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BUSINESS MAVERICK

Bullion boost: Harmony Gold annual earnings soar on higher prices and production

Peter Steenkamp, chief executive officer of Harmony Gold. (Photo: Waldo Swiegers / Bloomberg via Getty Images)

Harmony Gold unveiled annual results on Tuesday which showed a tidy profit, with earnings lifted by higher prices and increased production. Meanwhile, wage talks appear to be progressing well. It’s been something of a golden year for bullion producers.

Harmony’s headline earnings for the year to the end of June roared back into positive territory, surging to 923 SA cents per share from a headline loss per share of 154 US cents. A final dividend of 27 cents per SA share was declared, bringing the total dividend to 137 cents per share, which reflects the company’s policy of paying out 20% of its free cash flow. 

The two P’s were at play here: prices and production. The gold price the company received in US dollars rose 18% compared with the previous year, while production was up 26%. The gold price in August last year, part of the period under review, breached record highs over $2,000 an ounce as the pandemic boosted the precious metal’s status as a safe haven asset in times of uncertainty.  

It must be said that at these prices one would expect a gold producer to make money and pay dividends. Its headline earnings per share or HEPS of 923 SA cents was in the middle of expectations of between 857 and 994 SA cents, which may explain why its share price on Tuesday afternoon had fallen more than 5% at one point. 

On other fronts, the company is engaged in wage talks aiming for a three-year deal with unions, and those seem to be progressing well. 

“We are confident that we will have a good outcome,” CEO Peter Steenkamp told Business Maverick in an interview. 

A source with the National Union of Mineworkers (NUM), the majority union at Harmony, said the union was also confident that an agreement will be reached soon, averting the prospect of protracted talks or a possible strike.

“We appreciate the way Harmony has been negotiating and we hope for a wage agreement to be signed soon,” the NUM source said. 

The source said that Harmony’s offer was an extra R750 a month in the first year for entry level/category 4 surface and underground miners, R775 a month in the second year, and R825 in the third year. For artisans and other skilled miners, it is 5.5% or the consumer price index (CPI) for three years.

The Harmony offer according to NUM – which the company declined to confirm – would be about a 7.5% hike in the first year for entry level/category 4 workers, according to Business Maverick calculations. CPI is currently running at 4.6%, so that would make this another increase well above inflation. 

The typical mine worker has several dependants, and with the jobless ranks swelling in the country, many may have additional mouths to feed, which helps explain why an increase just in line with inflation may not go very far in such households. NUM’s initial demand was R15,000 a month – a hike of over 50% – but the union has whittled that down since. 

And basic pay does not capture the whole wage picture. Medical coverage, pension contributions, bonuses, overtime pay and other benefits can more than double the total pay-out. 

Harmony also announced that 30MW in renewable energy would “be rolled out in the first phase of our strategy to decarbonise”. If unions and greens are happy, let the sunshine in. BM/DM

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