Production Growth Drivers for South African Gold Miners
Growth in gold production
Gold production growth is an important metric for gold miners (GDX). On the basis of absolute production, AngloGold Ashanti (AU) stands out with an annual production of ~4.0 million ounces in 2015. Its production has fallen over the last few years, mainly due to the sale of its Cripple Creek & Victor Gold Mine to Newmont Mining (NEM).
The company has also curtailed its production at the Obuasi Gold Mine. AU has been dealing with illegal gold miner activity at the mine in 2016. If these activities continue, AU might lose the high-grade areas of this mine, leaving it as a low-return option.
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Sibanye Gold (SBGL) has been able to somewhat reverse its falling production. Production in 3Q16 was 382.0 million ounces, which is 7.0% lower than production in 3Q15. The company has slightly reduced its gold production outlook for 2016. Most of its growth options are in its platinum acquisitions. The company most recently acquired Stillwater Mining (SWC).
Long-term production growth drivers
Gold Fields’ (GFI) 3Q16 production results were in line with guidance for the fiscal year. All of its operations exceeded planned production for the quarter. The company maintained its production guidance for 2016 of 2.10 million–2.15 million ounces.
Regarding long-term production growth, the company has been facing operational issues such as problems with the ramp-up of its South Deep operation in South Africa. It has invested ~$4.2 billion in this asset since its acquisition in 2006. The company is now expecting South Deep to achieve a break-even level by the end of 2016. If achieved, the company could see production growth and cost improvements. The company has also invested in brownfield exploration in Australia and is looking for valuable acquisitions.
Harmony Gold’s (HMY) production for the fiscal year ended June 30, 2016, was almost flat year-over-year, but the company is determined to increase its production to 1.5 million ounces, from ~1.1 million ounces currently, within three years. It’s optimistic about growth from the acquisition of a 50.0% interest in Hidden Valley from Newcrest.
The key to the company’s long-term production growth is its Golpu Project. While financing for the project is not yet completed, any positives on this side would be beneficial to the stock.