Business Day (Johannesburg)
Charlotte Mathews
2 July 2009
Johannesburg — HARMONY Gold Mining will report a 3% increase in gold production in the June quarter as almost all of its South African mines have increased output, CEO Graham Briggs said yesterday.
Similar increases in production are expected from SA's two other large gold miners. Gold Fields said recently that June quarterly output would rise 4%, while AngloGold Ashanti estimated in May it would produce about 1,14-million ounces last month , or 3,6% more than in the March quarter.
Although the long-term trend for SA's gold production is downwards, miners' June quarterly performance benefits from comparisons with the March quarter, which is traditionally weak because it includes the annual Christmas break.
Briggs told an exclusive, analysts-only presentation that total production improved except for the group's Tshepong, Virginia and Kalgold mines in the June quarter. But cash operating costs had risen 8% because of higher volumes, the inclusion of one month of more expensive winter electricity tariffs and medical severance costs.
The group realised an average gold price of about R246000/kg in the quarter compared with R293238/kg in the March quarter.
Briggs said Harmony's total borrowings at the end of June had fallen to R300m from R2,8bn three months earlier, after repaying its R1,7bn convertible bond, and it held R1,8bn of cash. It was looking at exploration opportunities and was in the process of sealing the acquisition of Pamodzi Gold 's Free State assets, where it was named the preferred bidder by the liquidators.
Harmony had not disclosed how much it will pay for the President Steyn mine. However, its bid is believed to have topped the Sekunjalo Middle East Consortium's declared offer of R855m.
Imara SP Reid said in a note to clients that Harmony had the best growth profile of the major miners and was a good prospect in a strong gold price environment.
Its production margins could be lower than AngloGold's or Gold Fields' but this would improve as volumes increased. The firm recommended the shares as a "speculative buy".
Harmony's shares lost ground in afternoon trading on the JSE to about R80, despite a firmer gold price that boosted shares in AngloGold and Gold Fields.
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