(May 8 )(Bloomberg) -- Harmony Gold Mining Co., Africa's third-biggest producer of the precious metal, said output may rise by a fifth to about 12.5 metric tons in the current quarter as power approaches normal levels and grades improve.

``Last quarter was quite poor,'' Graham Briggs, chief executive officer of Johannesburg-based Harmony, said today in an interview. ``We expect production to improve.''

Most gold and platinum mines in South Africa, the world's biggest precious metals producer, were shut for five days from Jan. 25 and rationed afterwards to prevent state-run Eskom Holdings Ltd.'s power network from collapsing. South African gold output fell 17 percent in January from a year earlier.

The blackout, together with mine accidents and the holiday season, cut Harmony's production by 17 percent to 10.3 tons, or 332,662 ounces, in the third quarter ended March 31. Six workers died during the quarter at Harmony's operations, prompting the government to order temporary stoppages at mines including Elandsrand.

Harmony gained 3.10 rand, or 3.5 percent, to 92 rand in Johannesburg trading, valuing the company at 37.1 billion rand ($4.9 billion). The stock has jumped 30 percent this year, compared with the 0.9 percent gain at AngloGold Ashanti Ltd., Africa's biggest gold producer.

Harmony reported an almost eightfold increase in net income after an average 17 percent gain in the quarterly gold price offset production losses.

Profit Gain

Net income climbed to 345 million rand, or 86 cents a share, from 46 million rand, or 11 cents, in the preceding quarter. Cash operating costs fell 8.9 percent as the company shut less profitable shafts and cut jobs.

``What I like most is that total cash operating costs have come down,'' said Jaco Scholtz, who helps manage the equivalent of $750 million at Gryphon Asset Management in Cape Town. ``If they can now boost gold production then that will be positive.''

The company eliminated 1,421 jobs during the quarter, bringing to 5,985 the number of workers fired since Oct. 1. Further cuts are unlikely as the closure of high-cost operations has been completed, Briggs said.

``We have been through some pain, but I'm confident that we have turned the corner,'' he said.

Harmony reported a profit before one-time items of 42 cents a share compared with a loss of 43 cents in the preceding quarter. That exceeded the 33 cents median forecast of four analysts polled by Bloomberg. South African gold analysts review sequential quarters.

Lawsuit

Briggs said Harmony hasn't set aside money against a class action lawsuit filed on behalf of investors who claim the company overstated profit by understating costs in the quarter ended March 31 last year.

Law firm Schiffrin Barroway Topaz & Kessler LLP said April 16 it filed the lawsuit in the U.S. District Court in New York's Southern District.

``We haven't been served formally, so there's probably still a long way to go in that,'' Briggs said.

(Editor: Jia Fu)