The South Africa-based company, Harmony Gold, is having problems securing ongoing funding after using up more than $1 billion U.S. Its latest quarterly report shows that the company is grappling to produce free cash flow.
- What is free cash flow and why is this a worry for the company?
- With respect to free cash flow, why was it a good sign to analysts that Harmony paid its first dividend in five years on September 21, 2009?
- Explain each of the following in terms of helping or hurting Harmony’s free cash flow position:
- Cash raised from selling residual shares in Gold Fields, after an earlier bid for the company failed.
- Incremental cash increases earned from the rising price of gold sales
- Significant projects to replace aging assets used in the mining process
SOURCE: Sergeant, B. “For Harmony Gold, Free Cash Flow Remains Elusive,” Mineweb – Gold News (Retrievable online at http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=91685&sn=Detail)