HMY vs. AU: Which Gold Mining Stock is the Better Pick Now?

Harmony Gold Mining (HMY) and AngloGold Ashanti (AU) are benefiting from rising gold prices, up roughly 26% YTD, driven by economic uncertainties and central bank buying; however, AU appears to be a more favorable investment option due to its higher dividend yield (3.1% vs 1.2%), stronger dividend growth rate (32.1% vs 7.3%), and higher earnings growth projections, with 2025 EPS estimated to grow 95% compared to HMY's 10.2%.

Analysis

Both Harmony Gold Mining (HMY) and AngloGold Ashanti (AU) are capitalizing on a robust gold market, with prices up approximately 26% year-to-date and currently above $3,300 per ounce, driven by global economic uncertainties and central bank purchases. Harmony Gold, South Africa's largest gold producer by volume (1.56 million ounces in fiscal 2024), is advancing key development projects like Wafi-Golpu in PNG (estimated 13 million ounces gold reserve) and the Eva Copper project in Australia (expected 55,000-60,000 tons copper p.a.), supported by a strong balance sheet with net cash climbing 53% to $592 million in Q3 fiscal 2025. However, HMY faces significant cost pressures, with all-in-sustaining costs surging 24% and total cash costs up 22% year-over-year in Q3 fiscal 2025, primarily due to rising labor and electricity expenses, the latter increasing 21% in fiscal 2024. Conversely, AngloGold Ashanti is pursuing growth through acquisitions, such as Centamin in November 2024 (adding the Sukari asset with 500,000 ounces annual potential), which increased its Tier 1 asset production proportion to 67%. AU's mineral reserves stood at 31.2 million ounces at end-2024. The company reported a near sevenfold increase in Q1 free cash flow to $403 million and reduced adjusted net debt to $525 million, maintaining $3 billion in liquidity. Year-to-date, AU's stock has rallied 86.7% versus HMY's 76%, both outperforming the industry's 47.5% increase. While HMY trades at a lower forward P/E multiple of 7.61x compared to AU's 9.73x (both below the industry average of 13.82x), AU demonstrates superior financial metrics. The Zacks Consensus Estimate for AU's 2025 EPS indicates 95% year-over-year growth with estimates trending upwards, significantly higher than HMY's projected 10.2% EPS growth with stable estimates. AU also offers a more attractive dividend yield of 3.1% with a 32.1% five-year annualized growth rate, compared to HMY's 1.2% yield and 7.3% growth.

Key Decisions for Investors

• Investors seeking exposure to the gold sector should note that while both companies benefit from high gold prices, AngloGold Ashanti (AU) presents a more compelling case due to its significantly higher projected EPS growth for 2025 (95% vs. HMY's 10.2%), superior dividend yield (3.1% vs. 1.2%), and stronger dividend growth rate.
• Consider AngloGold Ashanti for its robust free cash flow generation, successful debt reduction, strategic acquisitions enhancing its Tier 1 asset base, and upward trending earnings estimates, which collectively suggest a stronger investment outlook.
• While Harmony Gold (HMY) offers a lower valuation multiple and is pursuing significant growth projects, investors should closely monitor its persistent cost pressures, particularly from labor and electricity, which could continue to impact margins despite its healthy balance sheet.