SAfrica gold shares face lean last
quarter-analysts
06:07 a.m. Oct 20, 1998 Eastern
By Allan Seccombe
JOHANNESBURG, Oct 20 (Reuters) - South
African gold mines face a leaner time heading into
1998's final quarter and analysts have put short-term
holds on most gold stocks as bullion falters below
$300 an ounce and the rand strengthens.
AngloGold posted better than expected September
quarter results on Tuesday with earnings per share
rising 18 percent, but a faltering gold price pummelled
shares in the world's largest gold producer.
AngloGold's shares slumped 500 cents to 287.00 rand
in early Tuesday trade after bullion sagged to
$296.15/6.65 an ounce from a Hong Kong close of
$298.30/80 on Monday.
''Generally some of the world instability is
disappearing and gold as a speculative hedge position
against that turmoil has started losing a bit of its
attractiveness,'' said Greg Hunter, a gold analyst at
Deutsche Morgan Grenfell SA Ltd.
An equity trader said the influential gold index on the
Johannesburg Stock Exchange was seen as a little
expensive given the current strength of the rand and
the weaker gold price.
The rand was last at 5.68 (bid) against the dollar, up
from lows of 6.84 against the dollar reached during the
September quarter, but still weaker than the 4.87 it
started the year at.
''Analysts will now have to rerate their next quarter.
With the rand where it is they can't expect the same
kind of profits they received in the last quarter,'' he
said.
''A lot of analysts with 'buys' on the top stocks have
now got holds on them,'' he added.
However, in the longer term there were good
prospects in the mining industry, Hunter said.
''I think the industry is in the best shape it has been in
for a long time. The production side is going very well
and a lot of productivity initiatives are starting to come
through, margins are reasonably wide at the moment
because costs have been driven down rather
aggressively.''
Another analyst said if the rand price of gold could
stay above the 1,700 rand an ounce level, almost all
gold mines would turn in profits. On Tuesday morning
an ounce of gold cost 1,680.43 rand an ounce.
''If the rand and gold remain where they are now we
will probably see a slight overall drop in industry
earnings for the next quarter,'' said Leon Esterhuizen, a
gold analyst at ABN-AMRO in Johannesburg.
He said one of the exceptions was Harmony Gold
Mining Company where costs had come down and
production had gone up.
AngloGold was seen as less exposed to the rocking
rand and gold price because of its hedging policies,
Hunter said.
But he said the world's second largest bullion
producer, Gold Fields Ltd will feel some heat.
''Gold Fields remains totally exposed so there is no
question that they will feel the lower rand revenues,''
he said.
Copyright 1998 Reuters Limited. |
