Harmony Gold unveils new dividend policy
JOHANNESBURG - HARMONY Gold Mining Company unveiled a new dividend policy as it recorded a whopping 336 percent spike in its interim net profit during the six months ended December 2020.
Chief executive Peter Steenkamp said yesterday that the new dividend policy would give 20 percent of free cash back to shareholders as a dividend and was aimed at being more predictable, meaningful and sustainable.
“We have grown the company rapidly over the past few years. We have done what we have done. I think it is prudent for us to return some of that money back to shareholders,” said Steenkamp, adding that the policy was on par with the rest of the industry.
The board is expected to use its discretion to decide on a dividend every half-year based on future major capital expenditure, net debt to earnings before interest, tax, depreciation and amortisation not being greater than one times, solvency and liquidity requirements in line with the South African Companies Act and current banking covenant.
Steenkamp said Harmony had also tweaked the how and when of its hedging policy, saying the group would be more selective before entering into hedges.
Harmony plans to only hedge when a margin of 25 percent above cost and inflation can be locked in.
“We are more clearer in terms of locking in bigger margins when we hedge and not necessarily hedge just to save our face,” Steenkamp said.
Harmony declared an interim dividend of R1.10 a share as operating free cashflow climbed to R4.7 billion making it possible for the group to reduce net debt to R580 million from R1.4bn in June 2020.
Commenting on the dividend policy, Seleho Tsatsi, an investment analyst at Anchor Capital, said of the larger gold producers listed on the JSE, Harmony had the lowest earnings multiple, perhaps reflecting caution around unit costs.
“The dividend is a low percentage of earnings. The rationale behind that may be to ensure dividend payments are sustainable, given the cyclicality of the industry,” Tsatsi said.
Harmony’s interim net profit climbed 336 percent to R5.8bn up from R1.3bn a year earlier as output and the average recovered underground grade improved following the acquisition of AngloGold Ashanti’s sole South African assets.
Steenkamp said Harmony was no longer a marginal gold producer and the quality of assets had dramatically improved. “We have gone from 5 grams a ton to almost 6 grams a ton from underground operations and we have more surface operations that we can mine,” said Steenkamp.
Harmony took ownership of AngloGold Ashanti’s Mponeng and Mine Waste Solutions on October 1, 2020 and had seen an increase in grade, production and cash flow.
The group’s production was 8 percent higher than a year earlier at 23 183 kilograms (817 756.26 ounces) compared to 21 411kg (755 250.8 ounces).
The group said the newly acquired assets had added 3 220kg (113 582.2 ounces) for the December 2020 quarter.
Harmony shares closed 0.5 percent lower at R57.61 on the JSE yesterday.