Harmony Gold Mining Company on Tuesday unveiled a R9 billion plan to extend several projects to drive long-term profitability as operations generated more cash on record bullion prices during the year to the end of June.
Chief executive Peter Steenkamp said yesterday that Harmony had approved the development of the R4.5bn Zaaiplaats project over the next 10 years, the R3.2bn extension of Mine Waste Solutions over four years, and about R1bn for Hidden Valley in Papua New Guinea.
“We have identified substantial opportunities in our existing portfolio through exploration and brownfield projects, which will extend the life of some of our larger and higher-grade assets, adding lower-risk, higher-margin ounces to Harmony’s portfolio,” said Steenkamp.
He said each project brought multiple benefits and exceeded all the group’s minimum criteria for allocating capital.
Steenkamp said the Zaaiplaats project, near the Moab Khotsong mine, was expected to produce more than 200 000 ounces a year and add 24 years’ life-of-mine at a yield of about 9 grams a ton and an estimated, real all-in sustaining cost of R512 300 a kilogram. The group expected to spend R536 million towards developing the project this year, with first production forecast in 2028.
“The major capital expenditure will be funded by Moab Khotsong. There are significant benefits to pursuing this project, such as leveraging existing infrastructure, increasing ounces and sustaining jobs. Harmony has proved its ability to extract value and add life-of-mine time and again throughout its 71-year history,” he said.
He said the Kareerand Tailings at Mine Waste Solutions was reaching its tailings deposition capacity and would require major capital to extend the existing deposition site to enable the full development of the group’s tailings resource in the region.
“This project will be funded out of group cash and will deliver excellent cash flow margins once this project is completed and the Franco-Nevada streaming agreement comes to an end. This project is expected to produce approximately 100 000 ounces of gold per annum and add 16 years’ life-of-mine at an estimated all-in sustaining cost of R572 000 a kg over the life of mine,” he said.
Harmony said highlights included the slashing of debt by R819m to R542m, and the full-year dividend of 27 cents a share, bringing the total 2021 dividend to 137c. Operations generated R9.7bn in cash, up from R5bn a year earlier, because of the higher gold price.
“The cash generated by operations was more than enough to pay for capital expenditure, a dividend and significantly reduce the group’s debt,” Steenkamp said.
Revenue was 43 percent higher to R41.73bn, mainly because of the operational expansion from the acquisition of Mponeng, coupled with the higher gold price received.
Total gold production for the year was 26 percent higher at 1.53 million ounces compared to 1. 217 million in 2020. The higher gold production was in line with the group’s guidance and mainly because of the inclusion of Mponeng and related assets in its portfolio.
Commenting on the results, Anchor Capital’s investment analyst, Seleho Tsatsi, said Harmony released a set of results that was much improved from a very difficult previous year that was affected by lockdowns.
“While the 60 percent reduction in net debt is encouraging, earnings were, however, lower than the market expected. The dividend may also be below what investors were expecting,” said Tsatsi.
Harmony said it aimed to construct three solar plants in the Free State that would generate 10 megawatts each as part of the first phase of its renewable energy roll-out. It planned to add between 70MW and 80MW in the next phase over the next 18 months.
BUSINESS REPORT ONLINE