South African gold shares were poised to outdo platinum shares in the first half of 2009, Royal Bank of Canada Europe analysts Leon Esterhuizen, Arnold van Graan and Yuen Low said last week.

In an 11-page report, the ana-lysts identified a clear leaning towards South African gold shares away from South African platinum shares, concluding that there would be more downside risk to platinum earnings than to gold earnings.

“We believe this is the beginning of a much better per- formance stretch for South African gold-sector stocks,” they said.

Potential gold-earnings increases, they said, would be driven not only by price but also by production, which made for a better investment case for gold.

In contrast, they expected South African platinum stocks to reflect the decline of the platinum price basket well into 2009.

They expected most of, if not all, the major platinum producers to post losses in 2009, bringing platinum’s multiyear bull run to an end.

Although the average fourth-quarter gold price was down 9% from $871/oz to $796/oz, the weaker South African currency delivered a 17% rise in the rand price of gold from R216 000/kg to R253 000/kg.

The outlook was further enhanced by the usual strong production in the final quarter, when mine personnel pushed hard to secure bonuses before Christmas.

The higher volumes usually flattened or lowered unit cost and increased revenue to deliver better earnings.

For the platinum-miners, the second half of 2008 could, however, be split into “a reasonable start and a disastrous end”.

The average platinum-group metals basket price dropped 43% in the second half and a further 35% at the start of 2009.

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