Summary
- Harmony announced on November 17 its operational update for the three months that ended in September 2019.
- Strong results with higher gold production sequentially and strong revenue due to a massive increase of the price of gold in 3Q.
- The Wafi-Golpu project in Papua New Guinea is a significant asset with good potential but presents an uncertain future.
- HMY, like many other gold miners, seems overbought at the moment and it is perhaps time to take some profit off the table and wait for a retracement.
Source: ItnewsAfrica
Investment Thesis
The South African Harmony Gold Mining (HMY) is a prolific gold miner that operates mainly in South Africa. Further, Harmony is active in Papua New Guinea, where it owns the Hidden Valley mine - an open-pit gold and silver mine - and owns 50% interest in the Morobe Mining Joint Venture, which includes the Wafi-Golpu project and extensive exploration areas. Please look at the map below.
The company has a total of nine underground mining operations, one open-pit mine, and several surface operations in South Africa. The gold production for the third quarter of 2019 was a total of 361,085 Au Oz, including three segments:
South Africa underground mining: 280,868 Au Oz or 77.8%
South Africa surface mining: 32,087 Au Oz or 8.9%
Papua New Guinea: 48,130 Au Oz or 13.3%
Source: HMY Website
The investment thesis is quite straightforward here and has not changed much from my preceding article. I consider the company as a long-term candidate for investors who want to own an active miner involved primarily in South Africa gold play. It is quite similar to Sibanye Gold (SBGL) that I also cover on Seeking Alpha. The only significant difference between Harmony Gold and Sibanye Gold is that the latter is more diversified and produces platinum and palladium at a substantial level since the company acquired Stillwater a couple of years back.
While I believe Harmony Gold is a robust long-term contender, I think Barrick Gold (GOLD) seems a slightly better choice after increasing its presence significantly in Africa with the merger with Randgold Resources in September 2018.
Harmony Gold Mining has a large asset base and good growth potential. Production of gold for the last quarter ending September 2019 was 361,085 Au oz from fourteen different areas indicated below.
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