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Johannesburg - SA gold producers are expected to record higher consolidated gold production for the June quarter as the electricity supply crisis of the previous March quarter had been ameliorated, mining analysts told Fin24.com.
There had also been "a better operational performance," an analyst said. "Costs, costs, costs will be the key issue facing management going forward," said another analyst who declined to be named.
A higher dollar gold price helped SA gold producers marginally in the quarter. It was $4/oz stronger at $925/oz in the June quarter. More helpful, however, was a weakening in the rand to R7.52 against the dollar which helped lift the gold price received.
The country's key producers, Gold Fields and Harmony Gold had operated on 90% of normal power supply from Eskom. AngloGold Ashanti, however, had benefited from an absence of accidents or closed shafts. It was heading for a 6.5% reduction in costs.
Gold Fields' production would be lower following two deaths underground at the Kloof Gold Mine on the West rand.
There was further evidence that Gold Fields' South Deep mine, also situated on the west Rand, was likely to prove troublesome for the remainder of the year, analysts said. It would need to keep an eye on costs as it continued to expand its workforce.
Industrial action would dent Harmony Gold's June quarter output with fatalities reported at its Free State mines. However aggressive cost-cutting around contract and redundant staff is estimated to result in approximate savings of R100m per quarter.
Costs, costs, costs
In May, Gold Fields confirmed a 5% increase in average costs, however analysts said the outlook for the September quarter was influenced by the 10% across-the-board wage increase negotiated last year.
In other matters, all eyes were likely to fall on newly appointed Gold Fields CEO, Nick Holland, formerly the firm's chief financial officer.
He has announced a number of safety initiatives such as halting pillar and remnant mining at its mines, including Kloof. This would reduce risk of hazard as well as future gold production.
Attention also will fall on AngloGold Ashanti.
It's recently unveiled rights issue, aimed primarily at reducing its hedge book, would help lift the mood at the firm. That's because more production will be exposed to the spot market allowing it to take greater advantage of higher gold prices.
In an earlier announcement, AngloGold Ashanti said it had raised $1.6bn by issuing discounted shares raising enough finance to reduce the hedge book to around 6.25m oz from over 10m oz.
Industry analysts were split in terms of a favoured stock going forward. AngloGold Ashanti was well positioned while Gold Fields is expected to benefit from better gearing in the short term with less interest in Harmony.
- Mining MX