Harmony warns of earnings decline


Harmony warns of earnings decline

Published Date: 2019-02-11 | Source: Stephen Gunnion | Author: Stephen Gunnion

Harmony warns of earnings decline

Although first-half production increased by a third, amortisation and depreciation charges will lead to lower earnings.

Harmony Gold Mining has warned of a steep fall in first-half earnings, partly due to a higher depreciation charge for its Hidden Valley gold mine in Papua New Guinea. However, the gold producer says Hidden Valley and recently-acquired SA mine Moab Khotsong have boosted production and contributed significantly to its operational free cash flow.

In an operational update and trading statement, Harmony said it produced 751,000 ounces of gold in the six months to end-December, a 34% increase from a year earlier. All-in sustaining costs rose by 6% to R528,265 per kilogram.

Hidden Valley reached commercial levels of production last June, resulting in a depreciation charge of R915 million to reflect the new value of the asset. On top of that, it incurred a currency translation loss of R180 million on its dollar-denominated debt, compared to a translation gain of R196 million a year earlier. Derivative gains of R20 million for the period were far lower than gains of R337 million previously.

Earnings and headline earnings per share for the period are expected to decline by between 87% and 97% in rand terms and will be 83% to 97% lower when measured in dollars.

Hidden Valley and Moab Khotsong, which it bought from AngloGold Ashanti, are expected to increase Harmony's annual production by between 450,000 and 500,00 ounces, helping it achieve its goal of producing 1.5-million ounces of gold a year.

Its results are due to be released tomorrow. Its shares ended 2.8% higher at R29.80 on Friday.

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