Harmony Gold CEO Peter Steenkamp. Picture: MARTIN RHODES
Harmony Gold CEO Peter Steenkamp. Picture: MARTIN RHODES

Accounting entries overshadowed Harmony Gold’s interim operating performance, which was boosted by the inclusion of Moab Khotsong and commercial output at its Hidden Valley mine in Papua New Guinea, hammering profits lower.

Net profit for the six months to end-December shrank to R75m from R897m.

Harmony reported total revenue of R13.8bn, up from R9.9bn a year earlier.

Revenue from gold sales grew to R13.1bn, up from R9.3bn in the same period a year before, while income from its hedging programme, or forward sales of gold and silver, contributed R365m, down from R503m the year before.

The inclusion of Hidden Valley’s full commercial production since June meant silver sales shot up to R227m from R33m, while the ownership of Moab generated R90m from uranium sales.

However, these benefits were eroded by amortisation and depreciation charges shooting up to R2.1bn from R1.3bn the previous year as Harmony began to amortise the money it spent at Hidden Valley now that the mine was in commercial production, said CFO Frank Abbott.

“We very satisfied with our cash flow,” said Abbott. “Cash is king and we are very proud of our results.”

Operational free cash flow more than doubled in the period to R1.1bn.

Net debt fell to R4.6bn from R4.9bn.

Harmony’s production remained unaffected by Eskom’s reduction of electricity to the economy this week as it unexpectedly cut supply of 4,000MW after six generating units stopped, said CEO Peter Steenkamp. 

Harmony was able to defer hoisting at some of its shafts, reducing electricity consumption until power was available, he said.

Harmony said its production of 751,008oz, up from 560,003oz a year earlier, set it on track to deliver 1.45-million ounces of gold for the financial year to end-June.

“The first half performance from certain SA operations has resulted in revising our all-in sustaining unit cost guidance for financial year 2019 to range between R520,000/kg and R530,000/kg, instead of R515,000/kg previously guided,” Harmony said.

Interim production costs rose to R10.4bn from R7.2bn.