South Africa's Harmony Gold Mining Co , the world's fifth-largest gold producer, said on Wednesday output for its 2012 financial year should rise to between 1.45 million ounces and 1.55 million from around 1.3 million in 2011.

Investors have been keen to see Harmony's output forecasts to see if it can crank up to take advantage of the high gold price without overextending so that it can keep cash flowing.

But the targets could be tough to reach as the group in the last financial year had to scale back its original forecasts because of safety stoppages and underperformance at some shafts.

Chief Executive Graham Briggs said he was optimistic they would be achieved. We've had a good look at our forecasts and our operations and we're pretty confident. A lot of work has happened in the seams, Briggs said on a conference call.

We need to have less safety stoppages, he said, noting the group had appointed a dedicated safety executive and was tying safety targets to its bonus system.

Harmony also said in a presentation on its web site that its capital expenditure for the next financial year was forecast to rise 16 percent to 3.64 billion rand ($505 million).

The group had 15 fatalities on its mines in South Africa in the financial year through June, down from 21 in the previous year. But under South African mining law, operations are almost always halted for a few days when there is a death.

Last week Harmony reported a 67 percent drop in quarterly profit, falling short of market expectations as power rates, new equipment and the costs of a troubled mine shaft hit its bottom line.

Analysts say the group was keeping a bit of a lid on production over the next couple of years but seemed to be freeing up cash at a time when gold has been soaring to record highs.

Harmony seems to have lowered the production forecast slightly over every year for the next four years. Still, it also looks like this is as a result of now focusing on a positive free cash margin, said Leon Esterhuizen, an analyst with RBC Capital Markets in London.

And that, I believe, is exactly what the doctor ordered. I think the general take is still positive -- particularly at current or even higher gold prices, he said.


The presentation said the group remained committed to reaching 2 million ounces in the next few years.

The company said a pre-feasibility study for its promising Wafi-Golpu project in Papua New Guinea, which it shares in a 50/50 joint venture with Australia's Newcrest , should be completed early next year and it was on track to have the mine up and running by 2017.

The project's production range was pegged in the presentation at 600,000 to 800,000 ounces of gold per year, up from previous estimates of 300,000 to 700,000 ounces, while Wafi-Golpu's copper output was seen at between 300,000 and 500,000 tonnes per year.

It is quite a range ... It is a bit of a moving target but it is the best estimate we have at the moment, Briggs said.

On one graphic on the presentation, Harmony said it saw its half of Wafi-Golpu contributing 400,000 ounces a year to its output and its Hidden valley operation in Papua New Guinea providing 200,000 ounces.

The government there can take up to a 30 percent stake in the sector and so those numbers could vary, depending on what happens on that score.

Briggs told Reuters in an interview on Monday that the government had signaled its intent to buy into the project but it was unclear if it and the money or how much of a stake it would attempt to acquire.

Harmony's share price was felled last Friday by reports that the government in Papua New Guinea would move to transfer mineral ownership from the state to local communities, but Briggs said on Monday he did not see it as a threat and that it was electioneering ahead of polls in 2012.

Harmony shares on Wednesday were down 1.3 percent as part of a broader retreat of gold miners after bullion in the previous session posted its biggest daily drop in 18 months.