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Alberto Abaterusso
Alberto Abaterusso
Articles (1384) 

Harmony Gold Expects Increase in Fiscal 2018 1st-Quarter Production

South African miner may beat expectations on revenue and earnings

October 12, 2017 | About:

Harmony Gold Mining Co. Ltd. (NYSE:HMY) has informed the stock market through a news release published on its website that because of increases in recovered gold grades and gold volumes the production from its underground mines in South Africa is expected to be higher in the first quarter of fiscal 2018 compared to the last quarter of fiscal 2017.

The increase is expected to be in the 12% to 14% range.

Harmony Gold Mining’s first quarter of fiscal 2018 ended Sept. 30.

Compared to the first quarter of fiscal 2017, which ended Sept. 30, 2016, the production of the yellow metal from Harmony Gold Mining’s underground operations in South Africa is expected to have increased by a percentage ranging between 6% and 8% in the first quarter of fiscal 2018.

Considering cutbacks’ waste stripping the South African miner expects to complete at Hidden Valley’s operations at the end of November, and that already had an impact on the company’s production of gold in Papua New Guinea, the total gold production of Harmony Gold Mining has increased anyway, the company says, “by 3% to 5% quarter on quarter and the corresponding quarter year on year.”

Since Harmony Gold Mining produced 275,660 ounces of gold in the last quarter of fiscal 2017 at an AISC of $1,218 per ounce of metal sold and 277,461 ounces of gold in the first quarter of fiscal 2017 at an AISC of $1,142 per ounce, investors in the South African gold producer can expect a first quarter of fiscal 2018 gold production of 284,000 ounces to 291,334 ounces.

Peter Steenkamp, Harmony Gold Mining’s CEO, said that “focus on safety, operational excellence at our South African operations and delivery at Hidden Valley in the second half of fiscal year 2018 will ensure that we remain on track to meet our production guidance.”

For full fiscal 2018, the South African miner expects to produce approximately 1.1 million ounces of gold and report an AISC of $1,180 per ounce.

Harmony reported that production results for the first quarter of fiscal 2018 ended Sept. 30 will be released on Nov. 7.

With an increase in the production of gold – and therefore in the sales volume – and an expected decrease in the AISC per ounce of metal sold during the first quarter of fiscal 2018 as fixed costs have been spread over a bigger amount of production, Harmony Gold Mining will likely beat expectations on quarterly earnings and revenue. Even though the bullion decreased by 4.3% from a price of $1,334.82 per troy ounce in the third quarter of 2016 to a price of $1,277.84 per troy ounce in the comparable of this year.

Despite a declining year-over-year quarterly gold price per troy ounce on the bullion market, Harmony Gold Mining should also report an increase in the quarterly cash flow as the miner has protected about 20% of its total production from the volatility of the gold market through the stipulation of short-term gold forward sale contracts.

Harmony Gold is currently trading around $1.90 per share with a market capitalization of $825.42 million.

Disclosure: I have no position in Harmony Gold.

About the author:

Alberto Abaterusso
If somebody asks what being a value investor means, Alberto Abaterusso would answer, “The value investor is not just the possessor of the 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 concern is how to have sales progressively growing. Also, the value investor is probably one of the most demanding persons in the world concerning sales.”

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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