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Harmony Gold, South Africa’s third-largest gold producer, recently released a set of strong numbers for their financial year ended 30 June 2012. The gold miner reported an 80% increase in operating (production) profits for the year to R 5.9bn, with headline earnings per share more than doubling from 223 cents to 551 cents. A final dividend of 50c brought total dividends for the year to 90c per share.
Simple start, rapid expansion
Harmony was incorporated and registered in 1950 and operated a single gold mine in agreement with Randgold until 1997, when it became completely independent. Through a series of acquisitions including Lydex, Bissett, Evander Gold Mines, Randfontein Estates, Kalgold, and West Rand Consolidated Mines, the company has evolved into a world-class gold producer that is looking for opportunity to expand even further. Much of Harmony’s recent success can be attributed to their innovative management team and executives, including CEO Graham Briggs and non-executive chairman Patrice Motsepe.
Operations
The miner’s interests in South Africa include nine continuing underground operations and three surface operations, mostly concentrated in the Witwatersrand area. Operations at Kusasalethu and Tshepong account for nearly 33% of the total gold produced locally, and contribute 37% to the production profit.
Source: www.harmony.co.za
Harmony has made a conscious effort of late to dispose of high-cost, unproductive mines, and this strategy is rewarded in that only one operation posted a loss for the year. In addition to streamlining its current operations, a renewed focus was placed on exploration and unearthing new opportunities in SA and abroad.
Harmony launched into offshore operations in 2007, acquiring royalty rights for the Hidden Valley area in Papua New Guinea. The Morobe Mining Joint Venture situated at Hidden Valley, which is a 50% partnership with Newcrest of Australia, is still in its exploration phase, with production planned to start in 2016.
This area is probably the most valuable untapped resource on the planet, with investigations and test drilling at the Wafi-Golpu site revealing the presence of vast amounts of high-quality copper and gold. The results of the pre-feasibility study on the region, which Harmony will release on 29 August, will be critical to Harmony’s future production and resultant profitability. Management hopes to mine 40% to 45% of its gold outside of SA by 2017, and establishing a flourishing operation at Wafi-Golphu can make this objective a reality.
Drivers of Profit
Harmony produced 39.642 tons of gold from a total of nearly 19m tons of ore milled, which is a slight decrease of 2% over the previous financial year. Cash operating costs increased by 20% due to increased electricity tariffs and a rise in transportation costs. The main drivers of profitability were the increase in the rand gold price by 36% and the weakening of the ZARUSD exchange rate by 11%. As a result, the increase in operating profit of 80% is mostly due to unpredictable macro factors that do not necessarily reflect Harmony’s ability to mine gold efficiently. These factors affect all gold miners similarly, and result in very inconsistent year-to-year earnings figures across the board.
Source: www.harmony.co.za
Current Valuation and Future Prospects
Harmony currently trades at a PE of 13.69, which is expensive relative to its rivals AngloGold Ashanti (8.69) and Gold Fields (8.9), and has a DY of about 1.2%. With the resources sector in general priced at very attractive levels, the opportunity to increase exposure is ever present.
Harmony’s venture at Wafi-Golphu has the potential to distinguish the company from its rivals in terms of ounces produced and ultimately also profitability, but only time will tell if the gold deposits can be accessed cost-effectively.
Investors have to decide if Harmony’s current price is low enough to pay for a capable management team, established local operations, and a potential gold mine (pardon the pun) of possibilities overseas.
