The record gold price has allowed SA’s largest gold mining companies to reduce their debts and free up capital in recent months, opening the door for more dealmaking activity and dividend hikes.
Gold has gained nearly a quarter this year thanks to safe-haven demand, with investors flocking to precious metals as a hedge against US policy uncertainty and heightened geopolitical tension.
As the price continues to rally, the latest trading statements published by Gold Fields, AngloGold Ashanti and Harmony Gold point to healthier balance sheets among the JSE’s largest gold producers.
Gold Fields, the largest JSE-listed miner by market value, saw its net debt reduced from $2.09bn to $1.98bn in the first quarter, fuelling the company’s inorganic growth ambitions.
The firm announced this week that it would buy 100% of Australian miner Gold Roads in its second major deal in six months. It plans to spend $1.49bn-$1.55bn this year, having boosted its capex by 12% to $1.183bn in 2024.
Gold’s gains towards the end of last year also enabled AngloGold Ashanti, the JSE’s second-largest miner, to reduce its adjusted net debt by 55% year on year to $567m in the quarter to end-December.
AngloGold announced this week that it would divest itself of its stakes in two gold projects in the Ivory Coast to capitalise on the favourable price environment.
The deal, valued at up to $185m (R3.4bn), comes less than six months after AngloGold’s acquisition of Centamin for $2.48bn.
Harmony Gold, SA’s largest gold producer by volume, saw its net cash position surge 49% thanks to the record gold price, which boosted gold revenue to R50.9bn for the nine months to end-March.
The free cash has resulted in a windfall for shareholders, with Harmony declaring a record interim dividend of 227c in March, 54% higher than the prior period.
It has also provided the opportunity for Harmony to reinvest in its ageing Moab Khotsong and Mponeng assets, unlocking more potential from these mines while funding the development of a new copper project in Australia.
Against this backdrop, Harmony recorded a capital expenditure (capex) bill of R5.8bn for the first three quarters of the year, up 31% from the previous comparable period.
The latest World Gold Council (WGC) data suggests that gold’s price rally is likely to continue into the year as policy uncertainty and trade wars persist.
While the global election cycle and geopolitical conflict in Ukraine and Gaza drove a surge in central bank buying last year, investors have become a more prominent driver of gold’s rally this year.
A sharp uptick in gold ETF inflows and physical gold buying in China saw the world’s total investment demand more than double year on year during the first quarter, according to the WGC.
Total gold demand thus reached its highest level of any first quarter since 2016 in the three months to end-March.
However, while the favourable price provides more capex confidence for SA gold majors, input cost inflation continues to constrain the sector’s ability to capitalise on record prices.
The latest Minerals Council SA data shows that gold miners recorded the highest average increase in input cost inflation of any mining subsector during March, with financing costs and electricity tariff hikes emerging as the primary drivers.
Despite these challenges, gold miners continue to rally on the JSE, with AngloGold recording an 88% share price gain this year.
Since end-December, Harmony’s share price has nearly doubled, while Gold Fields is up 69%.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.