Time to Buy Harmony Gold Stock

Harmony Gold [stock_market_widget type="inline" template="generic" color="default" assets="HMY" markup="(NYSE: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] stock has been on fire this year. Shares of the gold miner had more than doubled a few days ago as compared to where they were at the beginning of 2019, but there has been a sharp pullback of late.

Harmony seems to have been affected by a steep drop in gold prices earlier this month. On Sept. 5, gold witnessed its largest single-day slide in almost three years on the back of strong U.S. data. However, gold has held its ground and is still trading at more than $1,500 an ounce. What’s more, the possibility of higher gold prices should not be ignored as the development of recession-like conditions could push the price of the yellow metal higher.

In such a scenario, it makes sense to buy Harmony Gold because of the improvement in its production level.

Harmony Gold Has an Impressive Operational Profile

Harmony Gold’s fiscal year 2019 ended on June 30, and the company managed to deliver a 17% increase in its gold production to 1.438 million ounces. The increase in the company’s output can be attributed to a slight increase in the grade of gold, which came in at 5.59 grams per ton during the year as compared to 5.48 grams per ton in the previous fiscal year.

Thanks to the higher grade profile, Harmony’s cash operating costs per ounce of gold dropped from $1,018 an ounce in fiscal year 2018 to $965 an ounce in the previous one. Its all-in sustaining costs fell to $1,207 an ounce during the year from $1,231 an ounce the year before.

These favourable operational metrics allowed Harmony to offset the weak gold price it witnessed during the year. Harmony’s average realized gold price of $1,287 an ounce was 7% lower than the prior year’s realized price of $1,380 an ounce. But despite the lower prices, the company’s headline earnings increased to $75 million from $58 million the year before.

Looking ahead, Harmony Gold is taking steps to further boost production. This should come in handy and help the company take advantage of further increases in gold prices.

On Track to Achieve Higher Output

Harmony Gold is proactively looking for new assets so that it can replace the dwindling ore reserves at the Unisel and Masimong mines in South Africa. As reported by Mining.com:

Harmony will be operating in South Africa for a very long time,” Steenkamp said on a media call. “We are not against any investment in the country, provided it matches our criteria and we can make money out of it.

Steenkamp revealed that the Mponeng mine, AngloGold Ashanti’s last underground operation in South Africa, was among the many projects the company was looking at.

Harmony has reportedly submitted a proposal for the Mponeng mine, for which AngloGold is reportedly demanding $500 million. Getting hold of this mine could be a good deal for Harmony as it is likely to complement its existing operations in the country. Moreover, the cost profile of the Mponeng mine is among the lowest in the country.

What’s more, Harmony Gold’s financial growth should continue this year as the company forecasts an increase in production to 1.46 million ounces. With gold prices on the rise, it would make sense for investors to keep holding Harmony stock as it is capable of delivering more upside.

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.


Please enter your comment!
Please enter your name here