(Bloomberg) -- Harmony Gold Mining Co., the largest producer of South African gold, expects costs to jump this year, after profit in the previous 12 months soared with rising output and prices.
Johannesburg-based Harmony said the cost of extracting gold from its deep mines in South Africa and a project in Papua New Guinea will increase by 13% to 22% in the fiscal year through June 2025. It also forecasts production to decline, after exceeding expectations last year.
The market will focus on Harmony’s guidance for this year following the firm’s “strong” 2024, analysts from RMB Morgan Stanley wrote in a note on Thursday. Lower production and higher costs “may come as a negative disappointment to some,” they said, adding that the company’s dividend was also below consensus expectations.
Harmony shares fell as much as 10%, the most since August 2022. This year’s gains were pared to about 28%.
Harmony has specialized in squeezing value from aging assets in South Africa, which has many of the deepest and most geologically challenging gold mines. That paid off in the year through June as earnings soared 78%, bolstered by the precious metal’s record-breaking rally. This year looks set to be more difficult.
“Our FY25 guidance reflects the higher capital expenditure required to sustain production and our growth plans,” Harmony said in a statement on Thursday.
Production last year climbed 6% to 1.56 million ounces, led by increases at a project in Papua New Guinea and a South African mine acquired from AngloGold Ashanti Ltd. in 2020. The company said earlier this year it would invest further in Mponeng – the world’s deepest mine located southwest of Johannesburg – to extend the life of an asset that’s become a star performer.
The average gold price it received was 16% higher than the previous 12 months, the firm said.
We were able “to deliver above plan and capitalise on higher gold prices,” Harmony Chief Executive Peter Steenkamp said in the statement. The company is “confident we will beat guidance” for output and costs again this year, the CEO said on a call with analysts.
Net income rose to 8.6 billion rand ($480 million) last year. Profit before some one-time items – known as headline earnings – more than doubled to 11.5 billion rand.
Harmony – like the top two gold miners Newmont Corp. and Barrick Gold Corp. – is seeking to grow its exposure to copper in anticipation of spiking demand for the metal driven by the green-energy transition. The firm expects to make a final decision next year on whether to develop the Eva Copper mine in Australia.
Steenkamp, 64, who is due to retire at the end of 2024, told reporters on Thursday that the search for his successor is “well underway.”
(Updated with RMB comment in third paragraph and CEO comments in ninth)
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