HomeGoldHarmony earnings down 13%

Harmony earnings down 13%

Graham Briggs,
CEO, Harmony
Johannesburg, South Africa — MININGREVIEW.COM — 17 August 2009 – Harmony Gold Mining Company “’ the world’s fifth-biggest producer “’ has posted a 13% fall in fourth quarter headline earnings per share, and has surprised the market with its first dividend in five years.

Harmony “’ the third largest producer of gold in Africa “’ had previously said it would consider paying a dividend in its current fiscal year, and analysts had said they would be keen to find out if this was still the case.

The company, which is debt free, said it had R2 billion in cash, which put it in a position to pursue acquisitions, invest in organic growth projects, and to pay a dividend.

A company release stated that although headline EPS had fallen to 107 cents in the fourth quarter to the end of June, Harmony had still beaten market consensus. The company added that the erosion of earnings had been due mainly to the lower rand per kg price earned in the quarter.

Despite a 1% increase in gold output during the quarter, Harmony reported a drop in earnings because of the stronger rand. Production rose to 353 752 ounces in the quarter.

For the year, output fell to about 1.5 million ounces from about 1.6 million ounces, the company revealed.

CEO Graham Briggs said his firm had looked at a number of potential acquisitions, with the main criteria being good returns and adding value to the group’s portfolio of assets, but had not found assets worth buying.

“Most operations for sale require substantial capital to bring them to an acceptable level of profitability, and the few projects available would incur enormous developmental costs,” Briggs explained.

Against the backdrop of a new pay deal for workers, higher electricity tariffs and a stronger rand/dollar exchange rate, the company forecast that costs would rise.

Briggs said the strength of the rand against the dollar was a major concern for the company, and should this trend persist, the company would introduce incremental cutbacks from marginal mining operations and capital reduction.

He forecast that gold would trade at US$1 000 an ounce by the end of the 2009 calendar year, driven by general investment demand for the metal and its role as a store of wealth.

Briggs reiterated the company’s growth strategy of producing 2.2 million ounces a year by 2012 was intact.