Kind regards,
Cor van Deventer
www.seedinvestments.co.za
info@seedinvestments.co.za
021 914 4966
![[IMAGE]](image.php@width=300&height=150&cropratio=2%253A1&image=%252Fnews_images_sn%252F1317717632.jpg "Man walks past the Johannesburg stock exchange offices in Sandton") South African stocks booked a fresh record close on Tuesday as industrials and miners pushed higher on hopes that meetings on Greece's future this week and new plans drawn by the European Central Bank will help the Europe manage its debt woes. Full story ![[IMAGE]](image.php@width=300&height=150&cropratio=2%253A1&image=http%253A%252F%252Fwww.sharenet.co.za%252Fimages%252Fprofile%252Fadapt_it.gif) Revenue for the year shot up to R224.8 million (2011: R180.9 million). Gross profit jumped to R103.9 million (2011: R83.4 million), profit from operations rose to R22.2 million (2011: R15 million), while profit for the year attributable to equity holders of the parent grew to R18.1 million ( Full story |
 Hong Kong shares ended flat on
Tuesday, as strength in the Chinese consumer sector outweighed a
3 percent loss for China's leading offshore oil producer CNOOC
Ltd after its first half net profit fell twice as much as the
market had expected. Full story |
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Markets |
European shares rose in thin
trade on Tuesday, boosted by renewed speculation the European
Central Bank would act to rein in the sovereign. . . Full story |
U.S. stocks barely budged in
midday trade on Tuesday, trimming earlier gains after the S&P
500 hit a four-year high on hopes that. . . Full story |
Gold rose to its highest since
May on Tuesday, gaining 1 percent, on speculation the European
Central Bank will act to help Spain. . . Full story |
Global stocks rose to 3-1/2
month highs o n T uesday and the euro jumped to a seven-week peak
against the U.S. dollar. . . Full story | |||
Britain's top share index
advanced on Tuesday in light trade, led up by miners and banking
stocks, as investors speculated as to how. . . Full story |
A leading European share index
rose to a 13-month closing high in thin trade on Tuesday,
boosted by renewed speculation the European Central. . . Full story |
European shares extended gains in
choppy, light afternoon trade on Tuesday, with euro zone banks
th e best-performers as yields on Italian and. . . Full story |
European shares slightly trimmed
their gains into a modestly higher start for U.S. indexes,
buoyed by expectations central banks will intervene in the
near-future. . . Full story | ||||
SA Business |
Platinum edged down on Tuesday, sliding from a two-month peak hit in the previous session on heightened supply worries in top producer South Africa, while expectations for easing monetary policy supported gold.. . . Full story |
Platinum prices jumped nearly 2
percent on Monday, hitting a two-month high after deadly
violence at a mine in top producer South Africa triggered heavy
speculative buying on supply worries.
Bullion prices edged up as trading volume for U.S. gold
futures was. . . Full story | |||||
The rand rebounded against the dollar on Tuesday, and was the third-best performer in a basket of emerging market currencies, as. . . Full story | South African supermarket chain Shoprite said on Tuesday it will spend $205 million on property development in Nigeria to overcome a. . . Full story | British bank Barclays is in talks about combining its African operations with those of majority-owned subsidiary Absa Group in a move. . . Full story | The Ghana Stock Exchange (GSE) will list Absa Capital's gold-backed NewGold exchange traded fund on Wednesday, marking the bourse's first ETF,. . . Full story |
