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Alberto Abaterusso
Alberto Abaterusso
Articles (1256) 

Harmony Gold Mining Met Its Annual Production Guidance

Company will release its fiscal year operating and financial results next week

August 09, 2016 | About:

Harmony Gold Mining Company Limited (NYSE:HMY) has operations in South Africa and Papua New Guinea.

In South Africa, the company operates nine underground mines, one open-pit mine and several surface operations.

The company’s operations in Papua New Guinea that form part of a 50% joint venture with Newcrest Mining Limited (NCM) include the Hidden Valley open-pit gold and silver mine, the Wafi-Golpu project and exploration tenements. In addition to its joint venture work, Harmony also has a 100%-owned exploration portfolio that focuses on prospective areas in Papua New Guinea.

Source: Harmony Gold Mining Co. website.

Results for the second quarter fiscal year 2016 and six months ended Dec. 31, 2015:

Keep in mind that the fiscal year starts July 1 and ends June 30 of the next calendar year so fiscal year 2016 started July 1, 2015 and ended on June 30. Results are expected to be released on Aug. 17. The miner announced that it has met its annual production guidance of approximately 1.1 million ounces. Harmony says it continues to differentiate itself through quality grade management, increasing underground grade by 6% year over year, making it the fourth consecutive year of increased recovered underground grades.

To create further cash certainty, the miner entered into short-term gold forward sale contracts for 432,000 ounces over two years, representing about 20% of the miner’s total production.

Harmony says the limited size and duration of the hedge means shareholders retain full upside exposure on 80% of the company's future gold production for the next two years, after which shareholders will have 100% exposure to the gold price.

The first half started July 1, 2015 and ended Dec. 31, 2015. The second quarter of 2016 corresponds to the period from Sept. 30, 2015 to Dec. 31, 2015.

For the six months ended Dec. 31, 2015, South Africa operations produced 540,134 ounces of gold (95% of total production of 568,459 ounces) with 28,325 ounces of gold (5%) coming from Papua New Guinea.

Production costs sustained in South Africa were $444 million (-18.5% year over year) and $49 million (-12.5% year over year).

Capex were $73 million (-34.8% year over year) for South Africa operations and $3 million (flat year over year) for Papua New Guinea operations excluding expenditure spend on Golpu of $8 million (2014: $1 million).

For the six months ended Dec. 31, 2015, Harmony reported revenue of $639 million, a 13.5% decrease year over year, and production profit of approx. $147 million, a 5.8% increase year over year.

In fiscal year 2015, the South African operations accounted for 91% of total production of 1.08 million ounces, with 9% coming from Papua New Guinea. At June 30, 2015, Harmony reported attributable gold equivalent mineral reserves of 42.6 million ounces of gold and attributable gold mineral resources of 110.3 million ounces.

Highlights of quarter-on-quarter results that is the second quarter of 2016 on the first quarter of 2016:

Source: Harmony Gold Mining Co. second quarter fiscal year 2016 and six months ended Dec. 31, 2015 report.

As of the second quarter of 2016, the miner had cash and cash equivalents of 876 million South African rand ($64.04 million). During the second quarter of 2016 it decreased by 611 million rand due to the debt repayment of 1.12 billion rand, offset by net cash generated of 501 million rand.

As said before, Harmony repaid 1.12 billion rand of its debt during the December 2015 quarter. Repayments consisted of $50 million on its $250 million revolving credit facility and 400 million rand on its 1.3 billion rand facility. The repayments were partially offset by the foreign translation loss recorded due to the weakening of the rand exchange rate against the U.S. dollar.

As of the second quarter 2016 the miner had total debt of 3.391 billion rand, of which 299 million rand is the current portion.

According to this news released on July 26, Harmony is one of the gold mining companies approached by Barrick Gold Corporation (NYSE:ABX) because the latter was considering selling its 64% stake in African unit Acacia Mining (NYSE:ACA).

Acacia owns three producing gold mines in Tanzania, as well as exploration projects in the country and other parts of Africa.

Harmony is up trending as gold price moves higher and the miner gained 332% year to date. Enterprise Value/EBITDA is 11.61 and Price/Book (mrq) 1.02.

Disclosure: I have no positions in Harmony Gold Mining Company Limited.

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About the author:

Alberto Abaterusso
If somebody asks what being a Value Investor means, Alberto Abaterusso would answer: “the Value Investor is not the possessor of a security that represents the company, but he is the owner of that company. As an owner of the company the Value Investor is actively involved in the dynamics of that company and his first aim is how to have sales progressively growing.”

Alberto Abaterusso would add: “probably the Value Investor is one of the least patient persons in the world concerning sales.”

Alberto Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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