HARMONY Gold said mining inflation would be a factor in lower basic earnings for the first half of its financial year ended December.
A number of accounting factors would also weigh on the numbers which the group estimated in a trading statement on Friday would be 68% to 72% down on the first half of the previous financial year.
Said Harmony in listing one of the factors behind lower earnings: “Higher production costs, which offset the increase in production and revenue”.
Harmony is due to report its interim results on February 28 where it will face a number of questions on the production front including its difficulties with mine safety resulting in the unabated fatal underground mining accidents and the previously reported breakdown of a conveyor at its Hidden Valley mine in Papua New Guinea which would hurt gold production in the second half of its financial year.
“Production costs increased mainly due to the inclusion of six months of costs in respect of Mponeng and related assets in the first half of the 2022 financial year compared to three months in in the first half of the 2021 financial year,” said Harmony in its trading update. Mponeng was bought from AngloGold Ashanti in September 2020.
Said Harmony: “Inflationary increases also impacted on various facets such as labour and consumables costs.”
Hidden Valley
As a result of the conveyor damage, gold production for the year from Hidden Valley would fall to between 115,000 and 117,000 ounces compared to guidance of 153,000 to 161,000 oz. The outcome for Harmony as a group was a downwards adjustment to its overall full year production which would come in at between 1.48 million to 1.56 million oz from a previous forecast of 1.54 million to 1.63 million oz – a 4% decline.
As less gold would be mined, there would be an impact on all-in sustaining costs (AISC) which would rise to between R805,000 per kilogram and R835,000/kg from R765,000/kg to R800,000/kg. The AISC guidance for the South African mines which was put at R765,000/kg to R800,000/kg was unchanged, the company said.
“There have been previous issues with the conveyer system at the mine that materially impacted operations,” said Arnold van Graan, an analyst with Nedbank Securities.
“This could raise concern among investors that this issue could again have a longer-term material impact on the financial performance of the mine, and is likely to remain an overhang until it has been fixed, in our view,” he said.
