Ahead of the March 1 release of its results for the six months to December 31, 2022, gold miner Harmony Gold reports that its basic earnings will be between 20% to 40% higher year-on-year.

Earnings a share are expected to be between R2.73 and R3.18.

Headline earnings a share are expected to be between R2.72 and R3.22 – an increase of between 10% and 30% year-on-year.

CEO Peter Steenkamp says Harmony’s strategy of allocating growth capital towards high-margin, long-life assets has started to deliver the desired results.

The increase in earnings was mainly the result of an increase in gross profit as a result of higher underground recovered grades and an increase in the average gold price received which offset the increase in production costs.

With a loss of R298-million in the first half of its 2022 financial year, a foreign exchange translation gain of about R30-million ($2-million) is predominantly attributable to the smaller foreign exchange losses on the foreign-denominated borrowings.

This is a result of the rand weakening against the dollar by a smaller margin during the period under review. These losses were further offset by the gains realised on the commodities' receivables and cash, as well as a derivative gain of R313-million ($18-million) compared to losses of R35-million ($2-million) in the first half of its 2022 financial year.

The derivative gains are a result of the favourable exchange rates compared to locked-in prices as well as additional exchange contracts being entered into at favourable prices.

“Excellent recovered underground grades along with the strong rand-per-kilogram gold price have provided Harmony with good tailwinds.

“Execution excellence and sustainable mining practices will ensure that we achieve our annual production and cost guidance for the 2023 financial year,” Steenkamp says.

However, the increase in earnings was partially offset by production costs, which were 2% to 10% higher, mainly owing to inflationary increases in consumables.

Despite these increases, the all-in sustaining costs (AISC) were below the yearly guided AISC of R900 000/kg.

Harmony was also impacted by an increase in the taxation expense as well as deferred taxation. The taxation expense increased as a result of the foreign exchange gains and derivative gains impacting current tax as well as the use of the assessed losses and unredeemed capital expenditure increasing the deferred tax expense.