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Harmony earnings up on strong gold price, output dips

Journalist: Chanel Pringle

Johannesburg ( – Gold major Harmony Gold on Friday reported a 5% increase in headline earnings to R516-million for the quarter ended March 31, 2009, owing to a higher gold price.

This was compared with headline earnings of R492-million the quarter before.

The company, led by CEO Graham Briggs, noted that the gold price had increased by 15,7% to between R253 441/kg and R293 238/kg during the quarter.

“Gold has become a currency rather than a commodity – a good reason for us to remain bullish about the gold price. We believe that the uncertainty in worldwide markets will support a stronger gold price,” the company stated.

The higher gold price was, to some extent, offset by lower production, which was down 3,4% quarter-on-quarter to 10 880 kg in the March quarter, mainly as a result of a “slow build-up” after the Christmas break.

This had resulted in a R142-million decline in gold revenues.

Further, the company had reduced its operating costs by R204-million, mainly as a result of a build-up in gold inventory and lower consumable store costs, it stated.

Meanwhile, Harmony highlighted that it had reached a zero-debt position and that it had a strong cash flow during the quarter, with a cash operating profit at R1,2-billion.

“Harmony is financially healthy. We have delivered on our promise to reduce our debt, preserve cash and position the company to become net debt free. Our shareholders have invested in an uncomplicated, safety-conscious company with a strong cash flow, growing pipeline, a steady margin, completely unhedged and geared for gold bulls,” Briggs commented in a statement.

Harmony would continue with its plans to achieve a 2,2-million ounces of gold output by 2012.

The Phakisa, Doornkop and Elandsrand operations would be in full production in 2012, while higher grades from the Tshepong decline, the Bambanani shaft pillar and the Evander 8 decline were also expected.

Meanwhile, the commissioning of the Hidden Valley gold mine, in Papua New Guinea, was on schedule for the middle of this year.

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