Harmony Gold Mining Co. Ltd. (HMY, Financial) announced Tuesday an 8% increase in gold production in the first half of fiscal 2017, up from 513,576 ounces produced in the second half of fiscal 2016.
The South African gold miner will report its full financial results for the first half of fiscal 2017 on Feb. 2. The company is expecting to produce approximately 554,662 ounces of gold for the first half of fiscal year 2017 (a 2.5% decrease on a year over year basis) and approximately 277,201 ounces for the second quarter of fiscal year 2017 (flat from first-quarter 2017).
The all-in sustaining costs (AISC) per ounce of gold for second-quarter 2017 is expected to be lower compared to the previous quarter's AISC of $1,142 per ounce of gold due to the U.S. dollar appreciating against the South African rand.
The company's target gold production before 2019 is 1.5 million ounces at an AISC per ounce of $950 or less. The company also aims to increase the average grade of its asset base to approximately 5.13g/t in three years’ time. For the first half of FY 2017, Harmony says that the grade of its reserves stays unchanged above 5 grams per ton.
For full-year 2017, Harmony plans to produce approximately 1.05 million ounces of gold at a lower AISC of $1,100 per ounce of gold. This compares to an AISC of $1,142 per ounce of gold sustained in first-quarter 2017.
With gold averaging at $1,221.707 per ounce on the London Bullion Market from Oct. 1, 2016 to Dec. 31, 2016, an 8.8% decrease from the previous quarter, Harmony Gold will likely report a lower gold margin (gold price per ounce minus AISC per ounce) even if it has produced gold at a lower AISC per ounce. It will be positively offset, however, by the extra profit generated from short-term gold forward sale contracts, which cover about 20% of the miner’s total production.
The strategy of exposing only 80% of the company’s business to gold and currency market’s volatility will assure a certain amount of cash the miner can use for its outflow needs: organic growth, acquisitions, repayment of debt and the payment of dividends to shareholders.
Harmony paid dividends of $16 million to its shareholders. The dividend yield is 1.44% at the current price.
As of the most recent quarter, the miner had approximately $119.97 million in cash on hand and approximately $172.69 million in total debt.
Harmony Gold is currently trading at $2.46 per share on the New York Stock Exchange, down two cents or -0.60% from the previous trading day. The price is $1.24 lower than the analysts’ average target price of $3.70 per share. The gold stock is seen as a hold by the analysts and the recommendation rating is 2.7. The recommendation rating ranges between 1.0 (Strong Buy) and 5.0 (Sell).
The stock is trading at 0.51 times the book value and at 4.04 times the Ebitda.
Disclosure: I have no positions in Harmony Gold Mining.
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