Harmony Gold Mining Company Limited HMY reported a loss of 5 cents per share in third-quarter fiscal 2015 (ended Mar 31, 2015), that compared unfavorably with earnings of a penny per share recorded in the year-ago quarter. The bottom line was affected by lower gold pricing and high mining costs.

Revenues and Costs

Revenues decreased 17.5% year over year to $292 million in the third quarter from $354 million registered in the year-ago quarter. The decline resulted from lower gold volumes and gold prices in the reported quarter. Gold prices received fell 5.7% year over year to $1,220 per ounce (oz) in the quarter.

Gold production decreased 8.7% year over year to 245,697 oz. Gold production also decreased 10% from 271,963 oz recorded in the prior quarter. In the reported quarter, gold production was adversely affected by slow start-ups after the Dec 2014 holidays, as well as safety stoppages.

Production profit for the third quarter fell 36% year over year to $55 million from $86 million a year ago while remaining flat on a sequential basis. The year-over-year decline was due to a 6% decrease in gold price received as well as lower gold production.

Gold ounces sold fell 12.4% year over year to 239,330 oz in the third quarter. Gold ounces sold also decreased 13% from 275,851 oz recorded in the prior quarter.

Cost of sales decreased 11.7% year over year to $293 million in the reported quarter. Cash operating costs increased 1.4% year over year to $1,001 per oz and also rose 1% from $990 per oz in the previous quarter. All-in-sustaining costs rose 2.8% to $1,258 per oz from the year-ago quarter, but decreased 0.3% from $1,262 per oz recorded in the prior quarter.

Financial Overview

Cash and cash equivalents decreased 69.5% to $58 million as of Mar 31, 2015 from $190 million as of Mar 31, 2014. Cash flow generated from operating activities was $33 million as of Mar 31, 2015, compared with $72 million as of Mar 31, 2014.

Outlook

Per management, the company holds a positive outlook for both production volume and grade for the quarter ending Jun 2015. Moreover, as the restructuring of the Kusasalethu mine was completed in the third quarter, the company thinks that cost savings will be realized in the fourth quarter. Harmony Gold will focus on improving the performance of its assets and undertaking restructuring activities at Masimong, Doornkop and Hidden Valley for profitability.

Additionally, the company plans to reduce stripping at the Hidden Valley to enhance cash generation in the short term. Cost-reduction initiatives are also being undertaken at this mine along with restructuring activities. Moreover, an operational improvement program has been launched to improve mining and maintenance discipline.

According to Harmony Gold, Golpu is a promising orebody which contains mineral resources of 20 million ounces of gold and 9.4 million tons of copper. Attributable annual production for the company averages at 500,000 gold equivalent ounces per year over 2024–2029.

Harmony Gold is considering ways to fund Golpu and provide investors with attractive returns by investing in this project. The company is also working on its cost-control and cash-generation measures.

Zacks Rank

Harmony Gold currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the gold mining industry include Primero Mining Corp. PPP, Pretium Resources Inc. PVG and AngloGold Ashanti Ltd. AU. While Primero Mining sports a Zacks Rank #1 (Strong Buy), Pretium Resources and AngloGold Ashanti carry a Zacks Rank #2 (Buy).