By James Macharia JOHANNESBURG (Reuters) - Despite higher gold output and a stronger price for the metal, Africa's top three gold producers are expected to see a big drop in earnings and cash flow for their quarters to June, because of the stronger rand. South African gold miners sell their gold in dollars, and receive their earnings in rand, which gained in that quarter on increasing global demand for risk and expected capital inflows. "The rand will be the main issue, it was much stronger in the June quarter and dented earnings," Stephen Roelofse, a Cape-Town based gold analyst at Metropolitan Asset Managers. JP Morgan analysts Allan Cooke and Steve Shepherd said the gold price in the June quarter rose 2 percent to $922 an ounce, while the average rand/dollar exchange rate for the quarter strengthened 15 percent to 8.44 rand per dollar. This led to a 14 percent decline in the rand gold price to 250,000 rand per kg, Cooke and Shepherd said in a research note. "The benefits of higher gold production will be more than offset by the stronger rand/dollar exchange rate and cash costs inflation," Cooke and Shepherd said. For the September quarter and beyond, analysts were concerned about rising costs, especially after a wage agreement was reached on Tuesday between gold firms and unions, granting workers increases of between 9 to 10.5 percent. "The wage increases will add pressure on costs, and could lead to possible job cuts at some companies," Roelofse said. ANGLOGOLD AngloGold, the world's No. 3 and Africa's top producer, is expected to post adjusted headline earnings per share of 37 U.S. cents in its second quarter to the end of June, versus 42 cents in the previous quarter, according to the average of estimates from five analysts in a Reuters poll. The group has said it will report a 2 percent rise in gold production to 1.127 million ounces. Analysts will be keen to see if AngloGold, which has around 21 operations across four continents, cuts its hedge book further in a bid to gain more exposure to the spot price of gold. The firm wants to cut the hedge book to below 4 million ounces by end-2010 from 5.84 million ounces by the end of March. GOLD FIELDS Gold Fields, the No. 4 producer in the world and No. 2 in Africa, is expected to post an adjusted headline earnings per share of 121 South African cents for its fourth quarter to the end of June, an average estimate of six analysts said. The company posted 204 cents in the March quarter. Gold Fields has said gold production will rise 4 percent to 905,000 ounces, mainly supported by a strong recovery at its Beatrix mine in South Africa. JP Morgan forecast a final dividend of 180 South African cents versus 120 cents. Headline earnings are the key profit measure in South Africa, stripping out capital, non-trading and some extraordinary items. Gold Fields earnings are adjusted to exclude the effects of financial instruments and foreign debt. HARMONY Harmony, which is the No.5 producer in the world and No.3 in Africa, will see its headline earnings per share slump to 57 South African cents for its fourth quarter to the end of June from 123 cents in the previous quarter, according to five analysts. The company has said it will consider paying dividends only from FY2010, and analysts will be keen to hear if this will remain the case. | 
