One fifth leap in gold price more than offsets heavy slide in Harmony interim gold production

Kusasalethu mine

HARMONY Gold is set to report a 253 cents per share turnaround in fortune for the six months ended December despite producing much less gold than in the interim period of the previous financial year.

Share earnings were estimated to come in at 249 cents per share which compares to a four cents per share loss in its 2019 financial year.

The improvement was largely down to a 19% increase in the rand gold price which averaged R683,158 per kilogram in the six months ended December compared to R572,898/kg previously. This more than offset the poor production period.

Harmony said in a trading statement today that it suffered “grade issues” at its Kusasalethu and Target gold mines which contributed to a 6% reduction in underground recovered grade to 5.29 grams per ton. As a result, total gold produced for the six months was 8% lower at some 688,379 ounces, or 21,411/kg.

Harmony Gold also said it had restated its previous year’s interim earnings following a bona fide error in the calculation of its borrowing costs as they should have been stated in the IAS 23 accounting standards.

The outcome of the correction was an increase in the comparative period’s amortisation and depreciation by R10m as well as finance costs by R84m. This decreased net profit for the six months ended December 2018 to four cents from a profit of 15 c/share previously.

According to RBC Capital Markets vice-president for global mining research, James Bell, the market may be supportive of a gold price above $1,500/oz for the foreseeable future, although he added that another catalyst was required to move higher than that. Such a catalyst could come from a sell-off in the equity markets.

Speaking at the Mining Indaba conference in Cape Town this week, Bell said: “We are deep, deep into a bull market for equities – this rally started in 2009 and stock markets are at an all-time high right now.

“We think from an RBC perspective that stock markets could have a less good performance from here. We are not calling for a recession in the next 12 months, but we do not think investors should be complacent.

“If there is a correction in equity markets gold prices should do well purely because people see gold as a safe haven and a hedge against risk.”

Bell pointed out the current gold price rally which started in 2016 had already run longer than some previous gold price rallies but he believed it still had “… upside from a price perspective”.


  1. Goldfields have also recently updated their 2019 earnings expectations.
    The numbers suggest an EPS which is around half that of the EPS for Harmony as detailed in this article.
    The Goldfields share price has surged on their news versus a drop for the Harmony announcement which appears to be counter intuitive.
    Perhaps further investigation into the vast difference in valuation would be possible?
    Would the EPS variation imply that Harmony should be priced at R100 per share or Goldfields at R47 per share or is it a case of reporting differences?

  2. There should be far more to come.
    A quick glance at any chart for gold priced in ZAR, will confirm a rather rapid and surprisingly steady increase over the last several years. This is in comparison to a drop in the USD based price of gold over the same period.
    This article confirms that Harmony’s profitability is directly connected to the SA Rand gold price.
    This raises some questions.
    Associating Harmony’s performance with the USD gold price is misleading as it appears to suggest a limited upside to the share when the SA Gold price is on a distinct upward trajectory.
    It would not be unfair to expect the price of the share in ZAR to track the price of gold in ZAR in some fashion.
    This has in no way been the case over the last several years and there is in fact an enormous divergence between the two when compared side by side over several years.
    What would be the reason?
    Do lower grades and higher costs actually justify this?
    Is there factual information available which substantiates the difference when compared on an annual basis?
    Some factual evidence, rather than the usual anecdotal evidence in the form of brief statements regarding rising costs and lower grades would help to clarify
    or would this be pocking the hornets nest…

    • Yes. Yes. It is truly mystifying, is it not?

      Let us continue to ponder this rich tapestry, as friends, around a bottle of red wine, shall we not? Contemplating back an forth, like dry leaves in the autumn breeze – going nowhere😂😂😂

      • If someone asking questions is as entertaining to you as comedy, perhaps you should consider the fact that you may not have understood the question. Alternatively you are welcome to provide the insight you may have to the rest of the readership, so that everyone would have the opportunity to consider your comments in the same light as you do for others.

  3. Chill, CC😊

    I know we’re all just trying to make some sense out of the snippets we can get our hands on – frustrating, of course😔

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