Harmony Gold turns into profit

Africa's third largest gold miner managed to pull the rabbit out of the hat by delivering third quarter net income of 490 million rand (USD 40.3 million), recovering from a loss the preceding quarter.

At first blush, the results look respectable after production increased and disposed of assets in Papua New Guinea. This disposal obscures the key take away from the results. The company is shifting its focus from exploration to buying producing assets. This strategy is less risky. That said, it shifts the focus to costs, such as labour and power, which are rising in double digits. In short, it shifts the focus from ‘promise tomorrow’ to ‘predictable cash flow and unpredictable costs’.