Harmony Gold Mining Company extended its gains on the JSE on a record cash flow in the six months to December. Photo: Supplied

JOHANNESBURG – Harmony Gold Mining Company extended its gains on the JSE on a record cash flow in the six months to December and higher production boosted by the inclusion of the Moab Khotsong and Hidden Valley mines in the portfolio despite warning that is headline earnings per share was down 94 percent.

The stock strengthened 2.08 percent to close at R29.88 a share on the JSE yesterday after the cash flow more than doubled to R1.1 billion during the period, while debt fell R333 million to R4.6bn.

René Hochreiter, an analyst at Noah Capital Markets, said the group’s outlook was promising, with the weak rand and prospects for Wafi Golpu, Harmony’s joint venture with Australia’s Newcrest Mining in Papua New Guinea (PNG), boosting performance.

“Wafi Golpu adds hope to the group,” said Hochreiter.

The group has described Wafi Golpu as a potential game-changer. It would provide 1.4 million ounces of gold a year and R9bn free cash flow in the first 10 years.

Last year, Harmony signed a Memorandum of Understanding with PNG committing to the Wafi Golpu project. The memorandum is key to the granting of the special mining lease expected in June.

A 6 percent increase in all-in sustaining costs and higher amortisation and depreciation costs related to Hidden Valley heavily weighed on the company. Net profit for the period fell to R75m from R897m in the comparative period last year, while headline earnings fell 14 cents a share compared with 224c a share a year earlier.

Financial director Frank Abbott said the results pointed to a strong asset base. “I think we have reported a good set of results. Our cash flow is good. 

“Net profit was disappointing, and it is as a result of writing off of capital that we spent previously. We have done very well in paying off a portion of our debt,” he said. 

Moab Khotsong, which was acquired from AngloGold Ashanti and Hidden Valley in PNG, saw production increase 34 percent to 751 008 ounces compared with 560 003 ounces a year earlier.

Gold production at Tshepong in the Free State declined 17 percent.

The company has appointed new management at the mine after Simphiwe Kubheka, the regional general manager of Tshepong and Phakisa, was shot dead on his way home in September 2017.

Gold production at Joel also decreased 18 percent, with grades at the mine expected to improve towards the end of this year.

Chief executive Peter Steenkamp said: “The group is on track to achieving production guidance of 1.45 million ounces.” He expected costs to be higher this financial year. 

The group had revised its all-in sustaining unit cost guidance to range between R520 000 a kilogram and R530 000 a kilogram.