Harmony Gold hits all the sweet spots

Harmony Gold Mining Company has announced its financial and operating results for the year ended 30 June 2023 (FY23).

“Our investment in our people, quality ounces and operational excellence continues to yield results. Over the past few years, we have shown resilience and demonstrated our ability to deliver to plan. We have created the necessary flexibility to maintain the strong momentum we have built at our mines,” says Peter Steenkamp, CEO of Harmony Gold.

“Our cost base is stable and predictable, and we have implemented good controls ensuring our cost increases are in line with our plans. We have improved our safety performance and engineered a higher quality and diversified portfolio.

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“As a result of our operational consistency and strong free cash flows, we have declared a full-year dividend of 75c per share, rewarding our shareholders alongside our growth aspirations. What we achieved in this financial year demonstrates we are succeeding in our goal of ‘Mining with Purpose’”.

His official review continues:

The past financial year was filled with many highlights as Harmony Gold delivered on its strategic objectives of producing safe, profitable ounces through operational excellence and value-accretive acquisitions.

Harmony Gold saw an improved safety performance while meeting our production, cost, and grade guidance as we continue navigating a challenging operating landscape.

It is worth noting that our costs have remained under control despite the current high inflationary environment. Embedded sustainability practices, improved asset quality and operational consistency resulted in a strong and sustainable group performance with solid operational free cash flows.

Globally, Harmony Gold is the largest producer of gold from the retreatment of old tailings dams, making us a major player in the circular economy. We are investing in copper as we understand the critical role that this future-facing metal has in transitioning towards a low-carbon economy.

We are therefore, allocating growth capital towards high-margin, long-life operating assets while progressing our two key international projects, namely Eva Copper in Queensland, Australia and the Tier 1 Wafi-Golpu copper-gold project in Papua New Guinea.

As we expand internationally, we will continue to build trust by partnering with our stakeholders to ensure long-term, shared value-creation, as we have done for over 73 years.

Health and safety are our number one priority. We remain focused on achieving zero harm through an integrated risk-based approach and a proactive safety culture. For the second consecutive year, the group lost time injury frequency rate (LTIFR) was below 6 per million hours worked. Our goal remains to ensure all our people return home safely every single day.

In our quest to achieve carbon net zero by 2045, we are investing in renewable energy and reducing consumption through various energy efficiency programmes. We are also closely managing the impact of energy shortages affecting South Africa and we have a clear strategy in place to mitigate potential risks. Phase 1 of our renewable energy programme has been commissioned, delivering 30 MW of generation capacity to our Free State operations. This will reduce our peak Free State operations’ daytime demand by approximately 20%, or 6% of our South African operations’ total demand. These initiatives will alleviate pressure on the national grid whilst furthering our decarbonisation strategy.

Gold revenue for the group increased by 14% to R47 519 million (US$2 675 million) in FY23 compared to R41 742 million (US$2 744 million) in FY22. This increase was due to higher underground recovered grades which increased by 8% to 5.78g/t in FY23 from 5.37g/t in FY22. This was further supported by the higher average gold price received which increased by 15% to R1 032 646/kg (US$1 808/oz) in FY23 from R894 218/kg (US$1 829/oz) in the previous reporting period.

Group production in FY23 was steady, decreasing by 1% to 45 651kg (1 467 715oz) from 46 236kg (1 486 517 oz) in FY22. However, adjusting for the closure of Bambanani at the end of FY22, group production increased by 2% or 848kg (27 270oz) year-on-year. Production was mainly driven by an excellent operating performance from our South African underground operations and an 18% or 663kg (21 316 oz) increase in Hidden Valley production.

Group AISC increased by 6% to R889 766/kg (US$1 558/oz) in FY23 from R835 891/kg (US$1 709/oz) in FY22. Higher underground recovered grades and a stable cost base ensured AISC came in below the guided R900 000/kg for this financial year. We are pleased with this increase given the high-inflationary environment currently being experienced globally.

Group all-in costs (AIC) increased by 9% to R938 997/kg (US$1 644/oz) from R865 237/kg (US$1 769/oz) because of our major projects. These projects include the Kareerand tailings storage facility (TSF) expansion at Mine Waste Solutions, and Zaaiplaats which is the Moab Khotsong life of mine extension project.

Total capital spent in FY23 was R7 598 million (US$428 million). This was R402 million (US$22 million) lower than the guided R8 billion (US$450 million) due to permitting delays at Kareerand TSF extension.

Group operating free cash flows increased by 108% to R6 031 million (US$339 million) in FY23 from R2 905 million (US$191 million) in FY22 due to the higher underground recovered grades and the higher average gold price received. Our underground high-grade operations, Moab Khotsong and Mponeng, contributed 57% towards group operating free cash flows.

Maintaining a robust and flexible balance sheet with strong liquidity is prudent as we expand internationally. With the acquisition of Eva Copper on 16 December 2022, net debt/EBITDA increased from 0.1 to 0.6 times.

Due to the strong cash flows generated throughout the financial year, we have repaid debt of R2 045 million (US$115 million) since December 2022, resulting in net debt/EBITDA of 0.2 times at the end of the financial year.

Headroom of R7 250 million (US$385 million) is available through cash and undrawn facilities and will be used to achieve our strategic objectives.

Basic earnings per share increased by 553% to 780 SA cents (44 US cents) compared to a loss of 172 SA cents (8 US cents) per share in the previous reporting period.

Headline earnings per share increased by 60% to 800 SA cents (45 US cents) per share compared to 499 SA cents (33 US cents) per share in FY22.

Harmony’s dividend policy is to return 20% of net free cash generated (net free cash is defined as operating free cash flow after capital, interest, tax, corporate and other expenses), to shareholders at the discretion of the board of directors. Due to the strong group performance and excellent operating free cash flows in FY23, we are pleased to declare a full-year dividend of 75 SA cents (4.03 US cents*) for this reporting period.

* The dividend was converted using a closing exchange rate of R18.63/US$1 at 25 August 2023.