Carli Cooke
HARMONY Gold’s profit for the first quarter jumped almost fivefold as production and prices increased, the company said yesterday.
Net income rose to R522 million or R1.21 a share in the three months to September, from R107m or 25c a share in the prior quarter, the company said in a statement.
Earnings excluding one-time items of R1.23 a share compared with a loss of 6c in the previous quarter.
The median estimate of five analysts surveyed by Bloom-berg was for profit of R1.22 a share on this basis.
Along with AngloGold Ashanti and Gold Fields, Harmony is trying to boost production to mitigate labour cost and electricity price increases and to benefit from increasing gold prices.
Chief executive Graham Briggs plans to increase production to 1.7 million ounces in financial 2016 from an estimated 1.3 million ounces this financial year.
Harmony stock increased 4.1 percent to R71.01 as of 9.40am yesterday, making it the best performer on the JSE. It closed 6.03 percent up at R72.31.
Production grew 8 percent to 321 924 ounces in the quarter from three months earlier.
Gold gained 2.5 percent to an average $1 653 (14 373) an ounce in the quarter from $1 612.73 the previous quarter.
It would not be surprising if gold rose to $1 800 by the end of this year, Briggs said.
In local currency terms, it might rise to about R470 000 to R490 000 a kilogram, he said.
Second-quarter production would probably be similar to output in the first, excluding an estimated 25 000 ounce loss from a strike at Kusasalethu, Briggs said.
The total cost of the strike that lasted from October 2 to October 25 was estimated at about R325 million, the company said.
Strikes over pay spread from platinum mines to gold, coal, iron ore, chrome and diamond operations in the past three months.
The Association of Mineworkers and Construction Union (Amcu) had a “strong” presence at the Kusasalethu mine, where union representation was being confirmed, Harmony said.
Amcu has challenged the dominance of the National Union of Mineworkers in the platinum industry.
Wage increases were costing the firm about R10m a month more than before, Briggs said.
Harmony mines about 90 percent of its metal in South Africa and is investing in existing and new projects in Papua New Guinea.
Harmony’s first-quarter earnings also improved after a higher tax payment was not repeated, finance director Frank Abbott said.
A crusher upgrade at Hidden Valley mine in Papua New Guinea should be completed next month and throughput could be normalised by March, Briggs added. – Bloomberg