HARMONY GOLD CEO PETER STEENKAMP
JOHANNESBURG (miningweekly.com) – Harmony Gold swung back into a profit for the six months ended December 31, with earnings lifted by gains from gold and currency hedges.
The higher rand and US dollar gold prices received over the last year had improved the profitability of Harmony’s operations and enabled the company to enter into favourable hedging arrangements.
Combined with producing safe, profitable ounces, Steenkamp noted that the company had also focused on prudent cash management.
Headline earnings a share for the period under review were 150c, compared with the headline loss a share of 103c reported for the six months to December 31, 2015.
The company had already flagged to the market that it expected the number to come in at between 139c and 160c a share.
Revenue, including the gold hedge, increased by 3% to R9.87-billion for the six months.
Production profit, however, decreased to R2.48-billion.
Harmony’s net profit for the six months rose to R1.5-billion from a loss of R445-million in the prior comparable period.
“Positive cash flow generation from our operations enabled the company to pay a dividend . . . and reduce net debt from R1.1-billion at the end of June 30, 2016, to R289-million at the end of December 31,” Harmony CEO Peter Steenkamp said.
Harmony declared a dividend of 50c for the interim period.
“We achieved all we set out to do in the period. We improved our safety performance and increased production. Safe mines are profitable mines and profitable mines strengthen our margins,” he added.
Gold production for the interim period increased by 8% to 553 862 oz, compared with 513 576 oz in the prior comparable period.
All-in sustaining costs for all operations increased by 4% to $1 136/oz.
“We saw an improvement in production and saw better volumes. On the safety side, we have done much better and did not have many unplanned stoppages. We also improved infrastructure at our operations,” he said.
Gold production increased at nine of the company’s mines, with production having decreased at only three mines.
“Target 1 and Tshepong, in the Free State; and Doornkop, in Gauteng, need more attention.”
HIDDEN VALLEY
Despite harsh criticism by investment analysts regarding the full buyout of the Hidden Valley mine, in Papua New Guinea, in September, Steenkamp said good progress had been made in positioning the mine for growth.
The mine was previously earmarked for closure; however, Steenkamp noted that “there is no reason why this mine cannot do well.”
“Hidden Valley is an asset that we are familiar with. We know the orebody, have strong relationships with government and the communities in the area and have a robust reinvestment plan that will generate a return for our shareholders,” he said.
Harmony expects to invest $180-million in the mine.
A commercial level of production post pre-strip is estimated to be achieved in June 2018, with steady-state production thereafter of about 180 000 oz of gold and three-million ounces of silver.
“We are currently processing the Hamata ore and stockpiles until June 2017, [which will be] followed by a five-month mill shutdown.”
During the shutdown, Harmony plans to do plant maintenance and attend to upgrade projects.