Harmony Gold Mining: New Analyst Report from Zacks Equity Research
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Summary: We have maintained our Underperform recommendation on Harmony Gold. The company swung to a loss in the second-quarter fiscal 2014 on lower sales. Lower gold prices and gold sales contributed to a double-digit decline in revenues. Harmony Gold is progressing with its cost reduction program in a weak gold price environment. While the company remains on track to achieve its production targets, its operations are likely to be impacted by a slower-than-expected ramp-up in production at mines, higher-than-expected operating costs and gold price volatility. It also remains exposed to geopolitical risks associated with potential mine shut downs and labor strikes.
Overview: Formed in 1950, South Africa’s Harmony Gold Mining Company Limited is based in Randfontein, South Africa. The company conducts underground and surface gold mining. It is also engaged in related activities such as exploration, processing, smelting and refining. Presently, Harmony is the third largest producer of gold in South Africa producing about 22% of the country’s annual gold output and the fifth largest gold producer in the world. The company’s mining operations are principally concentrated in South Africa. Several of these are located in the Free State Province such as Welcom, Virginia, Tshepong and Bambanani, along with the Evander gold mine in Mpumalanga province, the Elandskraal mine at the West Rand goldfields in Gauteng province, and Kalgold operations in the North West province. The company has discontinued its mining operations at Mt. Magnet and South Kalgoorlie in Western Australia as a strategic move.
At the end of fiscal 2013 (ended June 30, 2013), the company’s mining operations reported total attributable gold equivalent mineral reserves of 51.5 million ounces (oz). Roughly 58% of gold reserve came from Harmony’s South African mines and around 42% came from its Papua New Guinea (PNG) operations. Attributable gold equivalent mineral resources were 147.7 million ounces (Moz) as of June 30, 2013, down 1.7% year over year.
Domestic Projects: In South Africa, Harmony operates a total of 10 underground operations, several surface operations including an open cast mine, and nine processing plants, which are located in all of the currently known goldfields in the Witwatersrand basin of South Africa as well as the Kraaipan Greenstone Belt.
International Projects: In PNG, Harmony has a 50% interest in the Morobe Mining joint venture, which includes Hidden Valley, an open-cast gold and silver project that began production in June 2009, and the Wafi-Golpu project. Harmony entered into a joint venture with Newcrest Mining Limited in fiscal 2009 to assist in the development of Harmony’s Morobe Province assets. Harmony’s exploration portfolio focuses principally on highly prospective areas in PNG and the Wafi-Golpu project in particular. Harmony reported positive drill results at its Wafi-Golpu joint venture in April 2010 and it expects that if Wafi-Golpu is developed, it will shift the company’s geographical mix from more than 90% South African production to 75% domestic output and 25% offshore.
Harmony Gold Mining Company Ltd. (HMY): Read the Full Research Report