> The dollar has tumbled this year
Good for gold, not as good for mining company costs:
SA most expensive gold producer
October 22, 2003
By Sherilee Bridge
Johannesburg - In a blow to local gold mining companies just before the start of the September quarterly reporting season, the Chamber of Mines said yesterday that South Africa mines had become the world's most expensive gold producers.
Local gold producers, left reeling from the rand's persistent strength against the dollar and rising costs of production, have been overtaken by arch rivals in Canada and Australia.
This was confirmed by the World Gold Council, which said in the September edition of its World Gold that costs were becoming the focus of attention with the June quarter demonstrating "a worrying trend".
The publication said: "Once again it is the South African producers who are most under the microscope as their currency has appreciated by 24 percent over the course of past year."
The World Gold Council's June quarter cost figures show that no South African gold producer made it to the top 10 lowest cost producers' list and six of the country's gold producers dominate the 10 greatest cost list.
The impact of rand strength will be seen in coming weeks, with gold companies reporting September quarter figures.
Kicking off with Avgold today, the companies are expected to post poorer profits for the quarter but analysts warn that worse is still to come.
David Davis, the gold analyst at Andisa Securities, said the December quarter was likely to be much nastier, with hefty cost increases and the lower rand gold price taking its toll.
September quarter cash costs should rise by 3 percent to 5 percent, driven largely by wage increases. The rand gold price has remained at R86 000 a kilogram.
The steady rise of the dollar gold price, from $347 an ounce for the June quarter to $363 an ounce in the September quarter, has been offset by the strength of the rand, which was back at just above R7 to the dollar.
This has already sliced R3 000 off the rand gold price, with the October price averaging R83 000 to date.
But Baxter said the cost structure was more than 30 percent higher now than when the rate was last R7 to the dollar three years ago.
REF: busrep.co.za |
