Harmony Gold Mining Co. (ADR) (NYSE:HMY) Pressured by Falling Gold Prices


Dallas, Texas 07/07/2015 (Financialstrend) – Harmony Gold Mining Co. (ADR) (NYSE:HMY), the South African precious metal miner  is under pressure by the fall in gold prices. The company which was up nearly 40% at the start of the year was down 27% as of date. The company also felt the impact of the South African mining wage negotiations. The long term impact of this issue is that it would lead to additional costs for the company.

There is a point of view that this was one of the worst performing gold mining sector stocks in recent times.

At the first point, Harmony Gold Mining Co. (ADR) (NYSE:HMY) had disappointing first quarter results. This was because gold prices are much lower than costs of production. The prices are not likely to rise in nearest future, experts explain. Much of the increase in production costs is due to the expensive electricity as well as the continued wage increase. The high electricity prices are tough for mining companies such as these, point out experts. At current prices, Harmony Gold Mining Co. (ADR) (NYSE:HMY) has electricity spend of nearly 17% of its costs. On the other hand wages are accounting for nearly 50% of Harmony’s costs. Besides, the number of workers is likely to go down, affecting production, even as the wages increase manifold.

Though there have been indications that all is not good at Harmony, not many are keen that the company explores ‘strategic alternatives.’ On its part, the company is reportedly looking for more funds to further its pet project at Golpu. But the sad part is that Golpu will pay dividends, in terms of production only by the year 2020. Hence, gold prices at current rates continue to hold companies such as Harmony Gold Mining Co. (ADR) (NYSE:HMY) under pressure. Additionally, it will remain vulnerable to changes and even fluctuations in the gold prices. Upside, if any for Harmony Gold, is likely after Golpu becomes productive and prices return to previous highs.