Harmony Gold Mining Co. Ltd. (HMY, Financial), the South African miner with assets in South Africa and Papua New Guinea, has informed the market through a news release published on its website, that the headline earnings per share and earnings per share as expected for full fiscal 2017 which ended June 30, will differ from those of full fiscal 2016 by more than 20%.
According to the Johannesburg stock exchange requirements, where Harmony Gold Mining Ltd. is also traded, the company is obliged to publish a trading statement with which its shareholders are informed about the existence of a difference between one year ago earnings and expected earnings for full fiscal 2017. The latter are expected by Harmony Gold with a “reasonable degree of certainty.”
The headline net income per share and earnings per share as expected by Harmony Gold for full fiscal 2017, which started last calendar year on July 1 and ended this year on June 30, are shown in the picture below.
Harmony Gold has also informed its shareholders that earnings per share for full fiscal 2017 are likely to be 70% to 50% lower than the same item of one year ago because of a $131 million impairment charge and a $70 million provision that was raised by the company to settle litigation and other costs related to a possible class action for silicosis, a form of occupational lung disease that affects mine workers. The company says that the amount of this provision – which is recurrent and therefore not added back to headline earnings – may be increased in the future.
The income statement of full fiscal 2017 will be charged with noncash impairments due to a 30% reduction in the life of the mine, which is now seven years, a reduction in the amount of resources that have been declared by Harmony Gold at Kusasalethu gold mine which is located in the South African Province of Gauteng, and due to “additional capital expenditure on improving environmental conditions at Tshepong mine which is located in the South African Province of Free State.
Harmony Gold says that these noncash charges “will not have an impact on reported cash balances and free cash flow” and the company’s “year-on-year financial performance and cash flow was strengthened by gains recognized on the gold and currency hedges (included in headline earnings).”
Harmony Gold is currently at $1.77 per share, down 9 cents or 4.84% from the previous trading day.
The average target price per share is $2.38, which represents a 34.5% upside from the share price. The recommendation rating is 2.7. The rating ranges between 1.0 (Strong Buy) and 5.0 (Sell).
The stock has been down trending since mid-April and has lost nearly 20% year to date. Harmony Gold is trading at 0.33 times the book value and the EV-to-EBITDA is -2.60.
Disclosure: I have no position in Harmony Gold.
