Fitch affirms Harmony's ratings
Posted Thu, 23 Oct 2003
International ratings agency Fitch Ratings on Thursday affirmed gold miner Harmony Gold Mining Company's national ratings at Long-term 'A (zaf)' and Short-term 'F1 (zaf)'.
Fitch said in a statement that the affirmation reflects Harmony's continued positive operating performance in the face of a stronger rand, good long-term growth prospects and relatively low debt levels as at year ended 30 June 2003.
Harmony's already substantial cash balances will be boosted following the announcement earlier this month of the sale of its investments in Highland Gold and in High River Gold. Proceeds from the sales will amount to almost R1-billion.
The Highland Gold disposal will result in a net gain of approximately R510-million.
Fitch added that Harmony's merger with ARMgold is seen as positive for the future, and meets a substantial part of the Mining Charter requirements in respect of black economic empowerment participation in the mining industry.
Harmony/ARMgold's joint acquisition of a strategic 34.5 percent stake in Anglovaal Mining provides exposure to Avgold's Target operation, a newly developed low-cost mine with substantial mineral resources.
"Harmony remains virtually unhedged, a position from which it has benefited as a result of the buoyant gold price," said Fitch
Ongoing development and expansion of its South African operations should ensure future growth in production and earnings, and the company continues to assess opportunities offshore, particularly in Australia and Papua New Guinea, it added.
The rating is constrained by uncertainty over the future direction of the rand/dollar exchange rate, and over the sustainability of the current strong gold price. Harmony's generally higher cost base and greater reliance on South African production make it more susceptible to a weaker gold price and stronger rand than its peers, Fitch concluded.
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