South Africa's Treasury sold a total of 2.1 billion rand of its 2023, 2036 and 2048 bonds on Tuesday.. . . Full story | Despite rising debt levels and increased social spending, South Africa is on a sustainable fiscal path, Deputy Finance Minister Nhlanhla Nene. . . Full story | South African government bonds and the rand strengthened on Tuesday as fears subsided the deadly violence that hit Lonmin's Marikana platinum. . . Full story | Grains, platinum and cotton
posted modest gains in an otherwise moribund commodity complex
on Monday, with broad market activity subdued as traders
contemplated the. . . Full story |
Company News |
KAP acquired the Steinhoff Industrial Assets ("the Steinhoff Industrial Assets") from Steinhoff Africa Holdings (Pty) Ltd. ("Steinhoff") and issued 1912.8 million. . . Full story |
Further to the SENS announcements dated 22 August 2011, 4 October 2011, 15 November 2011, 3 January 2012, 16 February 2012,. . . Full story |
Shareholders were referred to the specific authority to repurchase shares granted to Mvela Group at the general meeting held on 16. . . Full story |
Revenue increased 7.6% to R868.6 million from R807.3 million in the prior year. EBITDA amounted to R112.1 million (2011: R105.7 million). . . Full story | |||
Further to the audited results for the year ended 30 June 2012 released on SENS today, 21 August 2012 notice is hereby given that a gross cash annual dividend of 28.00 cents per share has been declared for the year ended. . . Full story |
Shareholders were advised that in line with their strategy to operate as One Bank in Africa, Barclays and its subsidiary Absa Group Limited ("Absa") are engaged in discussions about combining the majority of the Barclays Africa operations with Absa ("the proposed. . . Full story | ||||||
Company Results | Revenue for the interim period ended 30 June 2012 lowered by 13.6% to R1.3 billion (2011: R1.5 billion). Gross profit fell. . . Full story | Revenue more than doubled to R161.3 million (R79.3 million). EBITDA more than tripled to R18.5 million (R5.7 million). The net. . . Full story | Revenue for the year ended 30 June 2012 soared to R10.2 billion (2011: R7.8 billion). Trading profit jumped to R959.9 million. . . Full story | Revenue for the year increased by 4% to R18.7 billion (2011: R18.1 billion). Operating profit jumped to R658.9 million (2011: R451.7. . . Full story |
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| Date | Adv. | Decl. | Unch. | Actives | Volume | Value | Trades | Orders |
|---|---|---|---|---|---|---|---|---|
| 21/08/2012 | 234 | 121 | 79 | 434 | 192,706,142 | R10,933,262,713 | 93864 | 1092328 |
| 20/08/2012 | 166 | 170 | 65 | 401 | 175,778,427 | R10,751,109,876 | 89930 | 1197148 |
| 17/08/2012 | 183 | 182 | 62 | 427 | 168,552,001 | R11,622,695,942 | 106681 | 1409081 |
| 16/08/2012 | 205 | 149 | 67 | 421 | 144,689,655 | R9,087,649,179 | 80933 | 1303509 |
| 15/08/2012 | 135 | 170 | 90 | 395 | 164,684,736 | R10,373,760,776 | 73028 | 1081700 |
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| Date | Time | Headline |
| 21/08/2012 | 17:50 | INDWA INVESTMENTS LIMITED - listing of tap issue |
| 21/08/2012 | 17:45 | 1TIME HOLDINGS LIMITED - Notice of appliaction for business rescue and renewal o... |
| 21/08/2012 | 17:19 | Adaptit Holdings Limited - Preliminary Consolidated Audited Results For The Year... |
| 21/08/2012 | 17:05 | N PLC - Statement on Marikana and Covenants |
| 21/08/2012 | 16:50 | PROTECH KHUTHELE HOLDINGS LIMITED - Renewal of cautionary announcement |
