In the last trading session, the stock price of Harmony Gold Mining Co. (ADR)(NYSE:HMY) declined 0.45% to close the day at $2.22. The decline came at a share volume of 250 compared to share volume of 5.06 million. HMY stock was downgraded to ‘Sell’ post 3Q2016 results.
The performance
Harmony Gold plunged despite posting a production profit of 1.4 billion rand on its best ever quarterly sales of 5.25B rand, up 9% QoQ and 16% YoY. The company reported that its 3Q2016 production surged 10% YoY to over 277K oz., and it is on track to record its full-year output projection of 1.05M oz. Cash operating expenses surged by 12% QoQ in rand terms, primarily due to higher costs in electricity and labor.
Harmony stock is downgraded to ‘Sell’ from ‘Neutral’ at Citigroup, which stated increasing expenses, a roll-off in gold and currency price hedges will sharply reduce earnings post FY2017. The company lifts 1Q2017 output, after highest ever quarterly revenue. It posted its highest ever quarterly sales of R5.25-billion in the quarter to September 30.
Revenue for the reported period was 9% higher QoQ, on the back of a 10% jump in production to 277 461 oz, against the 253 349 oz generated in the quarter closed June 30. Underground recovered grade surged by 5.5% QoQ to 5.01 g/t. Development grades at all businesses except for Target 1 are also in line with projections and support the projected grade in the life-of-mine program.
At Kusasalethu, superior grades were intersected in the reported period. At Target 1, uneven ground situations troubled further mining in the premium areas. Action programs comprised an increased focus on advancement to ensure that mining flexibility enhances, with higher grades only projected by the 3Q2017 fiscal. Cash operating expenses for the September quarter surged by 12%, owing to a surge in higher electricity costs and labor expenses.
Harmony’s all-in sustaining costs declined 1% to R516 116/kg, regardless of the seasonal impact of winter electricity tariffs. The businesses recorded free cash flow of R850-million, enabling the miner to minimize net debt by 51% to R528-million from R1.08-billion, after compensating a dividend of R218-million.
