FOCUS-Costs, not bullion rule S.Africa gold firms
12:19 p.m. Jan 26, 1998 Eastern
By Nicole Mordant
JOHANNESBURG, Jan 26 (Reuters) - Bullion's spike above the psychological
$300 an ounce level on Monday catapulted South African gold shares to
three month highs, but analysts said the metal price alone could not
heal the embattled industry.
Reducing costs through a planned wave of restructurings and
retrenchments was still the top priority for mines as many remained on
the critical list despite the gold price's welcome surge to a two-month
peak.
''There is no doubt that there is continued pressure on the industry and
that the focus is on productivity improvements feeding through into
lower costs. That is the name of the game,'' said Roger Baxter, chief
economist at the Chamber of Mines.
Gengold, the gold company in the Gencor Ltd stable, said earlier it
would continue to emphasise cost cuts regardless of bullion's $13 rally
on Monday to fix at $304.50 -- its highest level since November 24,
1997.
''I'm trying to delete the words 'gold price' from the vocabulary of my
mine managers,'' Gengold managing director Tom Dale said at the firm's
December quarter results presentation.
Analysts said miners had realised they could not pin their hopes to a
recovery in the bullion price as the metals market, continually plagued
by news of central bank gold sales, remained treacherously volatile.
''Definitely this (rise) will help, but the question is how much longer
will it last,'' said Mark Madeyski, a gold analyst at G O'Flaherty & Co.
By 1400 GMT bullion had already backtracked to below $302 an ounce.
Leon Esterhuizen, an analyst at UBS Securities, said that at a gold
price of $300 an ounce -- using an exchange rate of five rand to the
dollar -- about 30 percent of the industry was still in trouble on a
total cost basis.
His estimates were based on costs reported in the September quarter as
many December period results are still to be reported.
Gold shares on the Johannesburg Stock Exchange, however basked in
bullion's glory, helping the all gold index add over 10 percent.
Marginal mines -- high cost producers sensitive to movements in bullion
-- especially took heart.
Randgold & Exploration Co Ltd, a specialist at working marginal mining
assets, leapt 25 percent as gold rose in response to a dollar weakened
by sex allegations rocking President Clinton's White House.
Several of South Africa's biggest mining houses have recently unveiled
massive revamps to defend themselves against the gold price's $80-plus
slide in 1997, warning of massive job retrenchments as bullion plumbed
19-year lows.
Gengold and Gold Fields of South Africa Ltd announced in October that
they would pool their gold assets into a single firm, Gold Fields Ltd,
which is to list in February.
The following month Anglo American Corp of South Africa Ltd said it
would merge its gold operations into a single independently managed
firm, Anglogold, which will be the world's biggest producer.
''The industry really doesn't have a choice, they have to realign their
operations, they have to restructure. The worst thing that could happen
now is for them to stop that restructuring drive,'' Esterhuizen said.
newsroom+reuters.co.za)) ^REUTERS@
Copyright 1998 Reuters Limited. All rights reserved. Republication and
redistribution of Reuters content is expressly prohibited without the
prior written consent of Reuters. Reuters shall not be liable for any
errors or delays in the content, or for any actions taken in reliance
thereon. |
