Harmony is already seeing benefit from buying Moab Khotsong
The market applauded the addition of Moab Khotsong to the Harmony Gold stable after a $300m deal with AngloGold Ashanti as the new mine raised Harmony’s full-year gold output, helped lower group costs and boosted grades.
Harmony’s shares shot up more than 3% on Monday as the company outlined the benefits of Moab Khotsong on its full-year operating and financial results — due to be released on August 21 — marking the continued turnaround in its fortunes on the back of improving grades in SA and steady output.
The JSE listed company, which has a suite of old gold mines nearing the end of their lives, purchased Moab Khotsong to do precisely what has unfolded in the past four months it has owned the mine, bringing good-quality production into the company’s portfolio.
Harmony said on Monday it had achieved 1.228-million ounces of gold for its financial year to end-June, higher than a guidance of 1.18-million ounces.
Moab Khotsong contributed 10% of the increased production in SA, where output grew 14% during the year. Moab accounted for 105,900oz in the four months it has been in Harmony.
Harmony has grown its grades in SA to 5.2g of gold a tonne of ore mined, excluding Moab, from 4.26g in 2012.
Harmony made no mention of its Hidden Valley mine in Papua New Guinea in its brief production update. It is one of the key new projects in Harmony to add ounces on top of its 1-million ounce base.
In an April presentation, Harmony showed that if both its Hidden Valley mine and Moab were included in its interim results, operating free cash flow would have been 51% higher at $162m than the $107m it generated for the six months to end-December. Hidden Valley is a 180,000oz a year gold mine, while Moab will deliver 250,000oz, with both mines having an all-in sustaining cost of below $950/oz. Harmony said its all-in sustaining costs for the 2018 financial year were forecast to be below the targeted R520,000/kg.
The South African gold price has been languishing around the R520,000/kg mark for most of 2018. Harmony will sell 105,000oz for R660,000/kg in the first half of its 2019 financial year and 94,000oz for R623,000/kg in the second half.