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Harmony Gold's High Costs Warrant Caution: Can It Protect Margins?
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Key Takeaways
HMY's all-in-sustaining costs jumped 24% in Q3 FY25, with cash costs rising 22% year over year.
Higher labor and electricity expenses continue to pressure Harmony Gold's cost structure and margins.
HMY shares are up 78.1% YTD, trading at a steep valuation discount with rising EPS estimates for FY25.
Harmony Gold Mining Co. Ltd. (HMY - Free Report) saw a roughly 24% surge in all-in-sustaining costs (AISC) in dollars in the third quarter of fiscal 2025 (ended March 31, 2025). Total cash costs also climbed 22% year over year in the quarter.
Harmony remains exposed to higher costs, which are likely to weigh on its margins over the near term. Labor and electricity remain the largest components of its cost structure.
HMY saw a 21% increase in electricity costs in fiscal 2024 due to higher annual tariffs charged by Eskom. While the company is implementing various energy-saving initiatives and launching a renewable energy program, the burden of higher electricity costs is unlikely to abate over the near term due to higher tariffs.
Among its peers, AngloGold Ashanti plc’s (AU - Free Report) first-quarter total AISC ticked up 1% year over year to $1,640 per ounce due to higher sustaining capital spending. AngloGold’s managed operations saw a 2% year-over-year decline in AISC to $1,657 per ounce, while AISC for non-managed joint ventures surged 37% from the prior year to $1,463. AngloGold expects consolidated AISC in the band of $1,580-$1,705 per ounce in 2025.
Gold Fields Limited (GFI - Free Report) reported a roughly 7% year-over-year decline in AISC to $1,625 per ounce in the first quarter. Gold Fields’ all-in cost also fell 12% year over year. Gold Fields sees AISC of $1,500-$1,650 per ounce and all-in cost between $1,780-$1,930 per ounce for full-year 2025.
HMY’s Price Performance, Valuation & Estimates
Shares of Harmony Gold have shot up 78.1% year to date against the Zacks Mining – Gold industry’s rise of 53%, thanks to a surge in gold prices.
Image Source: Zacks Investment Research
From a valuation standpoint, HMY is currently trading at a forward 12-month earnings multiple of 5.13, a roughly 59.4% discount to the industry average of 12.62X. It carries a Value Score of B.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for HMY’s fiscal 2025 earnings implies a year-over-year rise of 190.8%. The EPS estimates for fiscal 2025 have been trending higher over the past 60 days.
Image Source: Zacks Investment Research
HMY stock currently sports a Zacks Rank #1 (Strong Buy).
Image: Bigstock
Harmony Gold's High Costs Warrant Caution: Can It Protect Margins?
Key Takeaways
Harmony Gold Mining Co. Ltd. (HMY - Free Report) saw a roughly 24% surge in all-in-sustaining costs (AISC) in dollars in the third quarter of fiscal 2025 (ended March 31, 2025). Total cash costs also climbed 22% year over year in the quarter.
Harmony remains exposed to higher costs, which are likely to weigh on its margins over the near term. Labor and electricity remain the largest components of its cost structure.
HMY saw a 21% increase in electricity costs in fiscal 2024 due to higher annual tariffs charged by Eskom. While the company is implementing various energy-saving initiatives and launching a renewable energy program, the burden of higher electricity costs is unlikely to abate over the near term due to higher tariffs.
Among its peers, AngloGold Ashanti plc’s (AU - Free Report) first-quarter total AISC ticked up 1% year over year to $1,640 per ounce due to higher sustaining capital spending. AngloGold’s managed operations saw a 2% year-over-year decline in AISC to $1,657 per ounce, while AISC for non-managed joint ventures surged 37% from the prior year to $1,463. AngloGold expects consolidated AISC in the band of $1,580-$1,705 per ounce in 2025.
Gold Fields Limited (GFI - Free Report) reported a roughly 7% year-over-year decline in AISC to $1,625 per ounce in the first quarter. Gold Fields’ all-in cost also fell 12% year over year. Gold Fields sees AISC of $1,500-$1,650 per ounce and all-in cost between $1,780-$1,930 per ounce for full-year 2025.
HMY’s Price Performance, Valuation & Estimates
Shares of Harmony Gold have shot up 78.1% year to date against the Zacks Mining – Gold industry’s rise of 53%, thanks to a surge in gold prices.
From a valuation standpoint, HMY is currently trading at a forward 12-month earnings multiple of 5.13, a roughly 59.4% discount to the industry average of 12.62X. It carries a Value Score of B.
The Zacks Consensus Estimate for HMY’s fiscal 2025 earnings implies a year-over-year rise of 190.8%. The EPS estimates for fiscal 2025 have been trending higher over the past 60 days.
HMY stock currently sports a Zacks Rank #1 (Strong Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.