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

Harmony Gold says it has returned to profit in its half-year to end-December, as interest rate cuts by global central banks and geopolitical tension helped propel gold to a record price in rand terms.

Net profit climbed to R1.3bn in the six months to end December from a loss of R19m previously, even as the miner reported lower production due to grade issues at some of its mines.

At Kusasalethu, production dropped by almost a third due primarily to geological factors and, to a lesser extent, seismicity, the company said on Tuesday. Some high-grade areas were now being mined at lower grades than anticipated.

Total gold produced for the half-year fell 8%, and the company has lowered its guidance for the full year by 4% to 1.4-million tonnes.

The average gold price received rose 19% to R683,158/kg, while all-in-sustaining costs rose 15% to R605,911/kg. This refers to the cost of sustaining production, with the company saying electricity costs rose 13%, or by R220m, during the period.

“While a stronger gold price received continues to provide a welcome boost to our financial performance, we will focus our efforts on what we are able to control being safety, costs and production,” Harmony CEO Peter Steenkamp said.

The company was making progress in developing its own 30MW solar power plant, which may be about a year away, pending regulatory approval, he said.

Load-shedding in December disrupted the production momentum the company had ahead of the Christmas break, he said, while current load-shedding continued to constrain output.

Continuous stage 2 load-shedding was preventing the company from catching up production at the weekends, said Steenkamp, adding the group was engaging with Eskom with the aim of resolving this issue.

According to the World Gold Council, the precious metal had its best year in nine years in 2019, underpinned by geopolitical tensions, including between the US and China. Gold prices reached record highs in most currencies except the US dollar and Swiss franc.

Financial and geopolitical uncertainty combined with low interest rates is likely to bolster gold investment demand in 2020, the council said.

In morning trade on Tuesday Harmony's share price was down 3.76% to R43.57, having fallen more than double over the past two years.