Original source：Citi ResearchFirst published on Unhidea：Original source date：
Key takeaway
Citi maintains buy ratings on both companies, but third-quarter support comes mainly from cash accumulation and capacity for returns. Production growth is limited, and costs and project conditions still affect delivery.
Why are AngloGold’s earnings expected to decline quarter on quarter?
Citi expects AngloGold’s third-quarter earnings per share to be 1.83 dollars, down about 7% quarter on quarter and slightly below the VA consensus of 1.85 dollars. EBITDA, including equity-accounted investments, is expected to be 1.901 billion dollars, down 4% quarter on quarter but above the consensus of 1.86 billion dollars. The main drag is a roughly 5% quarter-on-quarter decline in gold prices.
The second half is usually a stronger production period, but flooding at Iduapriem and a rockfall incident at Sukari have lowered production expectations. Citi expects third-quarter gold production of 735 thousand ounces, down 1% quarter on quarter and 4% year on year, below the consensus of 748 thousand ounces.
Quarter-on-quarter cost improvements have not fully offset the pressure: all-in sustaining costs (AISC) are expected to fall to 1,857 dollars per ounce, down 9% quarter on quarter but still up 8% year on year. Cash costs are expected to be 1,457 dollars per ounce, above the consensus of 1,402 dollars.
Why do cash and dividends remain supported despite weaker earnings?
In Citi’s model, AngloGold’s third-quarter capital expenditure falls to 428 million dollars from 487 million dollars in the second quarter, while free cash flow rises to 847 million dollars from 727 million dollars, an increase of 17% quarter on quarter. Cash flow therefore moves in a different direction from earnings, but remains below the consensus of 898 million dollars and falls 8% year on year.
Citi expects period-end net cash, including lease liabilities, to rise to 1.485 billion dollars from 1.004 billion dollars in the second quarter. The quarterly dividend is expected to be 0.80 dollars per share, corresponding to a payout ratio of about 45%. Cash accumulation supports dividends and buybacks and is also a focus of the earnings release on 5 November.
Does stable production at Gold Fields mean operating pressure is easing?
Citi expects Gold Fields’ total third-quarter gold production to be 651 thousand ounces, broadly flat quarter on quarter and up 2% year on year, slightly above the consensus of 646 thousand ounces and within the full-year guidance range. Attributable production is expected to be 635 thousand ounces.
The year-on-year increase mainly reflects the proportion of Gruyere production included rising to 100% from 50% in the prior-year period. Meanwhile, Cerro Corona has shifted to processing stockpiled ore and Damang has stopped production following the expiry of its lease, offsetting part of the increase; growth does not reflect simultaneous expansion across all mines.
Stable production is accompanied by further cost increases: AISC is expected to be 1,991 dollars per ounce, up 3% quarter on quarter and 30% year on year. All-in costs (AIC), which include a broader range of capital expenditure, are expected to be 2,219 dollars, up 8% quarter on quarter and above the consensus of 2,162 dollars.
Why does Citi maintain its buy ratings, and which conditions matter most?
Citi has cut its 2026 EBITDA forecast for AngloGold by only about 1%, left its 2027 forecast broadly unchanged, and maintained its buy rating and 125-dollar target price for the US-listed shares. Its long-term thesis depends on low-cost incremental production from the Obuasi ramp-up and Nevada expansion; project delays or capital expenditure overruns would weaken that valuation basis.
Gold Fields also retains a buy rating, with a 57-dollar target price for its US-listed shares. Citi believes existing assets have already received substantial capital investment, allowing higher gold prices to translate more fully into free cash flow, and expects substantial surplus cash over the next 12 months, creating more room for reinvestment and shareholder returns.
An important condition for Gold Fields’ production update on 5 November is the negotiation to renew the Tarkwa lease in Ghana: its timing, outcome and terms are uncertain, and an adverse outcome would affect the company. The Windfall project is still awaiting environmental impact assessment approval. Changes to the two companies’ year-end operating guidance will also determine whether current production expectations can be sustained.
