SA’s largest gold miner, Harmony, says a weaker rand and higher production costs weighed on its performance in the half year to end-December, with earnings expected to fall about two-thirds.
Headline earnings per share (Heps) are expected to fall 62%-67% from a restated R7.13bn previously, Harmony said in a trading update on Friday, with a number of items hitting earnings, including a rise in production costs, such as labour.
Harmony’s update on Friday implies Heps could be as much as 6.4% below pre-pandemic levels.
The miner reported on Friday it suffered a foreign exchange translation loss of about R298m, from a gain of R652m in the prior period, due to a weakening rand.
Harmony became SA’s largest gold miner in 2020 when it acquired the last remaining assets of AngloGold Ashanti in SA, but its international operations exposes it to foreign exchange movements.
The group also reported derivative losses of almost R35m, from a gain of R902m previously, again due to the rand. This refers to financial instruments that can be used to lock in high prices.
Harmony operates nine underground mines and one open-pit operation in SA, as well as several surface treatment operations.
The group also owns Hidden Valley in Papua New Guinea, an open-pit gold and silver mine, and a significant gold-copper portfolio that includes a 50% stake in the Wafi-Golpu project, also in that country.
In January, Harmony trimmed its full-year guidance by about 4% after reporting its operations at Hidden Valley were under pressure, including from a conveyor-belt failure.
Covid-19-related restrictions and rostering also had an effect on the workforce in Papua New Guinea, while 6km of an overland conveyor belt was damaged in early January 2022 and needs to be replaced, Harmony said at the time. The damage was due a splicing failure, referring to the joins between parts of the belt.
Harmony’s shares closed 7.53% higher at R62.40 on Friday, their best performance in about a month.
Gold miners were faring well, with peer Gold Fields adding 5.8% on Friday as the precious metals index reached an eight-month high last week as inflation concerns and tension over Ukraine boosted investor interest in safe-haven assets.
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