By Matthew Hill

This year is set to be a scorcher for SA's gold miners. Just as AngloGold Ashanti, Harmony Gold and Gold Fields get ready to reap the benefits of hefty restructuring exercises, the rand gold price scaled R300 000/kg for the first time ever this year in January, and again in February.

While none of the trio reported results that blew investors' hair back, they all enter 2009 with a strong wind at their backs.

Harmony reported headline earnings of R492m for the quarter ended December 31. That was with an average gold price of R253 441. With the rand gold price hovering just below R300 000/kg, profit rises significantly.

This brings about a "huge number of opportunities" for SA's third-biggest gold miner, says CEO Graham Briggs. The company has more than 1bn t of mine dumps in the Free State that can be processed at attractive margins.

"We are asking ourselves why didn't we start producing yesterday?' "

Harmony is also scouting for acquisition opportunities, of which Briggs says there are many. Stingy banks and wary investors mean companies are struggling to find funding for new projects.

AngloGold, the world's third-biggest producer and SA's largest, suffered a nearly R170m loss for the last quarter of 2008, as its hedge book continued to swipe profits. A hedge book is a contract where a company sells future production at a set price.

This led to AngloGold's getting about 17% less for its gold than the average gold price. CEO Mark Cutifani wants to reduce this to 6% of spot this year. Gold hit a high of US$1 030 in March 2008.

Second only to safety, perhaps, AngloGold's onerous hedge book has been a top priority of Cutifani's since he replaced Bobby Godsell.

While Harmony's gold production for the December quarter was down, AngloGold managed to hold its production steady at 1,27m oz.

Gold Fields increased production for the same quarter by 5% to 839 000 oz, but this was off the previous quarter's low base.

CEO Nick Holland says Gold Fields has decided to go it alone in developing its uranium-containing mine dumps. This, he says, will effectively add a fifth mine to the group's SA production. It will reach a final investment decision by the end of the year.

Gold Fields managed headline earnings of R484m for the December quarter. This was during a period when the company closed the main shaft at one of its biggest mines, Kloof, west of Johannesburg, to replace old steel structures.

The department of minerals & energy warned last week in its safety audit that other gold mines may well have to undertake similar operations.

"Most of the key mining installations have a design life of 20-25 years. Given that most of the country's deep-level mines are much older than 20 years, there is a need for huge capital investment in refurbishing, replacing and improving the current installations."

But despite the risks, SA's gold miners have hot prospects for the next two years.

Speaking at the Mining Indaba in Cape Town, precious metals consultancy GFMS CEO Paul Walker said the gold price was in for a "hell of a ride". During both 2009 and 2010 there should be a rise in the price of the yellow metal as investors look to it as a value store.

However, he cautioned sentiment could turn in the longer term, giving a period of five to 10 years.

For the first time this decade, SA's gold miners can scoff at their platinum counterparts.

While the price of the two precious metals is almost on par (gold just above $900/oz and platinum at about $970/oz) most of SA's platinum producers have been careless with costs as the metals price soared. Despite announcing record profits for 2008, Anglo Platinum announced this week it was laying off 10 000 workers in an effort to cut costs at its mines.

The gold sector, on the other hand, has had to be vigilant with costs in a low-price environment. Now the pendulum has swung in its favour, it will reap the benefits along with shareholders. 

JSE takes a dive

Johannesburg - The JSE had sunk into the red by noon on Wednesday as investors around the world took profits and markets consolidated after the recent big moves.

By noon, the JSE all share index had given up 0.84% with resources losing 0.82% and platinum counters falling 0.53%. However, gold miners collected 3.87%. Banks weakened 0.72%, financials were flat (down 0.08%) and industrials lost 1.21%.

The rand was last bid at R9.34 to the dollar, from R9.31 when the JSE closed on Tuesday, while gold was last quoted at $863.87 a troy ounce from $848.65/oz at the JSE's last close.

Platinum was at $986.50/oz from its previous close of $964.50/oz.

"It's really not surprising that we are down at the moment. We have had some very big moves," an equities trader said.

"Shares have been over done in the short term. There is profit-taking and markets are consolidating.

"Metals have moved a long way and we could see them come off a bit more," he said.

"The worldwide rally seems to have run out of steam. Dow futures are down at the moment and it wouldn't be surprising if we close lower as well," he added.

Dow Jones Newswires reports that London stocks moved lower as investors consolidated gains from the recent run.

The FTSE was last down 1.32%.

US stocks are expected to fall at the open, caught in the downward momentum of lower trading in Europe. Martin Slaney, trader at GFT Global Markets, calls the DJIA to open down 86 points and the S&P 500 down 8.4 points.

- I-Net Bridge