| Mon 25 Oct 2004, 11:08 | | Harmony, rivals facing 'worst quarter ever' |
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Harmony, rivals facing `worst quarter ever`
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Gold Fields and AngloGold Ashanti also down HARMONY, the biggest miner of South African gold, may report a fifth
successive quarterly loss, while Gold Fields and AngloGold Ashanti may say earnings fell, as a rising rand boosted expenses.
This week will see quarterly results from the local gold companies kicking off with Harmony today.
`Unless the rand weakens, South African gold mines are in deep, deep trouble,` said Wayne McCurrie, MD of Momentum
Multimanagers. The unit of FirstRand manages the equivalent of $1,9bn, including Harmony shares.
`Harmony has to get some volumes on their books and get their fixed costs down,` McCurrie said.
Harmony, which last week made an unsolicited bid for Gold Fields valued at $7,6bn, gets 88% of its gold from SA, giving it
the highest costs of the Johannesburg-based companies.
CE Bernard Swanepoel plans to reduce expenses by closing unprofitable shafts and adding new mines.
The rand`s gains had undermined Harmony`s strategy of buying lower-quality mines that competitors did not want and cutting
costs to widen profit margins, McCurrie said.
The rand`s 90% gain against the dollar since 2001 had forced gold companies, including Harmony, Durban Roodepoort Deep
and Afrikander Lease to fire a combined 11000 workers, Swanepoel said on September 9.
Mining companies in SA have to pay most of their costs in rands and they sell the metal for dollars.
`This is going to be the worst quarter ever for this sector,` said Stephen Roelofse, who helps manage the equivalent of $32bn
at Sanlam Investment Management in Cape Town.
Harmony may today post a financial first-quarter loss before once-off items and goodwill amortisation of R197m, or 61,5c a
share, according to the median estimate of five analysts who were surveyed.
Gold Fields, the world`s fourth-largest gold producer, may say on Thursday that profit on the same basis fell 56% to R57m, or
11,5c, according to the survey.
AngloGold Ashanti is expected to say on Friday that financial third-quarter earnings dropped 10% to R303m, or R1,15, the
survey shows.
Gold Fields spokesman Willie Jacobsz and Steve Lenahan, a spokesman for AngloGold, declined to comment on earnings.
Ferdi Dippenaar, Harmony`s marketing director, could not be reached.
Swanepoel earned R6,06m in salary, bonus, pension contributions and profit on exercised share options in the year through
June, 51% less than a year earlier.
Harmony has eliminated 4000 jobs and is running mines seven days a week to improve margins.
The rand`s average value during the most-recent quarter was R6,37 to the dollar, 3,3% higher than in the previous three
months.
The loca currency traded as high as R6,193 to the dollar on Friday, the strongest since August.
Harmony`s purchase of Gold Fields would create the world`s largest gold producer, more than doubling Harmony`s output to
about 7,5-million ounces a year and reducing the company`s dependence on SA.
Gold Fields, with mines in Australia and Ghana, produces about 64% of its gold in SA. The country accounts for about 44% of AngloGold`s metal.
The average cost of mining gold in SA at the end of June was $352 an ounce, compared with the global average of $250 an
ounce, said Bruce Alway, a gold analyst at London-based consulting company GFMS.
Harmony closed at R77, up 2,93% on Friday. Gold Fields advanced 1,55% to close at R92, while Anglogold Ashnati
dropped 2,51 to end the day at R135.
