by Kevin Crowley
Harmony Gold Mining Co., which has the highest costs of the world’s biggest 18 gold producers, climbed the most in almost a week after saying all its operations will return to profit in the next year.
Two-thirds of Harmony’s mines had all-in sustaining costs higher than the average gold price received in the first quarter. That will change this year as restructuring undertaken in the past six months will boost earnings, Chief Executive Officer Graham Briggs said.
“We have planned for this coming year, which is financial year 2016, for every operation to be profitable,” he said on a conference call. Kusasalethu, Doornkop and Phakisa, its worst-performing mines, will probably break even in the next six months, he said.
Harmony stock has tumbled 38 percent this year, making it the worst performer in the Bloomberg Global Senior Gold Valuation Peers Index as the company battled to rein in costs at its aging South African operations as bullion fell. Its shares rose 4 percent to 13.35 rand at 11:04 a.m. in Johannesburg.
The third-largest producer of South African gold said Tuesday its fourth-quarter loss widened after writing down the value of its restructured mines by $303 million.
“The impairments are due to the restructuring of operations for profitability and in response to low commodity prices and high operating costs, which resulted in a reduced life of mine,” Harmony said in the statement.
The net loss was 3.15 billion rand ($244 million) in the three months ended June 30 after Harmony booked a 3.47 billion-rand impairment related to its Hidden Valley mine in Papua New Guinea and the Doornkop and Phakisa operations in South Africa. The loss was 263 million rand in the previous quarter.
“We obviously spent a fair amount of money, 250 million rand, on restructuring” in the past year, Briggs said on the call. “That hopefully is an investment in the future.”
Harmony’s production increased 4 percent to 256,465 ounces in the quarter. Its average gold price received rose 1 percent to 463,910 rand a kilogram, compared with all-in sustaining costs of 478,746 rand a kilogram, 1 percent lower than three months earlier.
While costs exceeded the gold price, the company reported a headline profit of 191 million rand after a loss of 262 million rand in the previous three months, it said. That was because of a tax credit related to the impairment, Finance Director Frank Abbott said on a conference call.
Harmony will produce 1.1 million ounces of gold at an average cost of about 435,000 rand a kilogram in the financial year ending June 30, 2016, it said in a presentation. Gold climbed 0.3 percent to 465,118 rand a kilogram Tuesday.(Bloomberg)