Harmony Gold to return to profit
Harmony Gold Mining says it will bounce back to profitability in the year to June, with higher average gold prices and the acquisition of the Mponeng operations from AngloGold Ashanti last October boosting its bottom line.
Harmony Gold Mining said on Thursday that it will bounce back to profitability in the year to June.
It attributed this to higher average gold prices and the Mponeng operations acquired from AngloGold Ashanti last October boosting its bottom line.
Like its bigger peers, the gold mining and exploration group that produces gold from its operations in SA and Papua New Guinea benefited from higher precious-metals prices. The gold price peaked at $2,063.54/oz about a year ago when Covid-19 uncertainty fuelled demand.
To help soften the blow of the pandemic on the economy, the US Federal Reserve cut interest rates to record lows in 2020 and started a multi-billion dollar bond buying programme.
However, demand prospects for gold have dimmed in 2021 given signs of economic recovery and rising inflation in the US, which raised speculation that the US Fed could taper its $120bn a month bond buying programme.
In yet another sign of economic recovery, South Korea raised interest rates by 25 basis points for the first time in nearly three years.
In a higher interest rate scenario, the demand for gold tends to drop as it has to compete with other higher-yielding asset classes.
Harmony Gold is at the mercy of the gold price and rand exchange rate, which are determined by market forces.
In a trading update statement, Harmony said its headline earnings per share will be R8.57R9.94 in the year to end-June, swinging from a headline loss per share of R1.54 a year ago.
The assets acquired from AngloGold contributed R7.9bn in revenue and R1.8bn in net profit. In addition, the fair value of the assets and liabilities acquired exceeded the money Harmony Gold paid, resulting in a gain on bargain purchase of R1.2bn.
The average rand gold price during the period was R851,045/kg, from R735,569/kg the year before.
The quantity of gold sold rose 23% to 47,353kg, lifting group revenue to R41.7bn from R29.2bn. In dollar terms, the average gold price rose to $1,719/oz, from $1,461/oz.
Harmony Gold made a gain of close to R1bn on its hedging strategy, as the rand strengthened against the dollar. Over a comparable period a year ago, it made a loss of R1.67bn.
Harmony Gold’s share price was down 0.13% at R53.76 on Thursday. However, other gold share prices were mostly higher on the day, with AngloGold Ashanti gaining 2.29% to R242.59 and Gold Fields gaining 1.8% to R137.01.
Harmony Gold will release its full-year results on Tuesday.