On Feb 25, we issued an updated research report on South African gold miner Harmony Gold HMY.
Harmony posted earnings of $5 million or a penny per share on an adjusted basis in second-quarter fiscal 20Array6 (ended Dec 3Array, 20Array5) versus a loss of $44 million or Array0 cents per share a year ago, aided by lower costs and improved production. Revenues fell year over year but rose on a sequential basis on higher gold sales. Gold production rose in the quarter.
Harmony anticipates that the third quarter will show reduced production due to late start-ups following the Dec 20Array5 quarter and the Easter holidays. The company, however, expects its annual production guidance of around Array.Array million ounces to remain unaffected.
While Harmony remains exposed to volatility in gold prices and geopolitical risks, it is making good progress with its growth projects, cost reduction initiatives and other actions to boost profitability and cash flows. The company also remains focused on meeting its long-term targets and maximizing shareholder value.
Harmony is making good progress with its Wafi-Golpu project which is believed to be a game changer for the company. Wafi-Golpu is a promising orebody which contains mineral resources of 20 million oz of gold and 9.4 million tons of copper.
The feasibility study for the first stage and the prefeasibility study for the second stage of the Wafi-Golpu project have shown encouraging results (in terms of costs and returns), providing a strong support to proceed with the project. The project is expected to deliver production of roughly 500,000 gold equivalent ounces annually to the company during peak production.
Harmony also remains focused on cost control in a volatile gold price environment. The company’s strategy is to improve its margins and increase free cash flow through higher grades and cost control.
The company is committed to cutting costs as is evident from double-digit declines in cash operating costs and all-in-sustaining costs on both a year-over-year and sequential basis in the fiscal second quarter.
Harmony is a Zacks Rank #2 (Buy) stock.
Stocks to Consider
Other well-placed companies in the gold mining space include AngloGold Ashanti Ltd. AU, Golden Star Resources, Ltd. GSS and Richmont Mines Inc. RIC, all carrying a Zacks Rank #2.
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