Harmony Gold said on Friday gold production for the first quarter exceeded its own forecast, rising 6% from the preceding quarter, helping to mitigate the impact of a stronger rand.
Harmony said in a statement that due to the rand’s strength, it may have to consider some restructuring at its lowest-grade, highest-cost operations, but did not give further details.
South African gold producers sell their gold in dollars and pay costs in rand, and have failed to enjoy the full benefit of the rise in the dollar price of gold.
Output for the first quarter to the end of September rose to 373 431 ounces compared with the June quarter.
But cash costs rose 14% to $753 per ounce because of wage and electricity tariff increases, which resulted in a 26% fall in cash operating profit to R552-million versus the preceding quarter.
Harmony CEO Graham Briggs said the company would fight the stronger rand with higher output.
”Our weapon in managing the strong rand and rising costs must be improved productivity — in short, we need to work harder and smarter. Our focus remains producing more profitable ounces,” Briggs said.
”Looking further ahead, we remain bullish on the fundamentals of the gold sector in the medium and longer term.”
Harmony forecast its gold production would increase marginally in the short term owing to the various restructuring measures the company has taken and from new projects, and that it would meet its annual production target.
But Briggs said he was concerned by the spectre of further extraordinary price hikes from Eskom, which has applied to raise tariffs by 45% per year over the next three years to expand power generation.
Briggs said Harmony, which paid its first dividend in five years in September, intended to continue paying regular dividends to its shareholders.
”We believe that paying a dividend is a sign of a healthy company and, depending on operational performance and revenue, we intend paying regular dividends to shareholders,” he said.
Harmony was keen to continue its four-phase growth path of optimising its asset portfolio, improving operational efficiency and productivity, making further acquisitions and joint ventures and growing organically, Briggs said. — Reuters