Harmony Gold Mining Co. Ltd. (HMY, Financial) reported first-quarter 2018 figures for gold production on Nov. 7.
During the quarter, the miner produced a total volume of 290,644 ounces of gold. This figure represents a 5.4% increase (or 14,984 ounces) from the previous quarter.
The higher production – on a quarter-over-quarter basis - was due to improved operating performance at the South African underground ore bodies. A production of 255,921 ounces of gold – which was a 13.8% increase on a quarter-over-quarter basis – more than offset the 5.7% decline to 25,560 ounces in surface gold production and the 61.2% decline to 9,163 ounces in Hidden Valley’s gold production.
Improved performances at underground mines in South Africa also had a positive impact on cash operating costs, which were $975 per ounce during the quarter (-3.6% on a quarter-over-quarter basis and -1.6% on year-over-year basis) since fixed operating costs could be spread over a bigger volume (production) of gold.
Compared to the previous quarter, Harmony Gold also reported an increased gold margin per ounce of metal sold thanks to higher realized prices ($1,350 per ounce in first-quarter 2018 versus $1,324 per ounce in fourth-quarter 2017) from the sale of 287,332 ounces of gold and a lower all-in sustaining cost ($1,152 per ounce in first-quarter 2018 versus $1,219 per ounce in fourth-quarter 2017) per ounce of metal sold.
The gold margin per ounce of gold sold was almost flat compared to the prior-year quarter.
In addition, the company said “increased cash flow generated from the South African operations supported the funding of the investment capital at Hidden Valley,” where the saleable level of gold production will be reached in the last quarter of fiscal 2018 following maintenance activities and other processing infrastructure upgrades.
 Harmony Gold has 906 million rand ($67 million) in net debt and a 1 billion rand revolving credit facility.
CEO Peter Steenkamp commented on the company's first-quarter operating results:
“Operational excellence has strengthened our margins at our South African operations significantly. The recently announced Moab Khotsong acquisition will further enhance free cash flows and enforces Harmony’s belief that it offers an attractive investment case."
On Oct.19, the company announced it is purchasing Moab Khotsong's operations.In addition, the company said “the Wafi-Golpu Joint Venture parties continued to progress activity in line with the forward work plan previously communicated” and plans to update shareholders with a feasibility study in the third quarter.
Harmony Gold is trading around $1.84 per share on the New York Stock Exchange with a market capitalization of $790.09 million, a price-book (P/B) ratio of 0.37 and an EV/EBITDA ratio of -1.42.
The stock is uptrending and has gained nearly 17% year to date.
Disclosure: I have no positions in Harmony Gold.
