Harmony Gold Mining Co. Ltd. (HMY) recorded net earnings of 8 cents per share in the third quarter ended March 2011, as opposed to last year’s loss of 9 cents per share. The company remained committed to its long-term strategy of generating earnings to fund growth.
Gold production reduced 2.0% sequentially to 316,909 ounces. Cash operating costs remained stable at $979 per ounce versus $979 per ounce in the prior sequential quarter due to cost savings, decreased electricity and labour costs. Cash operating profits declined 3.2% to $122 million, as the decrease in revenue was largely offset by a decrease in production cost.
Cost of sales increased 9.0% year over year to $375 million and increased 3.0% over the previous quarter. Total production costs increased to $295 million in the reported quarter versus $251 million in the comparable year ago quarter. However, production costs decreased by 3% sequentially. Gross profit in the quarter increased significantly to $47 million from a loss of $8 million in the year ago quarter and decreased 32.9% over the previous quarter.
Revenues were up 25.6% year over year to $422 million versus $336 million in the year ago quarter and were down 2.8% sequentially. The gold price received increased by 1.3% from $1371/oz in the December 2010 quarter to $1389/oz in the current quarter. Revenue for the March 2011 quarter decreased as a result of a 3.3% decrease in the gold sold.
Cash and cash equivalents amounted to $97 million as of March 31, 2011.
Outlook
The company is showing significant progress both in the growth of resources as well as diversity. Its key short-term objective is the build-up of its production and the main focus is on getting the assets, in which it has invested considerable sums over the last few years, into full production.
Harmony is a company, which has significantly improved the quality of its production, which it will continue to do with better cash costs and free cash flow in the future. The company has several world-class mines in South Africa which are currently in the build-up phase and these together with Hidden Valley, will be significant contributors to Harmony’s set production targets.
The company competes with Newmont Mining Corp. (NEM) and AngloGold Ashanti Ltd. (AU).
Currently, Harmony has a short-term (1 to 3 months) Zacks #3 Rank (Holdl), but a long-term (6 months and higher) Neutral recommendation.
ANGLOGOLD LTD (AU): Free Stock Analysis Report
HARMONY GOLD (HMY): Free Stock Analysis Report
NEWMONT MINING (NEM): Free Stock Analysis Report
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