JOHANNESBURG (miningweekly.com) – JSE- and NYSE-listed Harmony Gold met its yearly production guidance of 1.1-million ounces in the financial year ended June 30 and has entered into short-term gold forward sale contracts for about 20% of its production.

The gold miner on Monday said it had continued to differentiate itself through quality grade management in the financial year under review and increased underground grade by 6% to 5.02 g/t – the fourth consecutive year of higher recovered underground grades.

To create further cash certainty, Harmony has entered into short-term gold forward sale contracts for 432 000 oz over a period of 24 months, representing 20% of the company’s total production.

The sharp increase in and the volatility of the rand per kilogram gold price provided Harmony with an opportunity to lock in 20% of its gold sales at an average rate of about R682 000/kg.

“I am extremely pleased with Harmony’s performance. Harmony is well positioned to benefit from a strong rand per kilogram gold price. We remain positive on the strength of the gold price, with cash certainty being key in times of extreme gold price volatility,” said CEO Peter Steenkamp.

Earlier this year the company entered into foreign exchange rand-dollar hedging contracts that fixed the exchange rate on $400-million (R6.2-billion) of gold sales.

Harmony said the hedging contracts were spread over 12 months at an average minimum price of R15.59 to the dollar and an average maximum price of R18.60 to the dollar.

The contracts have a zero cost collar format that establish a minimum exchange rate for Harmony’s future dollar gold sale proceeds and a maximum exchange rate at which its future dollar gold sale proceeds can be exchanged into rands.

Harmony FD Frank Abbott said current rand weakness and volatility presented an opportunity for Harmony to establish a “very attractive” minimum exchange rate on the dollars it received on its gold sales.

At the same time, shareholders remain fully exposed to the upside of the dollar gold price.