Harmony Gold cuts its net loss
A R1.4bn impairment against the Phakisa mine and a loan to Rand Refinery kept Harmony Gold running at a loss. It showed a net loss of R1.27bn against a R2.3bn loss a year earlier.
A R1.4bn impairment against the Phakisa mine and a R127m loan to Rand Refinery kept Harmony Gold running at a loss in its 2014 financial year. Normalised earnings were R396m in the year to end-June.
When the impairment and the loan to Rand Refinery, which is reconciling an 87,000oz of gold discrepancy between its inventory and accounting records, are taken into account, Harmony shows a net loss of R1.27bn against a R2.3bn loss a year earlier.
Harmony increased gold output 3% to 36,453kg, with five of its mines improving strongly.
Harmony impaired Phakisa after shelving a R1.6bn plan to construct a decline shaft to access the deeper parts of the mine, reducing the life of mine by about 10 years to 11 years. Part of the Phakisa ore body will be mined from neighbouring Tshepong by extending an existing decline.
Harmony, which did not declare a dividend, is hunting acquisitions, looking for open cast or bulk mines in Africa and Papua New Guinea, said CEO Graham Briggs.
The distressed nature of some gold companies in these jurisdictions meant they would either have to raise capital in a difficult market or sell assets to pay down debt, creating opportunities for Harmony.
In Papua New Guinea, Barrick Gold’s Porgera mine is coming under some difficulties, while in Africa there are a number of opportunities presenting themselves.
Harmony had to diversify out of SA where its 10 underground mines and one open-pit operation generated 93% of its annual output.
It has joint ownership of the Hidden Valley gold and silver mine with Australia’s Newcrest Mining in Papua New Guinea.
Asked by analysts how Harmony intended funding an acquisition given it is close to releasing a prefeasibility study into establishing a mine at the Golpu deposit it shares with Newcrest in Papua New Guinea, Mr Briggs said Harmony could “write a cheque today” for R3bn.
Details on Golpu, which will be a project generating between 2.5million and 5-million tonnes of ore a year, may be unveiled in October.
Harmony projected it would produce 1.2-million ounces of gold this year at an all-in sustaining cost of between R410,000/kg and R430,000/kg. Harmony received an average R432,165/kg this year and its mines produced gold for R413,433, an improvement of nearly R20,000 on the previous year.
Harmony said it has exceeded the 26% empowerment target set by the Mining Charter this year, achieving 38% ownership. It said that it had exceeded the black management metrics laid out in the charter.
The Kusasalethu mine, which was shut by a strike for three months in 2012, had not yet returned to prestrike output levels and Mr Briggs expected it to reach that output in the next two quarters.
The mine produced 1,353kg of gold in the June quarter and steady state output before the strike was about 1,500kg a quarter.
Kusasalethu had the secondhighest all-in sustaining cost of R522,347/kg in the year.
Mr Briggs said those costs should come down below R440,000/kg in six months.