On paper, Harmony has a lot of positives. In its fiscal fourth quarter ended in June, the company's cash operating profit grew 49% while selling 345,266 ounces of gold at cash costs of $831 an ounce. The company is on track to produce 1.7 million ounces of gold in its next fiscal year and has 48.1 million ounces of reserves. Harmony also pays an annual dividend of 14 cents a share.
Despite its cash flow, however, the company reported a headline loss of a penny per share because of a strong local currency, restructuring issues and rising electricity and labor costs. The company mines 96% of its gold in South Africa and is currently expanding in Papua New Guinea and Australia. Harmony recently entered into a preliminary agreement to buy Scorpio Gold's Caribou Gold Property in Nova Scotia as the company rushes to diversify into other locations.Its biggest problem, according to CEO Graham Briggs, speaking recently at the Denver Gold Forum, remains the stigma attached to South African miners. TheStreet: What's your biggest headache mining in South Africa? Briggs: In South Africa, a lot has been written about the mining charter and black empowerment. Harmony is in a good position on all these issues. Those aren't our risk areas but when you look at investors come overseas to Denver or New York and speak to investors they raise this as quite a big issue but it's really not a big issue for our company .... really the big issue is around the press and what happens there. So why aren't they factors for you? Briggs: If you look at black empowerment, Harmony's 33% black empowered. If you look at previously disadvantaged people who need to get into positions of management, Harmony is at 40% now