The recent surge in the price of gold helped the local gold mining company, Harmony Gold, lift its second quarter earnings and reduce the costs amid a drop in the mining house production levels, the company reported on Monday.

Harmony Gold also reported that its cash operating profit rose by 44%to R800 million rand against the backdrop of the stronger rand gold price.

The world’s fifth largest gold producer said the rand gold price for gold was 10.6 percent higher quarter-on-quarter. The country’s gold producers trade their gold gems in dollar and receive their earnings in rand.

The production outlook at Harmony Gold, however, does not look rosy. The company said its gold production for the quarter was down 1.2 percent to 371 956 ounces. It said this was mainly due to the closure of marginal shafts.

However, the mining giant said it would stick to its expansion programme and would pursue growth opportunities through acquisitions and strategic partnership.

Harmony's Chief Executive Officer Graham Briggs warned in a statement that the journey will be "more pain before gain" on the production front as Harmony continues to assess and close those of its South African operations with depleted ore bodies in its pursuit of 2.2 million profitable ounces by 2012.

Briggs said Harmony Gold believes that the rand/kg gold price would most likely remain flat for the next 12 months despite improvement in the price of gold a few months ago.

"We still hold the view that general rand strength is likely to continue for so long as any global economic uncertainties last. We therefore expect the gold price to remain fairly flat for the next 12 months in rand/kg terms," he said.