Proactiveinvestors RSS feed en Tue, 25 Sep 2018 12:43:45 +0100 Genera CMS (Proactiveinvestors) (Proactiveinvestors) <![CDATA[News - City analysts examine Harmony Gold’s rising costs; earnings forecasts cut ]]>

City analysts have mixed views on South African miner Harmony Gold (JSE:HARJ) as its fourth quarter results missed the market’s consensus estimates.

Yesterday Harmony told investors that it production decreased by 9 per cent in the full year, mainly as a result of shaft closures, meanwhile year-on-year cash costs increased by 8 per cent.

With a bearish view Morgan Stanley analyst Simon Kendal, who rates the stock as ‘underweight’, cut his earnings per share forecasts for 2012 and 2013 by 24 and 20 percent respectively because of the ‘ratcheting up’ of Harmony’s costs.

“Harmony had guided unit costs would be up, but we find the magnitude disappointing,” Kendal said. He added: “We have been expecting evidence of operating inflection (volume, grade, unit cash cost) since mid-2010, but have so far only seen isolated evidence.” 

Meanwhile Kane Slutzkin, analyst at UBS, still sees Harmony as a ‘buy’ although he too had to cut his forecasts for the future.

“Harmony reported fourth quarter earnings below both UBS estimates and market consensus,” Slutzkin highlighted in a note to clients. “Production was in line with our estimates and prior guidance while costs, were higher than we had forecasted. We cut FY12 earnings by 4.3 per cent on the back of higher costs.” 

However unlike Morgan Stanley’s Kendal, the UBS analyst stressed that Harmony’s growth mines are now gathering momentum. Slutzkin also emphasised that a future improvement in gold grades would be a key catalyst for the shares. 

Importantly the UBS analyst is looking forward to an upcoming Investor Day on the August 24, which according to Slutzkin, could be another potential catalyst. 

Tue, 16 Aug 2011 14:56:00 +0100
<![CDATA[News - Did criminal miners cause an explosion at Harmony Gold's Phakisa Mine? ]]>

With the death in hospital of a fourth member of the Harmony Mine Rescue Services ‘proto' team following an explosion at the company's Phakisa gold mine near Welkom, suspicion has been raised that the four fatalities may have been a result of criminal mining activity underground.  Some of the mines in the area have been plagued by problems of this type with renegade miners, not employed by the mining company, virtually living underground for weeks or months at a time and mining gold for their own account.  They would have food smuggled in by normally-employed miners - there is usually adequate drinking water available underground - and tend to work at night when there is less chance of their being discovered.

That suspicion has fallen on criminal miners has been raised by Harmony Gold CEO, Graham Briggs, in a statement today where he reported that "while the cause of the explosion was not yet known, he was extremely concerned to have been informed that, while work was being done to restore ventilation to 66 Level, ‘booby trap' explosive devices (similar to those made by criminal miners) had been discovered some 900 metres from the accident scene."

Deaths through explosives accidents are extremely rare in the mines, so this tragic event which has killed, as Briggs noted,  "volunteer members of a highly trained, experienced corps of mine rescue workers, extremely knowledgeable about mine safety standards, who risk their lives to save those of others in danger. It is tragic and extraordinary that they have died in these circumstances, and we will spare no efforts to determine the cause.", is highly unusual.

On criminal mining activity Briggs commented that the company was doing everything in its power to rid its mines of criminal miners, with the full knowledge and assistance of the Department of Mineral Resources and the South African Police Service.

"Measures include the installation of additional security fencing and biometric and security card readers at all shafts, the banning of food being taken underground, and implementation of an amnesty, of which 102 criminal miners took advantage and returned to surface" he added.

The proto team members who died as a result of the explosion, were attending to a fire on 66 Level, some 2,013 metres below surface late on Thursday night. A fifth team member is in a serious but stable condition in hospital.

Provided courtesy of

Tue, 29 Jun 2010 11:21:00 +0100
<![CDATA[News - Harmony debt free after uranium assets sale and fundraising ]]>
The money raised totaled Rand2.7 billion and is being used to repay Harmony’s convertible bond due in May 2009 and its short term debt, leaving a positive cash balance of approximately Rand1.5 billion.

“Harmony is in excellent financial health with a strong balance sheet thanks to all the measures that have been taken in the past 18 months. Our focus now remains on achieving our overall targets and delivering consistent results”, chief executive Graham Briggs said.

