Harmony’s operations will return to profit by 2016
HARMONY Gold Mining, which has the highest costs of the world’s biggest 18 gold producers, said all its operations would return to profit in the next year.
Two-thirds of Harmony’s mines had all-in sustaining costs higher than the average gold price received in the first quarter.
That would change this year, as restructuring undertaken in the past six months would boost earnings, chief executive Graham Briggs said.
“We have planned for this coming year, which is financial year 2016, for every operation to be profitable,” he said.
Kusasalethu, Doornkop and Phakisa, its worst-performing mines, would probably break even in the next six months.
Harmony stock has tumbled 38 percent this year, making it the worst performer in the Bloomberg Global Senior Gold Valuation Peers index as the company battled to rein in costs at its ageing South African operations as bullion fell. Its shares were down 1.8 percent to R12.60 at the close on the JSE yesterday.
The third-largest producer of South African gold said yesterday that its fourth-quarter loss widened after writing down the value of its restructured mines by $303 million (R3.9 billion).
“The impairments are due to the restructuring of operations for profitability and in response to low commodity prices and high operating costs, which resulted in a reduced life of the mine,” Harmony said.
Loss Widens
The net loss was R3.15bn in the three months to June 30 after Harmony booked a R3.47bn impairment related to its Hidden Valley mine in Papua New Guinea and the Doornkop and Phakisa operations in South Africa.
The loss was R263m in the previous quarter.
“We obviously spent a fair amount of money, R250m, on restructuring” in the past year, Briggs said. “That hopefully is an investment in the future.”
Harmony’s production increased 4 percent to 256 465 ounces in the quarter. Its average gold price received rose 1 percent to R463 910 a kilogram, compared with all-in sustaining costs of R478 746 a kg.
While costs exceeded the gold price, the company reported a headline profit of R191m after a loss of R262m in the previous three months. That was because of a tax credit related to the impairment, finance director Frank Abbott said.
Harmony would produce 1.1 million ounces of gold at an average cost of about R435 000 a kg in the financial year to June 30, 2016, it said. – Bloomberg