HMY vs. AU: Which Gold Mining Stock is the Better Pick Now?
Harmony is South Africa's biggest gold producer by volume, with production of roughly 1.56 million ounces in fiscal 2024. It has a diverse portfolio of gold development projects spread across South Africa and Papua New Guinea (PNG). The company's development projects currently in progress include the development of the Wafi-Golpu copper-gold project in PNG and the Eva Copper project in Australia. The Wafi-Golpu project is believed to be a game-changer for the company, with an estimated gold reserve of 13 million ounces. HMY is currently in negotiations with its joint venture partner Newmont Corporation NEM and the PNG Government regarding the terms of a Mining Development Contract, which is required for a Special Mining Lease.The low-risk Eva Copper project in Australia offers additional upside, giving HMY a significant global copper-gold footprint. HMY acquired Eva Copper in 2022, adding a tier-one mining jurisdiction to its portfolio. The acquisition is in line with HMY's objective of transitioning into a low-cost gold and copper mining company. The feasibility study update for the project is currently underway. HMY has received a conditional grant funding from the Queensland government, which will help accelerate the development of this project. It is subject to several conditions, including HMY reaching a positive final investment decision by January 2026. Eva Copper is expected to produce 55,000-60,000 tons of copper per annum. Harmony boasts a strong balance sheet and generates substantial cash flows, which allows it to finance its development projects and drive shareholder value. Its net cash climbed roughly 53% to $592 million at the end of the third quarter of fiscal 2025 (ended March 31, 2025), from $386 million at the end of first-half fiscal 2025 (ended Dec. 31, 2024). HMY also has a dividend policy to pay 20% of net free cash generated to its shareholders at its board's discretion. HMY offers a dividend yield of 1.2% at the current stock price. It has a five-year annualized dividend growth rate of about 7.3%. Harmony, however, is exposed to higher costs, which are likely to weigh on its margins over the near term. Labor and electricity remain the largest components of its cost structure. It saw a roughly 24% surge in all-in-sustaining costs (in dollars) in the third quarter of fiscal 2025. Total cash costs also climbed 22% year over year in the quarter. HMY saw a 21% increase in electricity costs in fiscal 2024 due to higher annual tariffs charged by Eskom. While the company is implementing various energy-saving initiatives and launching a renewable energy program, the burden of higher electricity costs is unlikely to abate over the near term due to higher tariffs.
AngloGold Ashanti is executing a clear strategy of organic and inorganic growth. In November 2024, it acquired Egyptian gold producer Centamin, adding the large-scale, long-life, world-class Tier 1 asset (Sukari) to its portfolio. It has the potential to produce 500,000 ounces annually. With this addition, the proportion of gold production from its Tier 1 assets has moved up from 62% to 67%. AU's mineral reserves went up to 31.2 million ounces at the end of 2024.Recently, AngloGold Ashanti sold its interests in two gold projects in Côte d'Ivoire to Resolute Mining Limited to sharpen its focus on its operating assets and development projects in the United States. Obuasi remains a significant pillar of its long-term strategy. The company's focus this year is to continue the implementation of the underhand drift and fil UHDF mining method and make stoping improvements. This important orebody is expected to deliver around 400,000 ounces of annual production at competitive costs by 2028. At Siguiri, efforts are underway to improve mining volumes through ongoing improvements to fleet availability and utilization, and to introduce gravity recovery in the processing plant to further improve metallurgical recovery. AU's free cash flow increased almost seven fold to $403 million in the first quarter from $57 million in the year-ago quarter. It has managed to take down its adjusted net debt to $525 million from the $1.322 billion at the year-ago quarter's end. AngloGold Ashanti ended the first quarter of 2025 with $3 billion in liquidity, including cash and cash equivalents of $1.5 billion. Under its new dividend policy, AngloGold Ashanti aims to return 50% of its annual free cash flow, subject to maintaining an adjusted net debt to adjusted EBITDA ratio of 1.0 times. AU offers a healthy dividend yield of 3.1% at the current stock price. Its payout ratio is 47% (a ratio below 60% is a good indicator that the dividend will be sustainable), with a solid five-year annualized dividend growth rate of roughly 32.1%.
Year to date, HMY stock has shot up 76%, while AU stock has rallied 86.7% compared with the Zacks Mining – Gold industry's increase of 47.5%.
Image Source: Zacks Investment Research
Harmony is currently trading at a forward 12-month earnings multiple of 7.61. This represents a roughly 45% discount when stacked up with the industry average of 13.82X.
Image Source: Zacks Investment Research
AngloGold Ashanti is trading at a premium to Harmony. The AU stock is currently trading at a forward 12-month earnings multiple of 9.73, below the industry.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for HMY's 2025 EPS implies a year-over-year rise of 10.2% The EPS estimates for 2025 have been stable over the past 60 days.
Image Source: Zacks Investment Research
The consensus estimate for AU's 2025 EPS implies year-over-year growth of 95%. The EPS estimates for 2025 have been trending northward over the past 60 days.
Image Source: Zacks Investment Research
(Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)
Both Harmony and AngloGold Ashanti are well-positioned to capitalize on the current gold price environment. AU appears to have an edge over HMY due to its higher dividend yield and healthier dividend growth rate. In addition, AngloGold Ashanti's higher earnings growth projections and rising estimates suggest that it may offer better investment prospects in the current market environment. Investors seeking exposure to the gold space might consider AU as the more favorable option at this time.HMY currently carries a Zacks Rank #3 (Hold), whereas AU sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
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