Harmony Production Down Despite Rising Gold Price – JSE: HAR Shares Face Breakdown
Harmony Gold, South Africa’s largest gold producer, has struggled to maintain investor confidence despite record bullion prices...
Quick overview
- Harmony Gold's share price has declined significantly despite record gold prices, raising concerns about its valuation.
- The company's recent earnings report led to a 10% drop in stock price in one day, highlighting investor skepticism about its profitability.
- Gold production fell by 5% due to adverse weather and safety stoppages, even as profits increased by 26% year-on-year.
- Investor sentiment remains cautious, with the stock's premium valuation and production challenges contributing to increased volatility.
Harmony Gold, South Africa’s largest gold producer, has struggled to maintain investor confidence despite record bullion prices. The company’s latest earnings release triggered a sharp selloff, raising questions about its valuation and technical support levels.
The July Rebound and Current Weakness
Harmony Gold’s share price has been sliding since April, even as gold hit fresh highs. After falling nearly 10,000 ZAC from its April peak of R362, shares staged a modest rebound in July, climbing back towards R290 before being capped by the 20-week simple moving average (SMA). However, the recovery proved short-lived. This week, the release of H1 earnings sent the stock down 10% in a single day and more than 20% over the past five trading sessions, pushing it back to the 50-week SMA (yellow), a level that has acted as resistance since 2023.
HARJ Chart Weekly – A 20% Tumble Off the 20 SMA
If sellers manage to push below this support, downside risk could extend towards the 2024 support zone at R152. On the flip side, if buyers defend the R225 region, a rebound toward R360 remains technically possible, keeping the broader bullish structure intact, but sellers are in total control for now.
Gold Prices Surge, but Investors Remain Skeptical
Interestingly, the weakness in Harmony’s stock contrasts sharply with the underlying commodity. Gold surged past $3,400 per ounce this week, driven by persistent global uncertainty and heightened demand for safe-haven assets. This macro backdrop remains highly favorable for producers like Harmony, which reported a 26% profit jump compared to 2024, supported by record bullion prices and improved mining grades.
Despite these strong fundamentals, investor sentiment has soured. The sharp reaction to earnings suggests growing concern about Harmony’s ability to sustain profitability in the face of rising costs and operational disruptions.
Harmony Gold Mining Company Limited Earnings Highlights
- Annual Profit: Up 26% year-on-year, supported by record-high bullion prices.
- HEPS (Headline Earnings per Share): 23.37 rand ($1.33) vs. 18.52 rand last year.
Production & Operations
- Gold Production: Declined 5% to 1.48 million ounces, down from 1.56 million ounces.
- Reasons for Decline: Adverse weather and safety-related stoppages.
- Operational Offset: 27% increase in average gold prices and improved ore grades at South African mines.
Dividend & Shareholder Returns
- Dividend Declared: 1.55 rand per share, up from 0.94 rand in the previous year.
- Reflects stronger profitability and commitment to shareholder value.
Valuation & Ratios
- Price-to-Earnings (P/E) Ratio: 19.68 – edging towards overvaluation levels.
- Price-to-Sales (P/S) Ratio: 2.77, reinforcing premium pricing against fundamentals.
Outlook and Investor Takeaway
While Harmony’s year-to-date share performance still reflects a 43% gain, the recent plunge shows that investors are increasingly cautious. The stock’s premium valuation metrics, combined with production challenges, have amplified volatility. For long-term investors, the bullish case hinges on whether the stock can hold above key technical levels and continue to benefit from historically high gold prices.
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