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Harmony Gold Mining Surges After Posting Annual Results

Shares of Harmony Gold Mining Co. Ltd. (NYSE:HMY) surged 10.2% to $3.24 on Tuesday after the company released results for full-year 2019.

Production profit increased 12% to $465 million on revenue of $1.9 billion, which grew 19% from 2018 as a result of higher gold production and grades recovered from the mineral produced from underground deposits, offsetting a 7% drop in realized gold price to $1,287 per ounce sold.

Gold production increased 17% to 1.438 million ounces and recovered grades improved 2% to 5.59 grams of gold per ton of mineral.

A stronger U.S. dollar against the South African rand had a positive impact on costs reported in dollars as cash operating costs decreased 5% to $965 per ounce and all-in sustaining costs declined 2% to $1,207 per ounce.

The company reported that a full year of operations at the Moab Khotsong underground mine in South Africa and the Hidden Valley open-pit mine in Papua New Guinea boosted the operating free cash flow to $97 million.

The free cash flow margin, however, fell 400 basis points to 7%.

Moreover, Harmony recorded a 51% decrease in profit to a loss of 35 cents per share and a 19% increase in core operating earnings to 14 cents per share.

Looking ahead to 2020, the miner guided for gold production of approximately 1.46 million ounces.

In addition to Moab Khotsong and Hidden Valley, Harmony produces gold from eight underground mines and three open-pit mines in South Africa.

South African operations contribute approximately 85% to total gold production, while Hidden Valley in Papua New Guinea accounts for the remaining 15%.

The miner holds 36.5 million ounces of gold and equivalent gold in total attributable mineral reserves as of June 30, with South African reserves representing 47% of the total and Papua New Guinean reserves making up the remaining 53%.

The company also focuses on exploration activities in South Africa, Papua New Guinea and Australia as it has the potential to convert about 80.8 million ounces of attributable gold and gold equivalent into mineral reserves .

The balance sheet had $73 million in cash on hand and $413 million in total borrowings as of the end of the year. Total gold inventories were valued at $3 million and property, plant and equipment were $1.96 billion. Total equity was worth $1.6 billion.

The stock has climbed 98% over the past year through Aug. 20 to above the 200-, 100- and 50-day simple moving average lines. The market capitalization is $1.73 billion.

The closing share price on Tuesday was 120.41% above the 52-week low of $1.47 and a whisper away from the 52-week high of $3.245.

As such, the stock is not currently trading at a low valuation.

The 14-day relative strength index of 72 suggests the stock is overbought.

Sell-side analysts on Wall Street recommend holding positions in Harmony Gold Mining and their estimates on the price target to hit within 12 months averaged $2.91 or 9% lower than Tuesday's closing share price.

Disclosure: I have no positions in any securities mentioned.

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This article first appeared on GuruFocus.