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SA gold shares soar on surging gold price - BusinessLIVE

Wednesday, 5 August 2020

Gold Fields and DRDGold issue guidances as their shares bullet higher

Gold Fields and DRDGold have advised investors what to expect from their financial results in the coming weeks as JSE-listed gold companies shoot higher on soaring metal prices.

The JSE gold index was nearly 7% higher by midday on Wednesday as the gold price remained above the $2,000/oz mark and traded at R1.13m/kg.

For SA-focused miners such as Harmony Gold and DRDGold this is a real windfall, marking the second time this year the gold price has sold for more than R1m/kg. The price first broke through that level in April.

Harmony and DRDGold both traded about 8% higher on Wednesday, bringing their year-to-date gains to 121% and 243%, respectively.

AngloGold is removing itself from operations in SA as it focuses on its international portfolio, selling its last underground mine in the country, Mponeng, the world's deepest mine at 4km below surface, and its tailings retreatment business to Harmony for $300m.

AngloGold stock has increased by 76% so far this year. It advised investors at the end of July that its interim earnings would more than treble because of weaker currencies in Australia, Africa and South America compared to the dollar. It will report its results on August 7.

Gold Fields has whittled down its exposure to SA to a single mine, South Deep. It unbundled three gold mines to form Sibanye-Stillwater in 2013 and that company has since become the world's largest source of platinum group metals.

Gold Fields, which added more than 7% on Wednesday, has risen by 143% so far this year. The smallest gain for the year is Sibanye, which has grown by 41%.

Gold Fields told investors on Wednesday to expect basic earnings to have doubled to between $0.081 and $0.099 per share for the six months to end-June when the results are reported on August 20. Headline earnings would roughly quadruple to a maximum of $0.155.

"The increase in earnings for the period is driven largely by the increase in the gold price received," Gold Fields said.

Gold output was marginally higher at 1.087-million ounces as its suite of mines in Australia and Ghana offset Covid-19 stoppages at South Deep and Cerro Corona in Peru.

Gold Fields will report an 11% increase in all-in sustaining costs of $986/oz as it increased the mining of waste rock at its opencast Damang mine in Ghana and added $20/oz of costs related to Covid-19. Its all-in costs, which include capital spent on expansion, fell by 4% to $1,065/oz.

Gold Fields retained its full-year production at up to 2.25-million ounces, but bumped up its all-in sustaining cost target by $40 to between $960/oz and $980/oz. All-in costs would be $35 higher at $1,070 and $1,090/oz.

DRDGold, which focuses purely on reprocessing old tailings dumps, was not as detailed in its market update and just gave a production guidance for its year to end-June. It advised shareholders to expect full-year production to come in fractionally below the bottom end of its production guidance when it releases results on September 1.

DRDGold will increase gold output by 9% to 174,385oz because of the addition of the Far West Gold Recoveries business, which entails plants and dumps acquired from Sibanye in exchange for shares in the tailings reprocessing specialist.

DRDGold had hoped to produce between 175,000oz and 190,000oz of gold for the year, but its plans were derailed by the government's economic lockdown at the end of March.

The cash operating cost was about R490,000/kg. DRDGold said it had R1.7bn in cash by the end of its financial year.

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