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Expansive Harmony to pay out dividend


Publication: BusinessDay
Journalist: Charlotte Mathews

Harmony Gold Mining, SA’s third-biggest gold miner, plans to spend about R5,6bn on development projects and maintenance over the next two years to bring its production up to 2,2-million ounces a year by 2012, CEO Graham Briggs said yesterday.

Harmony produced 1,46-million ounces in the year to June and expected to mine between 1,65-million ounces and 1,7-million ounces this financial year. Harmony spent R4,4bn in capex last year and spending this financial year on maintenance and development projects was estimated at about R3,1bn — including the last R340m required to complete the Hidden Valley mine in Papua New Guinea.

In the following year capex would be R2,5bn, and thereafter the trend would be downwards, Briggs said. The 2,2-million ounce goal would be achieved from new projects and increased productivity.

Harmony yesterday declared its first dividend in five years, at 50c per share. It said paying a dividend was a sign of a healthy company, and it wanted to reward the shareholders that had remained loyal.

These were mainly institutional shareholders, Briggs said. But he could not give any assurances about future dividend payments because of uncertainty in currency and gold markets. Rand strength, which translated into weakness in the gold price realised by Harmony, was a “considerable concern”.

Harmony was bullish that gold would reach and hold 1000/oz by the end of this year, but the rand could continue to attract speculators until there was real evidence of global recovery.

Although gold has traded between 900/oz and 950/oz for much of the past six months, it has dropped sharply from a peak of more than R320000/kg in February to recent lows of about R232000/kg in rand terms.

Harmony planned for a gold price of about R225000/kg, Briggs said, but if it traded at lower levels, “incremental cutbacks from marginal mining operations and capital reduction can be expected”.

Harmony reported a net profit of R2,9bn for the year compared with the previous year’s net loss of R245m. Headline earnings were 262c a share from 126c.

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