Harmony Gold Mining Co. Ltd.(HMY) recorded net loss (excluding items) of 10 cents per share in second-quarter fiscal 2015 (ended Dec 31, 2014), compared with net loss of 2 cents per share recorded in the year-ago quarter. The bottom was affected by lower gold pricing and stoppage of operations at the Kusasalethu mine.
On a reported basis, Harmony Gold posted net loss of $79 million or 18 cents per share in the second quarter as against net loss of $10 million or 2 cents per share in the prior-year quarter.
Share price of Harmony Gold dropped around 4% to close at $2.76 on Monday.
Revenues and Costs
Revenues decreased roughly 18.7% year over year to $327 million in the second quarter from $402 million registered in the year-ago quarter. The decline resulted from lower gold volumes and gold prices in the quarter.
Gold production decreased 11.1% year over year to 271,963 ounces (oz). Gold production also decreased by 10% from 303,341 oz recorded in the prior quarter. The lower production was due to stoppage at the Kusasalethu mine. The mine, which has been affected by illegal mining activities and a series of fires, has not returned to profitability.
Production profit for the second quarter fell 43.3% year over year to $55 million, compared with $97 million a year ago and $85 million in the previous quarter. The sequential decline was due to a 6% decrease in gold price received as well as lower gold production.
Gold ounces sold fell 12.4% year over year to 275,851 oz in the second quarter. Gold ounces sold also decreased 14% from 321,089 oz recorded in the prior quarter.
Cost of sales decreased 6.1% year over year to $354 million in the reported quarter. Cash operating costs increased 4.3% year over year to $990 per oz and declined 4% from $1,028 per oz in the previous quarter. All-in-sustaining costs rose 3.3% to $1,262 per oz from the year-ago quarter, but decreased 1% from $1,245 per ounce recorded in the prior quarter.
Financial Overview
Cash and cash equivalents decreased 46.4% to $119 million as of Dec 31, 2014, from $222 million as of Dec 31, 2013. Cash flow utilized by operating activities was $2 million as of Dec 31, 2014, compared with cash generated from operating activities of $70 million as of Dec 31, 2013.
Outlook
Management has positioned the company to remain sustainable for many years to come, managing costs and production to ensure profitability amid a volatile gold pricing environment. The company anticipates that gold production during the third quarter of fiscal 2015 will be higher after the Kusasalethu mine’s restructuring is finalized and Hidden Valley starts full production, backed by higher gold prices. Moreover, Harmony Gold’s Golpu project is believed to be a game changer for the company. According to Harmony Gold, Golpu is a promising orebody which contains mineral resources of 20 million ounces of gold and 9.4 million tons of copper. Attributable annual production for the company averages at 500 000 gold equivalent ounces per year over 2024–2029.
Harmony Gold has positioned itself to thrive in the current gold price environment and provide investors with attractive returns by investing in the Golpu project. The company is also working on its cost control and cash-generation measures.
Harmony Gold currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the gold mining industry include Gold Standard Ventures Corp (GSV), Golden Star Resources, Ltd. (GSS) and Lake Shore Gold Corp. (LSG), all carrying a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment