JOHANNESBURG – Harmony turned in a strong operating performance in its maiden results following its merger with ARMGold, as the group adjusted to the strong rand environment and bolstered production.
In its first set of results as a merged entity, the new Harmony, created through the merger of Harmony Gold and Patrice Motsepe’s ARMGold, reported a cash operating profit of R330,4 million from a previous pro forma number of R332,9 million.
“At financial level its very much a stand-still quarter, with the higher wage bill and the rand wiping out the effects of the higher gold price,” Swanepoel said.
Cash earnings a share, which strip out the effects of volatile hedging instruments, came in at 130 cents a share, two percent lower than the 133 cents the merged group would have reported in the June quarter. With the effects of the group’s hedging taken into account, basic earnings per share improved 82 percent , from a loss of 134 cents to a loss of 24 cents.
But Swanepoel said the group’s operating performance had been encouraging. Production increased one percent to 969 179oz, from 963 200oz in the June quarter. Costs rose three percent, from R73 480/kg to R75 319/kg. “We are pretty pleased with the level of the increase – we gave a 10 percent wage increase, which should have added 6 percent to our costs,” he said.
The strong rand is close to claiming its first casualty in the Harmony group: Swanepoel said he could not guarantee that the Deelkraal mine would still be around in six months. He said there would be no job losses at the mine, as Harmony’s switch to continuous operations would absorb the surplus labour. “We have always dealt with these things, we have dealt with loss makers, Harmony seldom loses people,” Swanepoel said.
Swanepoel said Harmony would not panic in response to the strong rand, and was adapting to the new environment. “We are not going to mine ourselves out of the ‘dwang’ by pushing volumes, that was the Harmony of 1992,” Swanepoel said. Swanepoel said “for once” he agreed with SA Reserve bank Governor Tito Mboweni’s stance on not intervening to weaken the rand.
Swanepoel offered the reassurance that all its local operations could make money with the rand per kilogram gold price at its current R85 000/kg. Harmony has shifted its planning price to R85 000/kg, from R93 000/kg that seemed appropriate at the beginning of the year.
Swanepoel said the newly-merged company wanted to be part of the 20 percent of companies that merge that create the value they promised.
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