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By Mike Caggeso
Despite gold's meteoric rise, South Africa-based Harmony Gold Mining Co. (HMY) posted its third-straight quarterly loss as the company suffered a 44-day mine stoppage and an 8.3% decline in gold production.
After factoring in taxes, exploration costs and operating costs, the company lost $7 million (55 million rand).
The company's earnings release compares earnings with the previous quarter, not the same quarter from the previous fiscal year.
The company also had to lay off 5,000 workers and move another 10,000 to other mining projects,.
Harmony said it would lower its production estimate for the quarter ended March 31, 2008 because of electricity supply disruptions.
With production falling and the price of gold settling around $910 an ounce after peaking at $936.92 in late January, the company is extending the life of some mines to scrape as much gold as possible while its spot price is still near its record high, MineWeb reported.
“Harmony has been focusing on organic growth and these projects are now mines under construction, most building up in production from now to 2010. All of these mines will have a longer life with generally higher grades. These production units are larger and we will be expecting more consistent results, both in tonnes and grade,” Chief Executive Officer Graham Briggs said at a news conference.
Still, that doesn't sound a vote of confidence for the near term. And with analysts forecasting gold to clip $1,000 an ounce this year, investors ought to look elsewhere than Harmony.
Capturing Gold's Gains While Downsizing Risk
Even though economic conditions for 2008 are expected to closely resemble those of 2007, investors should never see gold as an investment that can only rise in price. Viewed as a hedge, and purchased at the right time, gold will provide a sound addition to many investment portfolios. And if the yellow metal also manages to produce massive gains, even better.
That said, though, there are gold investments out there that combine safety and performance.
The StreetTracks Gold ETF (GLD) offers bullion-based pricing without the storage problems and liability of delivery.
Another possibility is the Prudent Global Income Fund (PSAFX). While it's not a gold investment per se, it gives you exactly what gold investors look for – protection against a falling dollar.
Shares prices of Toronto-based gold-mining company Barrick Gold Corp. (ABX) – the biggest gold producer in the world – performed about in line with gold itself during 2007. But be wary of mining companies. They face the same inflationary pressures that everybody else does. And gold bugs aren't inherently risk takers.
If you want gains most accurately – and safely – tied to gold's value, another possibility worth a look is a pooled precious metals account, where you can buy gold and silver for as low as 1% above market price, but storage and maintenance fees are lowered by spreading the cost out amongst a pool of investors.
Famed commodities guru Jim Rogers predicted the gold and global commodities boom we're experiencing more than a decade ago. To see how you can obtain a free copy of Rogers' just-released bestseller, “A Bull in China: Investing Profitably in the World's Greatest Market,” please click here.
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