Harmony Gold Mining Co. Ltd. (HMY, Financial) communicated quarterly figures Thursday about the production of gold and the production profit for the first quarter of the fiscal year that started July 1 and will end June 30, 2017.
During a quarter in which Harmony says it “recorded its highest ever quarterly revenue of 5.25 billion rand, a 9% increase quarter on quarter (16% increase to $374 million),” the miner was able to continue its strategy of reducing the net debt that was already undertaken in fiscal 2016.
At the end of fiscal 2016 the net debt in South African rand decreased 54% on a year-over-year basis.
During the first quarter of 2017, the company reduced the net debt by another $36 million thanks to the free cash flow of $60 million produced during the first quarter of fiscal year 2017 despite more costs sustained for higher energy prices and the workforce.
As of September, Harmony’s total company liabilities and debts net of the total liquid assets was $38 million.
The hedging strategy consisting in the stipulation of short-term gold forward sale contracts for 432,000 ounces over two years, representing about 20% of the miner’s total production and foreign currency hedging contracts, helped Harmony in generating $17 million of extra profit.
Given the volatility of the gold market, this strategy is contributing to more cash certainty for the miner for its outflow needs.
Harmony paid dividends of $16 million to its shareholders. The dividend yield is 1.14% at the current price.
During the first quarter of 2017, Harmony produced 277,461 ounces of gold, up 10% from the previous quarter, at all-in sustaining costs (AISC) of $1,142 per ounce of gold, down 5% from the fourth quarter of fiscal 2016.
Harmony reported increased quarterly production and improved figures of profit and free cash flow during a period characterized by increased gold price. In the first quarter of fiscal 2017, Harmony received $1,339 per ounce of gold sold versus $1,262 per ounce of gold sold in the fourth quarter of fiscal 2016.
Harmony closed at $3.25, up 11 cents or plus 3.50% from the previous trading day. A volume of 7,946,700 shares traded on the New York Stock Exchange. The stock gained nearly 250% year to date on the NYSE.
At the moment, the stock is trading below its price-book (P/B) value (P/B mrq is 0.72), and the Enterprise Value/EBITDA is 5.17.
The enterprise value/EBITDA is 5.20 and P/B (mrq) is 0.68.
Disclosure: I have no position in Harmony Gold.
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