Currently viewing Global edition

Lift in production, gold price boosts Harmony

South Africa-based Harmony Gold Mining has reported a strong operational performance for the September quarter, its last before taking over AngloGold Ashanti’s assets in the country.
Lift in production, gold price boosts Harmony Lift in production, gold price boosts Harmony Lift in production, gold price boosts Harmony Lift in production, gold price boosts Harmony Lift in production, gold price boosts Harmony

Unisel in South Africa, Harmony Gold Mining’s oldest operating gold mine

Staff reporter

CEO Peter Steenkamp said a solid operational performance, aided by the gold price, had "significantly strengthened" the balance sheet and allowed the company to achieve an operating free cash flow margin of 20%, double the previous quarter's 10%.

Harmony's operating free cash flow almost tripled quarter-on-quarter to R1.8 billion, compared to R603 million in the previous quarter, due to higher production and a 5.4% increase in the R/kg price of R922,398/kg (US$1,698/oz, 12% higher) quarter-on-quarter.

With current favourable market prices and current levels of production prevailing, the company said it expected to be in a net cash position by the end of March 2021.

It had net debt at September 30 of R3.25 billion (US$194 million) after paying for the AngloGold assets and said stronger production cash flows had enabled it to reduce its net debt to EBITDA ratio from normalised 0.8x in June 2020 to 0.5x by quarter-end.

Harmony produced 313,725 ounces of gold in the September quarter, 38% more than the COVID-19 shutdown-impacted June quarter's 226,632oz but 13% lower than the 361,085oz a year earlier.

All-in sustaining costs were up 7% from September 2019 quarter to US$1,341/oz (or up 24% to R728,465/kg), while the gold price received was up 17% to $1,698/oz.

Its underground mines in South Africa returned to 100% capacity after the country's lockdown restrictions were lifted but gold production at Hidden Valley in Papua New Guinea decreased 19% quarter-on-quarter to 31,604oz.

Harmony said PNG production was impacted by a planned major shutdown of the processing plant, as well as a result of lower mined grade as the mine transitioned between various stages of the open pit.

Also in PNG, Harmony said it was waiting a decision on the environmental impact statement for its proposed Wafi-Golpu joint venture with ASX-listed Newcrest Mining.

It considered deep sea tailings placement "to be the safest and most environmentally and socially responsible tailings management solution" for Wafi-Golpu and said it looked forward to re-engaging with the state to progress discussions on a special mining lease. 

Having taken over AngloGold's Mine Waste Solutions, related assets and Mponeng, the world's deepest gold mine, on October 1, Harmony said it would update its current guidance of 1.26-1.3Moz at an AISC of R690,000-710,000/kg, in its half-year results in February.

It also said it completed additional hedging to cover the newly-acquired ounces at prices above R1 million per kilogram, increasing the average forward Rand gold price on the hedge book from R743,000/kg in the previous quarter, to R846 000/kg in the September 2020 quarter.

"We are in the process of integrating our newly-acquired assets in line with our growth strategy and believe that we will be able to unlock further value through increased ounces and various surface and service synergies," Steenkamp said.

Harmony reported three fatalities during the quarter.

Its shares (JSE: HAR) sank 16.3% yesterday as the gold price and related equities fell on COVID-19 vaccine hopes, to close at R77.55 and capitalise it at R46.82 billion (US$3 billion).