Harmony to report a loss despite higher gold price


Harmony to report a loss despite higher gold price

Published Date: 2020-09-11 | Source: Stephen Gunnion | Author: Stephen Gunnion

Harmony to report a loss despite higher gold price

While sales benefitted from the higher rand gold price, the weaker rand impacted dollar borrowings and the value of its gold hedges.

Harmony Gold Mining Company will report a reduced full-year loss after it benefitted from higher gold prices but recorded a big loss on a derivative instrument.

In a trading statement, the gold miner said revenue rose by 8.6% to R29.2 billion for the year to end-June due to the higher rand gold price it received for its metal. Earnings per share were expected to improve to a loss of between 148c and 180c per share from last year's loss of 498c, while headline earnings per share would be in a range of 139c to 169c from a 204c loss previously.

Although it benefitted from a lower depreciation charge due to the impact of the national lockdown on production levels and hadn't recorded an impairment for the year following last year's R3.9 billion write-down, it recognised a currency translation loss of R919 million on US dollar denominated debt. The translation loss in the comparable period was R78 million. Also included in this year's numbers are derivative losses on its gold hedges of close to R1.7 billion compared to gains of R484 million last year. It said the losses were as a result of the weaker rand exchange rate and the strengthening of commodity prices, which negatively impacted derivative valuations.

In an operating update last month, Harmony warned that the increase in the gold price - both in US dollar and in rand terms - had negatively impacted the valuation of the gold hedges. However, it said it continued to enjoy favourable commodity and foreign exchange pricing on the unhedged portion of its exposure, whilst simultaneously locking-in the current higher prices as part of its hedging programme.

Harmony's results are scheduled for release on 15 September. Its shares rose 35 to R106 yesterday.

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