surge
Two large JSE-listed gold miners advised shareholders to expect strong earnings growth because of a higher gold price.
According to the World Gold Council, the dollar price of gold increased by 10% during 2019, the biggest rise since 2011. The six-year high in dollar terms translated into record high prices in rand terms.
Gold companies join their peers in the platinum group metals industry, which are reporting bumper profits on the back of higher palladium, rhodium and platinum prices during 2019.
Gold Fields, which has one last mine in SA, told shareholders to expect 2019 full-year headline earnings — which strip out one-off items — to increase to between $0.19c and $0.21c per share compared with $0.07c the year before.
Gold Fields will swing from a basic loss of $0.42c a share in 2018 to earnings up to $0.21c for the 12 months to end-December.
“The increase in basic and headline earnings is driven by higher production, higher gold prices achieved, lower cost of sales and lower impairment charges in 2019,” it said.
Gold Fields has come through a period of heavy spending at its Gruyere mine in Australia and Damang in Ghana, while ramping up the troubled South Deep mine in SA.
Net cash flow for the year will be $249m after $193m spent on growth, including the Salares Norte exploration project.
Full-year gold production jumped by 8% to 2.195-million ounces, beating the company’s guidance of up to 2.18-million ounces. The all-in cost came in 9% lower at $1,064/oz, which was also below guidance.
Net debt fell to $1.3bn, giving the company a net debt to earnings before interest, tax, depreciation and amortisation ratio of 1.08 times.
Harmony Gold, which is far more exposed to SA, told shareholders its interim net profit for the six months to end-December would be R1.3bn compared with R75m in the same period in 2018.
Revenue grew by 12%, or R1.7bn, from the R13.8bn earned the year before. The average received gold price jumped by 18% to R683,158/kg.
Headline earnings and basic earnings are both forecast at R2.49 per share, which is higher than the restated 4c loss a year earlier.