| 21/08/2012 | 16:48 | FIRSTRAND BANK LIMITED - Interest Rate Reset |
| 21/08/2012 | 16:45 | NTERNATIONAL HOLDINGS LIMITED - trading statement |
| 21/08/2012 | 16:42 | TORQUE SECURITISATION (RF) LTD - Listing of New Financial Instruments |
| 21/08/2012 | 15:30 | PALABORA MINING COMPANY LIMITED - further cautionary announcement |
| 21/08/2012 | 15:15 | O RESOURCES LIMITED - trading of Exxaro ordinary shares on behalf of the Exxaro ... |
| 21/08/2012 | 15:12 | STANDARD BANK OF SOUTH AFRICA LD - SCIB - The Standard Bank of South Africa Limi... |
| 21/08/2012 | 15:10 | STANDARD BANK OF SOUTH AFRICA LD - SCIB - The Standard Bank of South Africa Limi... |
| 21/08/2012 | 15:00 | PROTECH KHUTHELE HOLDINGS LIMITED - voluntary strategic and operational update |
| 21/08/2012 | 14:55 | STANDARD BANK OF SOUTH AFRICA LD - SCIB - The Standard Bank of South Africa Limi... |
| 21/08/2012 | 14:45 | STANDARD BANK OF SOUTH AFRICA LD - SCIB - The Standard Bank of South Africa Lim... |
| 21/08/2012 | 14:43 | Standard Bank Of South Africa Ld - Scib - The Standard Bank Of South Africa Limi... |
| 21/08/2012 | 14:41 | INVESTEC BANK LIMITED - Final Dividend- SHPIHE |
| 21/08/2012 | 14:25 | TOTAL CLIENT SERVICES LIMITED - Renewal of Cautionary announcement |
| 21/08/2012 | 12:45 | ESORFRANKI LIMITED - directors dealings |
| 21/08/2012 | 12:24 | Pinnacle Point Group Limited - Renewal Of Cautionary Announcement |
| 21/08/2012 | 12:02 | Huge Group Limited - Associates Dealings In Securities |
| 21/08/2012 | 11:51 | WORKFORCE HOLDINGS LIMITED - UNAUDITED CONDENSED INTERIM FINANCIAL RESULTS for t... |
| 21/08/2012 | 11:03 | PICK N PAY STORES LIMITED - Pick n Pay Stores Limited - New Financial Instrument... |
| 21/08/2012 | 10:47 | Mvelaphanda Group Limited - Repurchase Of Shares And Disclosure Of Significant H... |
| 21/08/2012 | 10:34 | CALGRO M3 HOLDINGS LIMITED - Dealing in securities by a director |
| 21/08/2012 | 10:33 | CALGRO M3 HOLDINGS LIMITED - CANCELLATION OF S321628 Dealing in securities by a ... |
| 21/08/2012 | 10:30 | EDCON (PTY) LIMITED - Release of quarterly Financial Results |
| 21/08/2012 | 09:30 | S A French Limited - Update Announcement: Mirror Listing Of Sa French |
| 21/08/2012 | 09:05 | EMIRA PROPERTY FUND - Interest Rate Reset |
| 21/08/2012 | 09:00 | ST BUSINESS GROUP LIMITED - Abridged Audited Consolidated Financial Statements ... |
| 21/08/2012 | 09:00 | WITWATERSRAND CONS GOLD RESOURCES - Wits Golds advanced De Bron-Merriespruit (DB... |
| 21/08/2012 | 09:00 | Shoprite Holdings Limited - Preliminary Results For The Year Ended June 2012 |
| 21/08/2012 | 08:31 | GE MAIN REEF LIMITED - Report for the quarter ended 30 June 2012 |
| 21/08/2012 | 08:12 | SYNTHESIS FUNDING LIMITED - SYN942 Synthesis Funding Limited - New Financial In... |
| 21/08/2012 | 08:11 | SYNTHESIS FUNDING LIMITED - New Financial Instrument Listing |
| 21/08/2012 | 08:11 | A HOLDINGS LIMITED - Cash Dividend Declaration |
| 21/08/2012 | 08:09 | Eqstra Holdings Limited - Audited Abridged Year-end Results For The Year Ended 3... |
| 21/08/2012 | 08:01 | African Eagle Resources Plc - Miyabi Gold Project New Gold Discoveries |
| 21/08/2012 | 08:00 | SACOIL HOLDINGS LIMITED - Withdrawal of cautionary announcement |
| 21/08/2012 | 08:00 | ABSA GROUP LIMITED - cautionary announcement:Barclays and Absa in discussion to ... |
| 21/08/2012 | 08:00 | LABEL TELECOMS LIMITED - Audited Results for the year ending 31 May 2012 |
| 21/08/2012 | 07:30 | Aquarius Platinum Limited - Amendment Appendix 3y |
| 21/08/2012 | 07:10 | BRITISH AMERICAN TOBACCO PLC - Transaction in own Shares |
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