South African bullion producer Harmony Gold said it had swung back to a quaterly profit despite a fall in production as it benefited from a smaller foreign exchange loss on a US denominated loan.Photo Supplied

Johannesburg - Harmony Gold Mining Company returned to profitability in the quarter to March despite disappointing production from some local operations.

The company committed itself to improving profits and paying dividends.

It gained from foreign exchange translations, but production declined 12 percent to 269 000 ounces in the March quarter from 306 000 the previous quarter.

Among the reasons for lower production was the accident in which eight mineworkers died in a fire and rockfall accident at the Doornkop operation in February.

The flooding of the shaft bottom at the Joel operation, and a slower turnaround and technical issues at the Kusasalethu Mine also contributed to the decline.

An independent locally based company was working with the Department of Mineral Resources to conduct a safety audit at all operations, Harmony chief executive Graham Briggs said during a conference call on Tuesday.

“We will have an indication on where we are in this quarter and we will be able to address any challenges in our safety strategy,” Briggs said.

He was optimistic about the future and cited as some of the group’s highlights low debt, and a 5 percent improvement in underground grade to 5.1g a ton from 4.85g a ton in the previous period.

The company’s net debt was 13 percent lower, leaving it with a cash balance of R2 billion.

The drilling that was completed at the Wafi Golpu operation during the quarter was expected to lead to higher grades.

Briggs said: “We remain committed to increasing our profits and cash flow to enable us to pay dividends in future. Our objective is to pay dividends. I cannot quantify that for you. It is a discussion that the board will have in June or July.”

Harmony posted a net profit of R31 million in March compared with a net loss of R91m in the previous quarter, mainly due to a smaller foreign exchange translation loss recorded on a dollar-denominated loan. The gold mining house was also boosted by the lower rand-dollar exchange rate in the period.

Earnings a share of 7c were reported in March from a loss of 21c a share in the December quarter.

Harmony shares dropped 3.37 percent to close at R34.40 on Tuesday. The shares rose 2.16 percent on Friday – the same day that Imara SP Reid analyst Sibonginkosi Nyanga issued a hold recommendation for the stock.

“We view the group’s existing assets as offering lower quality earnings than peers [higher costs, greater operating risk, specifically associated with deep-level mining] and we think better opportunities exist elsewhere in the sector,” the note read.