Harmony Gold forecasts 100% interim headline earnings leap
HARMONY Gold expects headline earnings per share for the half-year period ended December 2023 to jump 100% to between 937 cents and 976c on the back of elevated output and higher gold prices.
Peter Steenkamp, the CEO of Harmony Gold, said yesterday that the performance of the company for the period reflected higher ounces, stability in the cost structure and ongoing investments.
Shares in the company traded about 5.52% higher at R112.43 in afternoon trade yesterday. The shares closed the day 3.32% up at R110.09.
“The stellar H1FY24 results are a result of our ongoing investment in safety, higher quality ounces, a stable and predictable cost structure and operational excellence across the entire group. This has placed us in a very good position to take advantage of the strong gold price and generate excellent operating free cash flows,” said Steenkamp.
The company will focus on expert conversion of its “significant mineral resources to mineral reserves” in pursuit of “long-term value” creation.
The December 2023 interim period under review benefited from “higher recovered grades” as well as “increase in gold production,” the company said in a trading update.
In addition to this, the company operated against higher average gold prices. Bullion prices have firmed up by about 8% on a year-on-year basis, say analysts although there was slight downward volatility between January and February 2024 prices amid mixed global economic data.
In the key US market, buoyant reports on gross domestic product (GDP) growth, manufacturing activity and inflation have tempered expectations of imminent US Federal Reserve rate cuts although gold prices have held steady on the $2 010 (R38 160) per ounce to $2 020 per ounce range on healthy longer-term demand drivers. “Gold ETF holdings are languishing around $1 500 – nowhere close to previous peaks,” said Tobi Opeyemi Amure, an analyst at Trading Biz earlier this month. “When gold eventually breaks out above $2 050, that’s when ETFs will start piling in en masse, catapulting prices much higher.”
Analysts say investors should keep an eye on the geopolitical landscape, which can significantly impact gold prices. Rising “tensions between major countries, conflicts in resource-rich regions, and global supply chain disruptions could all potentially boost safe-haven demand” for gold.
“And with central banks continuing their gold-buying sprees – Russia in particular has been aggressively accumulating bullion – there is underlying support for prices,” said market analysts.
Harmony Gold would likely further benefit from the precious metal’s safe haven status.
Gold production for the period was likely to be 14$ stronger at between 820 000 ounces and 835 000 ounces.
Apart from higher gold output in the half-year period to December, Harmony Gold has also recorded an increase in production of silver and uranium from the Hidden Valley and Moab Khotsong operations, respectively.
There was also a “meaningful increase in the average prices received for both commodities” in addition to better performance profiles.
Harmony’s robust earnings performance for the period had been partially offset by an increase in production costs due to inflationary increases in labour and electricity costs as well as higher royalty taxes driven by an increase in revenue and profitability.
The company was also impacted by a rise in amortisation and depreciation as a result of higher depreciation recognised for stripping activities at Hidden Valley.