Harmony Gold announces first dividend in five years

Harmony Gold Mining Co. declared its first dividend in five years as the third-largest producer of the metal in Africa said sales of less-profitable assets, staff cuts and lower debt returned finances to “excellent health.”

Shareholders asked management to pay a dividend for the fourth quarter, Chief Executive Officer Graham Briggs told analysts at a presentation today in Johannesburg, where the company is based. Investors will get 50 cents ($0.06) a share.

Harmony has been battling to restore credibility since the resignation of Chief Executive Officer Bernard Swanepoel and Financial Director Nomfundo Qangule in 2007 after the company overlooked about 250 million rand of quarterly costs. The shares slumped 37 percent in Johannesburg that year.

Profit for the fiscal fourth-quarter ended June 30 of 1.07 rand a share, excluding one-time items, beat the 59-cent median estimate of four analysts Bloomberg surveyed. Harmony also posted a tax credit of 547 million rand in a statement today.

Briggs plans to increase production more than 40 percent to about 2.2 million ounces a year by 2012, from 1.55 million now. The company is seeking to buy the assets of Pamodzi Gold Ltd. in Free State, South Africa for 405 million rand.

Harmony is among South African gold mining companies affected by the strength of the rand as they pay costs in the local currency while selling metal for dollars. The company’s net profit fell 76 percent last quarter to 238 million rand as the South African currency rallied against the dollar.

Rand Surge

Gold’s value slumped 14 percent in the three months through June against the rand, the biggest drop since 1986, even as the metal rises for a ninth straight year in dollar terms. The rand gained 23 percent against the dollar in the second quarter, the best performance among the 176 currencies Bloomberg monitors.

“The rand will continue to hurt the gold mines,” Stephen Roelofse, a fund manager at Metropolitan Asset Managers, said in Cape Town today. Harmony’s fourth-quarter results were “largely positive, but the rand gold price is the problem,” he said.

Harmony and rivals in South Africa are trying to cut costs after agreeing to salary increases of between 9 and 10.5 percent this year and as power utility Eskom Holdings Ltd. increased charges by 31 percent. Harmony lost about 75 shifts of output due to 25 safety stoppages after fatal and other accidents in the fiscal year, Briggs said. Nine died in the fourth quarter.

The company fell 1.50 rand, or 2 percent, to 73.50 rand in Johannesburg trading. Gold declined 1.9 percent to $930.88 an ounce as of 4:56 p.m. in London, its lowest since July 29.

Source: Bloomberg

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