Sharp rise in profit margin generates strong cash flow for Harmony Gold
JOHANNESBURG (miningweekly.com) – Gold mining company Harmony Gold delivered another round of strong year-over-year operating results through the integration of AngloGold Ashanti’s assets into its portfolio and at a price of l higher gold in rand per kilogram.
The combination of a higher received gold price and improved profit before interest tax amortization (Ebitda) resulted in strong cash generation and a strengthening of the company’s balance sheet over the three month preceding March 31.
Despite quarterly production down 12.2% to 378,927 oz, free operating cash flow for the nine months ended March 31 increased 78% to R 5,297 million and the cash flow margin operating availability increased to 18% for the period considered.
Harmony, led by the CEO Peter Steenkamp, said in an announcement from JSE that growing the company’s ounces and margins in a safe and responsible manner in capital will guide every decision it makes as it continues to invest in both its people and assets. Five of Harmony’s employees lost their lives in work-related incidents during the quarter.
Continuing to prioritize the safety of its employees, Harmony said in a stock market announcement that it continually strives to avoid any work-related injuries by focusing on humanistic transformation in all of its operations, across the board. development of an engaged and interdependent workforce. with a proactive relationship with security. Zero loss of life remained the non-negotiable objective of the company.
The total cost of maintaining harmony (AISC) for the reporting period increased by almost 16% to $ 1,416 / oz, again due to royalties due to an increase in the price of gold in rand, costs related to Covid and increased security costs, which have been impacted by rising steel prices and the installation of steel safety nets in all of its mines to eliminate soil scraps. Target 1 experienced pillar failure and backfill dilution during the March quarter, which further weighed on AISC for the reporting period.
Following major repairs and maintenance of fixed facilities at Hidden Valley, production forecast has been adjusted to a high of 1.55 million ounces, down from the previous high of $ 1. 6 million ounces for the year to June 30. There remain grade indications of 5.47 g / t to 5.64 g / t and overall cost forecasts of 700,000 R / kg to 720,000 R / kg for the year.
Weekly mining can point out that Harmony’s cash improvement project portfolio is expected to increase cash margins and support its production, with the Wafi-Golpu project offering both commodity and geographic diversification and enabling it to grow. press on its copper-gold base.
A strong focus on its environmental, social and governance (ESG) initiatives resulted in Harmony being included in the Bloomberg Gender Equality Index for the third year in a row. Additionally, the latest FTSE4Good ESG ratings revealed improved scores for Harmony, who said they remain committed to operating ethically and honestly while operating in a sustainable and impactful manner. A virtual ESG Investor Day is scheduled for June 22, during which more ESG initiatives will be shared with the market.
During its operations in Papua New Guinea, Hidden Valley was affected by Covid-19 and the geotechnical stability of the east wall of the Stage 6 pit during the March quarter, resulting in a decrease in the grade of the ore. Despite this, Hidden Valley still managed a 15% increase in average recovered grade to 1.41 g / t at Q3 FY21 versus 1.23 g / t at Q2 FY21, resulting in a 16% increase in quarter-to-quarter gold production at 43436. oz.
Following the issuance by the environmental director of Papua New Guinea of ââthe environmental permit for the Wafi-Golpu project in December, the governor of Morobe and the provincial government initiated legal proceedings in the National Court. to obtain judicial review of the decision to issue the permit.
The National Court has yet to hear this application for judicial review, in which the participants in the Wafi-Golpu (WGJV) joint venture are not defendants. At this point, project and permitting activities can progress and Harmony and Newcrest Mining, its partner WGJV, are eager to reconnect with the State of Papua New Guinea on the special mining lease for the project.
MINIMUM MARGIN COVERAGE
The average Rand gold futures price on the hedge portfolio has now fallen from $ 1,889 / oz to $ 1,971 / oz, with Harmony hedging when it is certain it can reach a minimum margin of 25% above AISC and inflation. Locking in the required margin is a prerequisite. About 15% of its gold production is currently hedged.
The 0.1x Net Debt-to-Ebitda ratio remained stable quarter over quarter, with debt of R 833 million ($ 56 million) repaid in the three months ending March 31 , when net debt increased to 953 million rand ($ 64 million). ).