Pan African Reports Positive Results, Can Anglo American Match It

Pan African managed to improve margins despite pressures from fluctuating global gold prices, raising the question of whether its larger counterpart, Anglo American, can do the same.

Identifying Profit Sources

Pan African Resources reported positive earnings for the recent period despite challenges in the gold mining sector from global price pressures in the short term. Gold has remained relatively flat since the start of 2024, after reaching an all-time high last December, and has recently declined back under the $2,000/oz handle. Meanwhile, inflation continued to add to operational costs, making it more challenging to maintain or expand miner profit margins.

Although long-term trends indicate that gold prices may rise further and reach new records by the end of 2024, the near-term does not look so bright. This means gold miners must focus largely on costs to deliver strong results. Pan African managed to reduce its all-in-sustaining costs (AISC) while maintaining full-year production guidance. Morevoer, it lowered cost guidance for the remainder of the fiscal year.

Exceeding Expectations

Following Pan African's earnings report, its larger competitor, Anglo American, outperformed the market ahead of its own financial update next week. Anglo American recently reaffirmed full-year production guidance. As a more diversified operation, Anglo American faces more significant challenges in reducing costs to protect margins, complicated by production declines in key assets, particularly in Chile.

Anglo American said it aims to lower production costs, but analysts worry it could reduce cash flow if more investment is required. It would leave less money available for shareholders, a concern that contributed to a 50% stock price decline over the last 12 months. Overall, recent production results were in line with expectations. The focus now turns to how Anglo American can maintain margins in a high-inflation environment and how much profit they can allocate to future investment.​

H&S Or Double-Bottom

Anglo American's share price has declined significantly from its peak in 2022. There remains optimism for an imminent trend reversal, however, owing to the formation of a head-and-shoulders pattern. It suggests prices may soon stop declining as part of a falling wedge pattern and instead initiate an upward reversal. Key support lies at approximately £1500 under £1640. Should the bulls successfully breach £2000 and reclaim the £2280 golden pocket level, sentiment will likely turn positive. Alternatively, continued weakness raises the prospect of the stock sliding towards £1000.​

Source: Key Takeaways / Anglo American

Key Takeaways

Pan African Resources reported positive earnings despite challenges in the gold mining sector from flat gold prices and rising costs. They managed to lower their costs while maintaining production guidance, putting them in a better position than their larger competitor, Anglo American. Anglo American also reaffirmed its full-year production outlook but faced more difficulties in reducing costs due to its diversified operations. They stated they aim to lower costs, which could reduce cash flow if more investment is required. Now, it must find a way to maintain margins in the current inflationary environment.