Thu, 23 Apr 2009 11:32:00 +0100
<![CDATA[News - Harmony Gold's Elandsrand gold mine work suspended after fatality ]]> Harmony Gold Mining Co Ltd said a rockdrill operator has died in a fall of ground accident caused by a seismic event at its Elandsrand gold mine near Carletonville on Saturday morning. No other employees were seriously injured.

The incident occurred approximately 2780m below surface, the company said, adding the work has been stopped until investigations have been completed.

Harmony’s chief executive Graham Briggs and his management team express their sincere condolences to the family of the deceased and sympathy to those affected by the accident, it said.

Mon, 19 Jan 2009 09:12:00 +0000
<![CDATA[News - Harmony Gold - reducing debt and increasing production ]]> South African gold producer Harmony Gold has been through a tough time in recent years.  Production issues, power supply concerns, and high inflation in South Africa have all created their challenges for the company.  

Harmony had been on a 15 year acquisition binge until 2007, growing from a one mine operation to the ninth  largest gold producer in the world.  The decade and a half expansion left the company with indigestion however, and a bloated balance sheet packed full of debt.  Enter Graham Briggs, who moved from Managing Director of Harmony's Australia subsidiary to CEO of the Group.   With the change of CEO came a change of tact.  Over were the days of acquisitions, instead Graham embarked on a company rationalisation plan, and set about a series of asset disposals to pay down group debt.

Less than two years on, and Harmony is starting to look like a leaner, meaner gold producer.  Virtually all of Harmony's assets outside of South Africa have been jettisoned, except for a 50% joint-venture with Newcrest Mining at the Hidden Valley gold mine in Papua New Guinea which moves into production this year. The Hidden Valley mine will process 4.2Mt of ore a year from the two open pits, producing 255,000 ounces of gold and 4 million ounces of silver per annum.

The joint venture model with Newcrest Mining will be the way forward for Harmony in the future too, says Graham, who we spoke to this week from his offices in Johannesburg.   Rather than attempting to fund all of its projects alone, the company is keen to spread the risk and bring in partners where it makes sense to do so.  This will help the company free up capital while building production and cash reserves.  

Graham was none too keen on Harmony's debt pile either, and has focused on early repayments to improve the balance sheet.  Only last week Harmony placed shares equal to 2.6% of the share capital with institutional investors, which raised ZAR979 million.  The proceeds were used to pay down part of a ZAR2 billion debt facility with Nedbank. An additional US$169 million is due to arrive in April 2009 as the final instalment on the disposal of its Randfontein assets, to Pamodzi Resources Fund. Combined with projected free cash flow of ZAR3.3 billion for 2009, Harmony looks on track to meet its stated objective of zero net debt by June 2009.  

This combination of factors has lead Macquarie Bank to raise its target price on Harmony to ZAR135 per share, arguing that the company is currently on 0.72 x P/NPV compared to a long term average of 1.6.
What about production?  Macquarie is anticipating total group production of 1.64 million ounces in 2009 at a cash cost per ounce US$526, climbing to just over 2 million ounces in 2010 at $538 per ounce.  It has to be said that the substantial boost in gold production is dependent on the company successfully moving five developments into production (three are extensions of existing mines), which clearly has its risks.  Harmony should also benefit from downward pressure on cost inputs, like steel and diesel,  though Eskom's power supply issues has meant higher electricity bills for South Africa's industry.  Favourable movements in the Rand versus the Dollar have also resulted in a higher gold price in Rand, which is good news for South Africa based gold producers.  

Harmony Gold may even be in a position to start paying a dividend in 2010, if the gold price holds up.   
Clearly with a gold producer like Harmony, the share price is heavily influenced by the price of gold in US dollars - which doesn't actually translate particularly well to non-US based gold producers like Harmony.

  Nonetheless, investors who are bullish on the price of gold in 2009, may find Harmony a tempting proposition as it moves towards a zero net debt position and continues to grow its production profile and generate substantial free cash flow.  Despite wider issues with the global economy, gold was one of the few asset classes to finish 2008 at similar levels to where it started.  Many analysts are forecasting gold will continue to perform well against other investments as the ripple effects of the credit crunch continue to reverberate around the world. For many mid and top tier gold producers, the theme for 2009 is one of continued development of their production profile, and Harmony is no different.

Fri, 16 Jan 2009 12:14:00 +0000
<![CDATA[News - Harmony Gold raises R985 million to pay down debt ]]>
Looking ahead to 2009, Harmony said it still intended to move ahead with its capital expenditure programs.
Mon, 22 Dec 2008 09:21:00 +0000