Two platinum miners reported trading updates on Friday. One was Impala Platinum, who have had their fair share of labour problems lately. Thousands of workers have been fired last week at their flagship mine. “A reasonable degree of certainty exists that Implats’ headline earnings per share (HEPS) and basic earnings per share (EPS) for the six months ended 31 December 2011 are expected to be between 552 cents and 587 cents which is between 60% and 70% higher than that of the six months ended 31 December 2010 (EPS and HEPS of 345 cents).” Numbers are expected in 10 days time. The other platinum mining company that released a trading update was Northam Platinum. They have had their share of labour problems too. The results are “estimated to increase by between 136% and 156%.” That sounds incredible. Until you see how low the base is: “Earnings for the six months ended 31 December 2010 were 21 cents per share.” Both these stocks look relatively expensive, when compared to some of the other industrial commodity producers. And a single commodity stocks earnings are always going to be wild. Northam results are expected 24 February 2012.

Wow. Credit must be given where it is due. And in Harmony’s case their December quarter seemed to be moving in the right direction, results released this morning. Gold production was 5 percent higher at 344.5 thousand ounces and cash costs were better by six percent to 249 thousand Rands per kg, by 17 percent in Dollar terms to 958 Dollars per fine ounce. That is still very expensive by global standards. This translates to, for the quarter, 242 cents worth of earnings. These are record operating profits, and record headline earnings numbers for Harmony. And you would hope so, these are the best of times. High gold prices, a weaker currency. A dividend of 40 cents has been declared, this is for the half year. If you annualise the half year results you get around seven Rands worth of earnings for the year. And not a great dividend yield.

Like I said, good quarter, but they are in the best of times right now. I have very little sense of the Gold price. If the general environment continues to improve, then I am sure that there will be less attraction for the relative safety of gold. My overriding view of gold as an asset class is that time and again line from old Warren Buffett: “It gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.” So, if you do not understand something (like gold as an investment class, the only real money I am told), then steer clear.

Sasha Naryshkine of Vestact

Tags: #Harmony, #Impala Platinum, #platinum