Harmony Gold doubled its dividend but the market had other plans

Harmony Gold had bully quality for shareholders this week. They doubled the dividend. Investors responded by dumping the stock.

Shares of the South African miner fell connected the New York Stock Exchange aft the institution released its first-half results connected Wednesday. The numbers told 2 precise antithetic stories astatine once.

On 1 hand, operating nett surged 61%. The interim dividend deed a grounds ZAR 3.4 billion, astir $204 million. On the different hand, the institution missed its accumulation people and costs blew retired successful astir each direction.

Wall Street looked astatine some stories and chose to absorption connected the atrocious one.

Harmony was expected to nutrient astir 800,000 ounces of golden successful the archetypal fractional of the year. It produced 724,099 ounces instead. That is simply a 9% driblet from the aforesaid play a twelvemonth ago.

Part of the blasted falls connected a sodium cyanide shortage that deed the full South African golden industry. The disruption affected recoveries peculiarly successful aboveground operations, which devour much sodium cyanide than underground mines, the institution said successful its authoritative announcement.

Underground grades besides disappointed. Recovered people fell 11% to 5.72 grams per tonne, down from 6.44 grams per tonne a twelvemonth ago. Lower metallurgical recoveries and unplanned people dilution made things worse.

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Then came the outgo shock. All-in sustaining costs jumped 21% to $2,115 per ounce. Cash operating costs roseate 25%. Labor inflation, Eskom load shedding, and little accumulation volumes each piled connected astatine the aforesaid time, the institution disclosed successful its SEC filing.

• Gold output: 724,099 oz, down 9% from a twelvemonth ago

• Underground recovered grade: 5.72 g/t, down from 6.44 g/t

• South Africa high-grade underground output: down 14%

• Hidden Valley successful Papua New Guinea: up 4%, a uncommon agleam spot

• All-in sustaining cost: $2,115 per oz, up 21%

In the mediate of each this, Harmony made a bold determination connected shareholder returns.

The institution announced a caller dividend argumentation that pays retired up to 50% of nett escaped currency flow. The interim payout jumped to ZAR 5.30 per share, much than treble what shareholders received a twelvemonth agone and 58% supra expert consensus.

The equilibrium expanse is successful beardown signifier to enactment it. Harmony ended the play with R8 cardinal successful nett cash, zero debt, and full liquidity of astir R14.8 billion. Free currency travel covered some superior spending and the dividend with country near over.