Benj Gallander Harmony Gold Mining Co Ltd HMY-N TOP PICK Nov 17, 2014

This company has had a great run. They are working on getting their costs down on their mines, but at the same time they lost $25 million US last quarter. Likes management. They have a project in Papua New Guinea that is going into a feasibility stage now. His target price is $16 plus. They have to get costs down further and an upswing in the gold price would certainly help.

(A Top Pick May 23/14. Down 40.5%.) The price of gold certainly hurt. The cost of production is too high at about $12.50 an ounce. Have a big project in Papua New Guinea, which is going to cost them a lot of money. He thinks they should still have a good future, and it remains on his Buy list. Have no dividend now, but thinks it will come back. His target price is over $20.

(Top Pick May 23/14, Down 52%) Part of the decline is the gold sector and part is that they are based in South Africa where there are difficulties with unions and electrical power. Management is doing a good job, but their costs are too high. It has tremendous upside potential but there is danger because they have gone through so much cash. He is monitoring it to see if it should be reduced from a buy.

Doesn’t have strong feelings about gold. He is more positive on silver. This company has been one of his worst picks in years. The CEO has just decided to resign. They are retooling a number of their mines. They have decided not to let any workers go, which is going to be costly.

(A Top Pick Aug 26/14. Down 67.61%.) This has lots of problems. Production price is about $12.50 an ounce, which is high. They are trying to work on their mines and get the cost lower. Having difficulty with labour which is asking for a 60% wage increase. CEO is looking for a replacement. Have a wonderful play in Papua New Guinea of gold/copper, but can’t really finance it at this time. Potentially they could go under, but he is willing to continue holding as it has a lot of upside if gold goes up. Very, very dangerous.

(A Top Pick Oct 8/14. Down 62.5%.) Had played this wrong. Came off the rails for a number of reasons. There was the price of gold, they had fires in some of the mines and sustaining costs were too high. Liked the CEO, but he left. Balance sheet is still reasonable, but they don’t have the money to develop their mine in Papua New Guinea. Because the stock went under $1, there is a possibility of a stock consolidation. Sold his holdings.

(A Top Pick Nov 17/14. Down 56.87%.) Sold his holdings at $0.70. Since he sold, 2 good things have happened. They have come to a wage agreement for the next 3 years with their employees. Also, their production is up about 10%. The balance sheet is not that bad. The key is going to be the price of gold and where it goes from here. This is a high cost producer. They are trying to cut back. A wonderful play in Papua New Guinea.

Took a tax loss on this, but since then it has quadrupled. His target price was about $16. If he had it now, he would still Hold it. The Rand has gone way down in value, which is helping quite a bit. Also, the price of gold has gone up. They were working to get costs down in their various mines. Management is doing a good job.

The change in government in South Africa is giving rise to optimism of lower corruption and a better business environment for gold miners in SA. He thinks that Harmony Gold will benefit from this optimism, at least over the short term. However, whether the actual business climate will change in SA for the long term is uncertain.