South African gold majors would likely see improved earnings for the quarter ended March 31, 2009, as a result of the high gold price, irrespective of an increase or decline in production, analysts canvassed by Mining Weekly Online agreed on Monday.

Cadiz Asset Management analyst Peter Major said that he expected to see “decent” results for Gold Fields, Harmony Gold and AngloGold Ashanti for the quarter, given the 14,5% quarter-on-quarter increase in the gold price.

He added that production for the three-month period at all three companies would likely be down quarter-on-quarter, in part as a result of the Christmas and New Year break, which only ended later in January.

Another precious metals analyst, who wished to remain anonymous, agreed that the increase in the gold price would boost the earnings of gold producers.

Major noted that he expected the best performance from AngloGold Ashanti, owing to “great management” by CEO Mark Cutifani, who, he said, had motivated the company’s employees and ensured that they were focused and working on all the right things.

The fact that the company had managed to close out a substantial amount of its hedge book and paid off some of its debt, was a good indication that the company’s costs would be lower, said Major.

While production would be down by about 2% to 3% quarter-on-quarter, as a result of the holidays and some problems at its Geita mine, in Tanzania, and a mine in Ghana, pushing its costs slightly higher, it would have to pay less interest on debt, mitigating this to some extent.

Major expected AngloGold Ashanti’s costs to be about $460/oz, slightly higher than the $445/oz forecast by the company, adding that the company could see earnings of 4,50c a share for the quarter.

Meanwhile, Major said that he expected Gold Fields’ production to be higher quarter-on-quarter, although not as much as the company might have anticipated.

He explained that while Gold Fields had targeted to reach output of 960 000 oz of gold during the quarter, it would probably only achieve an output of 870 000 oz of gold, owing to production challenges at two of its flagship mines, Tarkwa and Beatrix.

While the Tarkwa mine, in Ghana, still had the potential to grow in future, Major noted that the Beatrix mine, in South Africa, was an ageing operation that could be reaching the end of its life-of-mine.

Production at its South Deep mine, however, would be where most of its future production increases would come from, with Major noting that the mine had the scope to represent one-third of the group’s output, in future.

He expected Gold Fields’ earnings to increase to R2 a share for the quarter, compared with the 83c a share in the December quarter.

Meanwhile, Harmony Gold’s earnings would likely remain flat quarter-on-quarter at about R1 a share, said Major, as the company had indicated it had sold 17% less gold than the previous quarter, owing to building up its inventories.

The producer’s production decline was expected to be between 2% and 3%, but could be more, owing to fires set by arsonists at its Bambanani mine, unplanned shaft maintenance at its Joel mine and the fact that its Elandsrand mine was still under intensive care.

Gold Fields would release its results on May 7, followed by Harmony on May 8 and AngloGold Ashanti on May 15.

Source : miningweekly

Find More Mining News : -