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Harmony Gold Mining dishes out reduced interim dividend as profit plunges

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HARMONY Gold Mining yesterday dished out a much reduced interim dividend to its shareholders as headwinds, including unplanned labour stoppages and higher production costs, knocked its net profit hard.

For the six-month period ended December 31, the South African gold mining company reported a 69 percent decline in net profit from R4.6 billion ($284 million) to $96m.

It declared an interim dividend of 40 cents a share compared with 110c in the corresponding reporting period last year.

Harmony Gold chief executive Peter Steenkamp said: “The first six months of this financial year have been characterised by several temporary headwinds that negatively impacted our results, testing our resolve, but demonstrating our resilience and determination”.

According to the company, the net profit decline was due to a lower gold price received and the higher all-in sustaining cost (AISC) as a result of safety-related stoppages at some of its South African mines, geotechnical issues, and unplanned labour stoppages at some of its larger underground mines in South Africa and in Hidden Valley in Papua New Guinea.

Headline earnings decreased by 65 percent to $.017 a share.

Harmony also reported a 50 percent decrease in operating free cash flow margin to 11 percent from 22 percent for the same period in the previous year. It flagged a 26 percent decrease in production profit to R5bn.

Harmony Gold said gold production for the South African operations was expected to improve relative to the first half production as many of the production challenges had already been resolved.

“Production guidance for the South African operations has been revised down from a range of 1 394 000 to 1 469 000 ounces as previously guided, to a range of 1 366 000 to 1 439 000 ounces. FY22 (full year 2022) AISC guidance for the South African operations remains unchanged at R765 000 per kg to R800 000 per kg,” the company said.

However, Harmony said it was set to close its Bambanani mine in the Free State incurring an impairment of R144m as it was no longer possible to operate the mine.

“Bambanani mine will be put on care and maintenance in July, roughly 18 months earlier than planned. The mine reported a 10.2 percent increase in AISC of R812 036 per kg following a one-fifth decline in gold production,” it said.

Looking ahead, the mining firm said it had a strong pipeline of organic projects to drive its production profile and margin expansion.

Plans were also under way to allocate capital to its decarbonisation strategy, with the first phase to build a 30MW solar energy plant in the Free State with the commercial close for the power purchase agreement imminent.

In phase 2, it would be building an additional 137MW of renewable energy at its various longer-life mines, while phase 3 was in the planning stage and progressing as anticipated.

Harmony expected phase 2 of its renewable energy project to deliver over R500m a year in electricity cost savings once it reaches full production in full year 2025, it said

In late afternoon trade, Harmony’s share price was up 12.38 percent at R65.88 on the JSE, bolstered by risk-adverse investors piling into safe haven gold stocks. The shares are up 98.04 percent in the past three years.

The price closed 14.62 percent higher at R67.19 yesterday.

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