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Harmony returns to profit as costs fall

Publication: Business Report
Source: www.iol.co.za
Author: Bloomberg

Harmony Gold Mining made a profit in its financial first quarter after output rose and costs fell, Africa’s third-largest gold producer said on Friday.

Headline earnings were R20 million in the three months to September, compared with an R802m loss in the previous quarter, the company said.

All-in sustaining costs dropped 19 percent in dollar terms to $1 264 (R13 031) an ounce in the period, and by 14 percent in rand terms to R404 694 a kilogram. Production increased 12 percent quarter on quarter to 309 773 ounces but declined 3.8 percent from a year earlier.

Harmony, along with rivals Gold Fields and AngloGold Ashanti, is battling twin pressures of a lower bullion price and declining output volumes in South Africa, the sixth-biggest producer of the precious metal.

Gold’s 22 percent price drop this year caused Harmony to suspend its dividend and make a loss in the previous quarter. It also forced the company to write down its 50 percent stake in the Hidden Valley mine in Papua New Guinea by $268m.

“Harmony has built new mines, enabling it to access new and higher-grade mining areas and reducing the time it takes crews to get to the face,” the company said. “Growing our margins is all about reducing our costs, improving productivity and increasing our gold production.”

The company agreed to exchange two mining-right portions at its Joel operation for two at Sibanye Gold’s Beatrix mine, it said in a separate statement. Sibanye would also sell a further two portions at Beatrix to Harmony for a royalty of 3 percent of net revenue, it said.

Its shares fell 1.62 percent to R33.50 on Friday.

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