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Harmony looks to golden dawn after struggle


Publication: The Times
Journalist: Jim Jones

Harmony Gold, South Africa’s third - largest gold producer, is emerging from the woods.

The problems of the past five years have to a large extent been overcome, but the company has not yet completely reached open country as chief executive Graham Briggs explained at his presentation of the June quarter’s results in Johannesburg yesterday.

Still, the five-year dividend drought has been broken with a R0.50 per share declaration, and the balance sheet has been knocked back into shape, with the prospect of future developments being funded entirely from cash flow.

Briggs is confident that gold will reach 1000 an ounce by this year’s end. But he cautions about the detrimental effect on revenues of a persistently strong rand against the dollar, the recent wage increase which will lift total costs by 5.2% and sharply higher electricity costs that are reckoned will add R60-million a quarter in the year to end-June 2010 and winter electricity tariffs that will load a further R120-million onto the current quarter’s costs.

Harmony’s South African operations put in some mixed grade and tonnage performances in the June quarter — not surprisingly, given that the company’s mines are very mature, which affects near-term operational flexibility.

As Briggs put it, Harmony is open to making acquisitions, but none, apart from Pamodzi, have yet passed the company’s investment hurdles. Harmony said it is paying R405-million for Pamodzi’s Free State assets. This is the first time the price of the assets has been disclosed.

Briggs revealed how the Pamodzi assets fitted into the company’s medium target to deliver 2.2 million ounces a year by 2012. The Pamodzi Free State Assets will be purchased free from all liabilities, save for all associated rehabilitation and environmental liabilities. — Additional reporting by I-Net Bridge

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Investor brief

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Harmony Investor brief

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