Harmony Gold Mining Co. Ltd. (HMY, Financial) reported its first-half fiscal 2017 operating and financial results on Feb. 2.
For the first six months of the fiscal year, the South African miner generated revenue of $706 million, a 3% increase.
The company’s production profit was $177 million, a 11.9% decline from $201 million in second-half fiscal 2016.
For the period, Harmony Gold increased gold production by 8% and the grade of its reserves by 3%.
For the period, the company processed gold at an all-in sustaining cost of $1,136 per ounce, a 14% increase from second-half 2016. The company's operations for the first half of the year were more costly due to exchange rates.
Despite the negative currency impact on the company’s operations, Harmony could generate more earnings during the period. Headline earnings per share were 11 cents, an increase of over 100% on a year over year basis, which gives continuity to its stream of operating cash flow due to a rising gold price (see table below).
The company’s hedging strategy to expose approximately 20% of its operations to the volatility of the gold market helped it generate a surplus cash flow of $45 million.
The substantial cash generated from operations allowed Harmony to repay a portion of its debt and distribute $16 million to shareholders in the form of dividends during fiscal 2016. As of Dec. 31, 2016, the company’s total debt amounted to $21 million, a decrease from $74 million.
Harmony Gold closed at $2.66 per share on Feb. 3 with a volume of 3,436,290 shares traded on the New York Stock Exchange.
The analyst average target price per share is $3.37, which represents a 26.7% 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 gained 20.36% year to date and is trading at 0.55 times the book value and at 3.88 times the Ebitda.
Disclosure: I have no position in Harmony Gold.
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