The Van Eck Associate Corp. increased its position in Harmony Gold Mining Co. Ltd. (HMY, Financial) on Feb. 10.
Van Eck now holds 15.01% of the South African gold producer's issued shares.Â
As of Sept. 30, 2016, Van Eck held 63,428,670 shares of Harmony Gold, which represented 14.50% of the company’s total issued shares.
Source: Yahoo Finance
Van Eck is the top institutional holder of Harmony, one of the few gold mining stocks in the industry that pays a dividend to its shareholders.
The company distributed $16 million worth of dividends to shareholders in fiscal 2016 through quarterly payments of four cents. The dividend yield is 1.29%.
What makes Harmony Gold an attractive opportunity is its 36.916 million ounces in proven and probable gold reserves traded at a discount compared to competitors.
As you can see from the table above, Harmony’s EVO (enterprise value over total gold reserves) is $33.86, the lowest in the industry.
Characterized by a high beta gold, Harmony presents a good opportunity for investors to not only gain exposure to gold, but benefit from rising gold prices. This is especially true now that protectionism in the U.S., the arising phenomena of populism in some European countries and new tensions with Iran all support an increase in the price of gold since they create apprehension and uncertainty in the financial markets.
The South Aftican company operates nine underground mines, one open-pit mine and several surface operations in South Africa. It also has one open-pit mine and several mines in development in Papua New Guinea.
There is a disadvantage to investing in Harmony Gold however. The mine operator is exposed to labor problems and strikes, illegal mining activities, shortages of available power and the lack of political stability in South Africa. The latter is having repercussions on the economy of South Africa. One of the hardest hit industrial sectors from the crisis is mining, which contributes to approximately 7% of the country's gross domestic product.
The miner is also engaged in several gold projects in Papua New Guinea, which opens a door to the eighth-largest producer of gold in the world. However, Papua New Guinea has a lot of economic, political and social problems as well, which is typical for a developing country.
Harmony Gold closed at $2.75 per share on Feb. 10 with a volume of 5,552,762 shares traded on the New York Stock Exchange.
The analyst average target price per share is $3.39, which represents a 23.3% upside from the current share price. The recommendation rating is 2.7. The rating ranges between 1.0 (Strong Buy) and 5.0 (Sell).
The stock has gained 24.43% year to date and is trading at 0.57 times the book value and at 4.05 times the Ebitda.
Disclosure: I have no position in Harmony Gold.
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