* Q3 headline EPS 91 cents vs 97.3 cents market forecast
* Production down as expected due to seasonal woes
* Shares resverse earlier gains on commodity prices
* CEO sees gold price at $1,800 an ounce
(Adds quotes, background, details)
By Ed Stoddard
JOHANNESBURG, May 5 South African group Harmony
Gold (HARJ.J) fell short of market expectations with a 32
percent rise in quarterly profit after a slow restart following
its annual Christmas shutdown led to a drop in production.
Harmony was the first of South Africa's big three gold
miners to release results for the January-March quarter, a
period the companies had warned might be sluggish.
But beyond the usual seasonal woes, the company performed
well, said Leon Esterhuizen, an analyst at Royal Bank of Canada
Capital Markets in London.
Investors initially looked past the seasonal downturn and
sent the shares of South Africa's third-largest gold miner up by
But along with its peers it then reversed course as spot
gold XAU= slipped amd silver XAG= plunged. At 1200 GMT its
share price was 1.90 percent lower at 92.20 rand.
Analysts are also optimistic about the miner's current
project in Papau New Guinea, which Harmony has said could yield
up to 700,000 ounces of gold and up to 320,000 metric tonnes of
copper a year.
"Papua New Guinea drill results continue to impress and this
asset continues to hold the promise of substantial increases in
the Harmony share price," Esterhuizen said.
Harmony said headline earnings per share, the primary profit
gauge in South Africa, totalled 91 cents in the three months to
end-March, versus 69 cents in the previous quarter.
That was below the average estimate of 97.3 cents in a
Reuters poll of analysts. Harmony said last month it expected a
deferred tax credit to lift its earnings.
The company said its production was down 2 percent to
316,909 ounces, in line with its own forecasts because of
Cash operating costs fell slightly in dollar terms to $970
an ounce but rose a touch in rand terms.
CEO PEGS GOLD AT $1,800
Chief Executive Graham Briggs told a results presentation
that he believed it was possible for the gold price to reach
$1,800 an ounce next year and believed it would continue to rise
in both dollar and rand terms.
Spot gold XAU= scaled a record high of over $1,575.00 an
ounce on Monday but has fallen sharply since and was trading
around $1,503.00 an ouncee at 1222 GMT.
He also told Reuters the company was not interested in the
deep level Blyvoor mine that mid-tier rival DRDGold (DRDJ.J)
wants to sell.
Analysts have said only Harmony or one of the other big
South African gold miners, Gold Fields (GFIJ.J) or AngloGold
Ashanti (ANGJ.J), would be viable buyers because of their
experience with deep mining.
South Africa's mines are the deepest and the most dangerous
in the world and the big gold companies are scrambling to
diversify their operations and develop mins elsewhere.
Finance Director Hannes Meyer told Reuters in an interview
on Thursday the group aims to fund at least half its $1.5-$2.0
billion Wafi-Golpu project in Papua New Guinea from debt or
copper-backed finance and that even if it could pay the bulk
from cash it was "prudent" to have debt in the mix.[nLDE7441E6]
On the subject of looming wage talks with its unionised
workforce, he said gold miners could not afford to paying
above-inflation wage hikes.
"It is not a sustainable scenario having above-inflation
increases over many years. You can afford a year or two but
we've had a few now of above average inflation," he said.
(Editing by David Dolan and David Cowell)