Harmony sets 2021 gold target of 1.3 m oz as looks to emerge stronger from Covid-19 crisis

Peter Steenkamp, CEO, Harmony Gold

HARMONY Gold estimates that it lost about 160,000 ounces of gold production worth more than R5bn due to the national lockdown.

Harmony Gold CEO, Peter Steenkamp, said during a media conference call today that the company had been aiming to produce 384,000 oz of bullion during the three months ending June this year.

However, the company ended up producing 224,000 oz, thus falling short by 160,000 oz of gold during the quarter because of the lockdown, which the government imposed from March 27 and closed local mines completely until June 1.

Harmony reported its third consecutive annual loss as gold hedging derivatives and foreign currency translation losses related to the company’s US dollar loan knocked the company’s income. The increase in the gold price resulted in the gold hedging derivatives sustaining a loss of R1.7bn.

The gold mining company reported a loss of R850m for the year ending June compared to a loss of R2.6bn for the year ending June 2019 and a loss of R4.5bn in the 2018 financial year. The last time the company made a profit was in its 2017 financial year.

These losses come despite the fact that Harmony achieved a 25% improvement in the gold price it received in rand terms during its latest financial year.

This improved gold price resulted in the company’s increasing its revenue by 9% to R29.2bn during the 2020 financial year.

Last month, the gold price in both rand and US dollar terms increased to record levels as investors bought the precious metal as a safe-haven asset to protect them against the crisis sparked by the Covid-19 pandemic including a global economic recession, a depreciating US dollar, and worldwide interest rate cuts.

Steenkamp said that a rand per kilogram price at the moment of more than R1m was “very good” for Harmony’s gold mines. A gold price of above R750,000/kg meant that all the company’s operations were profitable, he added.

Harmony is forecasting as mine as much as 1.3 million oz of gold during the 2021 financial year. The company expects to mine that bullion at a cost of between R690,000 and R710,000/kg.

Looking ahead, Steenkamp said that the critical drivers of the gold price would depend on how the effects of the Covid-19 pandemic unfolded and how central banks adjusted interest rates. “Are central banks going to increase interest rates, or will they keep interest rates low? If interest rates remain low, then the gold price will stay strong for long,” Steenkamp said.

Steenkamp said that Harmony had budgeted to spend R100m on measures to cope with Covid-19, including the acquisition of personal protective equipment and converting parts of mine hostels into isolation facilities.

As of September 10, about 4% of the company’s workforce had tested positive for Covid-19, and 29 employees have died of the virus. Harmony reported six fatalities during its latest financial year compared to 11 mines deaths in the company’s 2019 financial year.