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Harmony may pay dividend after upbeat figures

Publication: Miningmx
Journalist: David McKay

Harmony Gold CEO, Graham Briggs, raised the prospect shareholders could be paid a year-end dividend after turning in improved third quarter figures and suggesting the final quarter could be better.

Thanks to lower currency exchange translation losses, and a higher rand gold price, Harmony Gold reported a third (March) quarter net profit of R31m ($3m) compared to a loss in the previous quarter of R91m (-$10m).

Gold production was 12% lower quarter-on-quarter at 8,368kg (269,839 ounces) but Briggs said the company had ratcheted back exploration and corporate costs while there had been productivity increases.

The outcome was a 12 cents per share headline profit (1 US cents/share) compared to a 21 cents per share headline loss in the December quarter (-2 US cents/share).

On a nine month basis, Harmony was still running at a negative R19m which equates to a negative 4 South African cents per share.

Net debt was also cut back to R2.8bn from R3.28bn as Harmony closed out its South African debt held with Nedbank. Cash on hand was R2bn down from R2.3bn in the December quarter.

"The aim is to be profitable and to pay dividends," said Briggs in response to questions following the group's presentation today. "The plan is intact to pay dividends but I can't quantify it as it will be a discussion with the board," he added.

There are continued headwinds in the business, however. The death of nine miners at the Doornkop mine after a fire broke out at the mine on February 4 has resulted in an independent study of the group's safety practices with the Department of Mineral Resources which Briggs said would be completed this month.

The company had also begun a management restructure installing Alwyn Pretorius as the group's new chief operating officer to whom three new regional managers would report. "We have had some engineering issues and there will be more focus on this," said Briggs. "We are looking forward to debottlenecking and better planning to reduce better results," he added.

A key metric in Harmony's life is improving the grade to match the targets set down in its reserve grade figures. Harmony had raised its grade for the third consecutive quarter coming in at 5.10g/t in the period under review against a 4.5g/t target.

Said Briggs: "We expect to beat our grade target in the current quarter. We are looking good to achieve ore reserve grades of all our operations".

UBS analyst, Kane Slutzkin, questioned whether this could be achieved. Commenting in a client note this morning, he said that "... reserve grade will continue to be challenging to meet as several key operations (Doornkop, Phakisa and Kusasalethu) remain well below reserve grade". He was "encouraged" by the third quarter grades, however.

Areas of operational concern for Harmony Gold in the current quarter, now a month old, are Kusasalethu, Joel and Doornkop.

Briggs said that production for the fourth quarter at Joel had dramatically improved whilst there had been an 'uptick in Kusasalethu' where morale was better and would be boosted again as productivity bonuses kicked in.

Re-development at the 192 level at Doornkop following the accident was virtually complete which would enable crews to move back into the area, although Briggs said that while tonnages would improve at the mine, grade at 3.5g/t would fall short of the targeted 4.5g/t level.

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