AFRICA — South African gold miners compete with North American cousins

Dramatic restructurings at Anglogold (AU-N) and Gold Fields (GLDFY-O) suggest that South African companies are challenging their North American counterparts for dominance in the international gold sector.

In June 1998, Anglogold began listing its American depository receipts (ADRs) on the New York Stock Exchange, and later that year announced it would buy the gold assets of Luxembourg-based Minorco for US$550 million. These assets include two mines in the U.S., as well as mines in Brazil and Argentina. These acquisitions, if approved, will secure the major’s status as the world’s largest gold producer, at nearly 7 million oz. per year.

Anglogold’s market capitalization is US$5 billion, which is low compared with US$8 billion for Barrick Gold (ABX-T).

Gold Fields, which merged with Gencor in 1998, now controls the second-largest global reserve base in the world (81 million oz.) and estimates production of 3 million oz. for 1999. However, the major’s market cap of just under US$2 billion places it behind other international gold companies.

Gold Fields has yet to list ADRs on the NYSE, though it recently hired an investor relations professional to act as its North American representative. The company currently trades unsponsored ADRs on the over-the-counter market in the U.S.

Gold Fields’ cash costs for the quarter ended Sept. 30, 1998, were US$197 per oz. — down 18% from the previous quarter. Costs are expected to remain below US$200 per oz. this year.