JOHANNESBURG – Harmony Gold is expected to go into the red with its annual earnings to fall up to 183 percent on a weaker exchange rate.
Harmony, which hedges a portion of its production to the gold price to secure margins at some of its higher-cost operations, during the year ended June reported derivative losses of close to R1.7 billion in the year under review, compared to gains of R484 million a year earlier.
“The derivative losses are primarily as a result of the weakening of the rand exchange rate against the dollar and the strengthening of commodity prices during 2020, which negatively impacted on the derivative valuations,” said the group.
Harmony, which operates mines in South Africa and Papua New Guinea, said headline earnings per share would shrink by between 168 and 183 percent to a loss of between 139 and 169 cents, compared to headline earnings of 204c reported a year earlier.
In US dollar terms, the headline loss per share was expected to be between 9 and 11 US cents per share, which is about 164 to 179 percent lower than the headline earnings, a share of 14 US cents per share reported last year.
The group said that an increase in the gold price received from R586 653 a kilogram in 2019 to R735 569 a kilogram in the year under review contributed to the revenue increase from R26.9bn in 2019 compared to R29.2bn in the year under review.
Harmony said in US dollar terms the increase in the gold price received from $1 287 an ounce in 2019 to $1 462 an ounce in 2020 and the weakening of the exchange rate from R14.18 against the dollar to R15.66 against the dollar contributed to the decrease in revenue from $1.89bn for the 2019 financial year compared to R1.87bn in the 2020 financial year.
The gold price has strengthened by around 30 percent since the beginning of the year after reaching record highs as investors sought a safe haven amid the global economic uncertainty as a result of Covid-19 pandemic.
Investment analyst at Anchor Capital, Seleho Tsatsi, said Harmony had hedged a meaningful proportion of its production at prices well below what the spot price was today.
“The company may have had a disappointing operational performance over the period. We’ll have to wait for results to find out,” Tsatsi said.
Harmony said there was no impairment recorded in 2020, compared to a R3.9bn impairment a year earlier.
“The Covid-19 lockdown for the South African mines has resulted in reduced gold production during the June 2020 quarter,” said the group.
The results are scheduled to be released on Tuesday, September 15.
Harmony shares closed 2.95 percent higher at R106 on the JSE on Thursday.
BUSINESS REPORT