Harmony Gold debt free by mid-May when it will have R1,5bn cash on hand

23rd April 2009 By: Martin Creamer - Creamer Media Editor

JOHANNESBURG (miningweekly.com) –  South African gold major Harmony Gold would have wiped its debt slate clean by mid-May, when it would have R1,5-billion in unencumbered cash, Harmony Gold interim financial director Frank Abbott said on Thursday.

Abbott told Mining Weekly Online that company was already free of net debt.

“But we want to be debt free as well,” Abbott added.

The company would pay its convertible bondholders R1,7-billion in cash on May 15 and settle R400-million in other short-term debt, from the R3,6-billion worth of cash currently on hand.

That would leave it with R1,5-billion worth of free, unencumbered cash.

"Harmony is in excellent financial health with a strong balance sheet thanks to all the measures that have been taken in the past 18 months. Our focus now remains on achieving our overall targets and delivering consistent results,” said Harmony Gold CEO Graham Briggs.

Asked what Harmony Gold would do with the R1,5-billion in cash, Briggs told Mining Weekly Online: “We’ve been looking at what there is out there to buy, but our philosophy is only to buy what betters our current average cash cost. But there are slim pickings, and we still have our own growth pipeline of projects to depend on.

“At the moment, we are going to preserve our cash,” he said.

The company currently employs 43 000 people, including contractors, after having 57 000 when Briggs assumed office two years ago. Some 4 500 people, including contractors, went over to Rand Uranium, in which Harmony Gold continues to have a 40% shareholding.

Briggs reported that Harmony had received its second and final tranche of cash from the Rand Uranium transaction with Pamodzi Resources Fund, totalling $348-million.

"We are excited about the future of Rand Uranium and look forward to sharing in Rand Uranium`s success,” Briggs said.

Briggs told Mining Weekly Online that production would be down in this, the company’s final quarter that it had allowed itself to carry out an operational rebuilding process.

“There have been massive staff changes,” Briggs said, adding that the fourth quarter to June would be marred production wise by South Africa’s spate of April public holidays.

“But certainly, the next quarter will be better,” he forecast.

The company would attain 1,6-million ounces of production for the year, which equated to just less than 12 t of gold a quarter.

The 2009/10 financial year would see a production slightly above that, with the benefit of gold from Hidden Valley in Papua New Guinea coming through.

A level of from 16 t/y to 20 t/y of gold was the target range for 2012.