Gold prices are surging to a record high amid increased central bank demand and geopolitical tensions, which are propelling mining companies like Harmony Gold Mining (HMY), whose stock has also reached record highs. The company is leveraging its robust financial position by announcing a solid interim dividend and diversifying its production with the introduction of copper, also achieving record highs. However, analysts have expressed concerns over the company’s high-cost structure and declining production levels, which could impact profitability. Additionally, safety issues remain a concern, though the company is actively working to address them. Despite these challenges, growth opportunities exist through projects such as the Mponeng reserve conversion and the Eva copper project.
Solid Earnings and Dividend
Harmony Gold Mining Company is one of the largest gold mining companies in South Africa. Its operations extend beyond its home country to include exploration projects in Papua New Guinea, which diversifies its asset and resource base. The company is further poised to diversify its operations by introducing copper production in the near term. This strategic shift is intended to de-risk the company’s production profile and expand its mining portfolio.
The company reported significant gains in its financial performance for the six months ended December 31, 2024. Headline earnings showed robust growth, rising by 33% in South African Rand and 39% in USD, reflecting strong operational output. The company’s production guidance for FY25 remains consistent, with expectations of producing between 1.4 million and 1.5 million ounces and maintaining an all-in sustaining cost (AISC) between R1,020,000/kg and R1,100,000/kg. At the same time, the underground grade is projected to remain above 5.80 g/t.
In addition to reporting strong earnings, Harmony has declared an interim gross cash dividend of 227 South African cents per share, equivalent to $0.10, a dividend equivalent yield of 0.83%, payable on April 14, 2025.
Analyst Urges Caution
Bank of America Securities analyst Jason Fairclough has reiterated a Hold rating for Harmony Gold Mining while raising the target price to $14.73 (from 11.89), noting Harmony Gold’s high-cost structure as a primary concern, which makes the company’s profitability highly sensitive to changes in gold prices despite a positive outlook for gold reaching $3,500/oz. Challenges include declining production levels that could potentially lead to increased costs, as well as persistent safety issues. Despite the potential for growth through initiatives like the Mponeng reserve conversion and the Eva copper project, these factors combined support a cautious approach.
Harmony Gold Mining is rated a Hold, with an average price target for HMY stock of $14.73, which represents a potential upside of 4.77% from current levels.
