JSE-listed Harmony Gold Mining Company expects, with a reasonable degree of certainty, that its net profit for the six months ended December 31, 2020, will be between R5.7-billion and R5.9-billion.

This is between 325% and 339% higher year-on-year.

Headline earnings per share (HEPS) are expected to be between 761c and 795c, which is between 205% and 219% higher than the HEPS of 249c reported for the six months ended December 31, 2019.

Earnings per share (EPS) are likely to be between 942c and 976c, or between 278% and 292% higher than the EPS of 249c reported for the prior comparable period.

The increase in net profit and earnings is primarily owing to an increase in production, a higher average gold price received and gains on derivatives and foreign exchange translation gain.

A gain on bargain purchase recognised on the acquisition of Mponeng and related operations also contributed to the higher profit.

However, the increase was partially offset by an increase in taxation expense.

During the period under review, Harmony’s revenue from the existing operations increased by R3.1-billion primarily owing to an 8% increase in gold production and a 19% increase in the gold price.

The average gold price received increased to $1 716/oz, compared with $1 447/oz during the first half of the 2020 financial year.

Further, gains on derivatives recorded a net gain of R902-million during the period, compared with a net gain of R157-million for the first half of the prior financial year. The increased gains are primarily as a result of a weaker rand/dollar exchange rate that resulted in a large gain on the unrealised foreign exchange derivatives.

Also, the foreign exchange translation gain for the period under review, of R652-million, is primarily as a result of the impact of the strengthening of the rand between June and December 2020 on the dollar-denominated loans.

The acquired assets contributed R3-billion in revenue and R2-billion in production costs.

In addition, a gain on bargain purchase of between R1-billion and R1.2-billion will be recognised on the acquisition. This gain takes into account fair value adjustments and provisions between the consideration paid and the net asset value of the acquired assets and liabilities assumed.

In terms of taxation, Harmony’s increased to R772-million, mainly owing to foreign exchange gains on dollar-denominated loans.

The deferred taxation expense for the first half of the 2021 financial year is higher mainly as a result of the use of assessed losses and unredeemed capital expenditure owing to increased profitability.