Harmony profits from higher gold price as output declines


Harmony profits from higher gold price as output declines

Published Date: 2020-02-12 | Source: Stephen Gunnion | Author: Stephen Gunnion

Harmony profits from higher gold price as output declines

The gold producer has lowered full-year production guidance due to grade issues at its Kusasalethu and Moab Khotsong mines.

Harmony Gold Mining has been cushioned by a higher gold price after it produced less gold due to grade issues at its Kusasalethu and Moab Khotsong mines, swinging back to a first-half profit.

Gold production declined by 8% to 688,379 ounces for the six months to end-December but it received an average price of $1,447 per ounce for its metal, up 15% from a year earlier. In rand terms the gold price rose 19%. All-in sustaining costs were 11% higher in dollars and 15% up in rand. It said a 9% rise in production costs was a result of rising labour costs, an increase in electricity charges and higher consumable stores.

Harmony said the underground grade recovered at Kusasalethu dropped significantly due to geological factors and, to a lesser extent, seismicity. However, it said plans were in place to counter the grade issue within three months, including fast-tracking new high-grade areas. At Moab Khotsong, the grade was lower than expected due to damage caused by seismic activity in the middle mine, its highest-grade section. Production at its Target mine declined as it continued its project to bring the infrastructure closer to the mining area. And it said it expected to start accessing higher grades at its Hidden Valley mine in Papua New Guinea towards the end of its financial year.

Although it expects grade recoveries at Kusasalethu and Moab over the next three to six months, the group has adjusted the grade guidance for its SA operations down by 6.5%. As a result its lowered full-year production guidance by 4% to 1.4 million ounces.

Thanks to the higher gold price, revenue jumped 12% to R15.5 billion over the period. Headline earnings per share climbed to 249c from a 4c loss. Again, it hasn't declared an interim dividend.

Separately, Harmony said it would recommence discussions with the Papua New Guinea government on a special mining lease for its Wafi-Golpu joint venture (WGJV) with Newcrest, a year after support for a memorandum of understanding between the two was withdrawn.

The company made no mention of the proposed acquisition of AngloGold Ashanti's Mponeng mine. Earlier, Bloomberg reported that AngloGold was likely to sell the mine to Harmony as it exits its SA assets. Harmony bought Moab Khotsong from AngloGold two years ago.

Its shares fell 7.7% to R41.80 yesterday.

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