Harmony Gold expects full-year profit to rebound by up to 70%, boosted by higher gold prices and the recovery of better grades of metal.
Following the release of a trading update on Wednesday, Harmony’s share price jumped as much as 12.2% before settling about 11% higher at R73.06. This was its biggest one-day gain since mid-March.
Rand gold prices have been resilient relative to other commodity markets even though they are well below the peak reached in March when global markets fell sharply, sparking a flight to perceived safe-haven assets such as gold. Central banks have also slowed down their purchases of bullion after being aggressive buyers in the first quarter of 2023 in particular.
Still, Harmony Gold, which is SA’s largest gold producer by volume, managed to achieve production targets set out early in the financial year.
CEO Peter Steenkamp said in a statement that Harmony “met the upper end of our production guidance” of between 1.4-million and 1.5-million ounces at an all-in-sustaining cost of below R900,000/kg.
Cost inflation, which includes electricity and consumables, remains a bugbear for the mining industry.
Harmony’s underground recovered grades exceeded the upper end of the guidance of between 5.45g and 5.6g per tonne, boosted by its Mponeng and Hidden Valley mines.
The company said headline earnings per share, a main profit measure that strips out exceptional items, would likely rise 50%-70% in the year to end-June. The jump in profit does, however, come off a low base after it halved in the prior corresponding period.
The SA gold producer owns a 50% interest in the Wafi-Golpu copper and gold mine project in Papua New Guinea.
In April, Harmony and joint venture partner Newcrest Mining signed a framework memorandum of understanding with Papua New Guinea. It sets out key terms to be included in the mining development contract, which is a prerequisite for the granting of a special mining lease. The lease has been delayed since 2019 because of a change in government in that country as well as the Covid-19 pandemic.
Once the lease is granted, Harmony will update its 2018 feasibility study on the project before seeking board approval to invest in it.
Nearly a year ago, Harmony agreed to buy Eva Copper Mine Project in Australia and its exploration land package in a transaction that sought to diversify its revenue base while giving it an opportunity to participate in the global transition to a low-carbon economy.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.