Harmony Gold looks beyond SA crisis as interim profits, dividends soared

A general view of Mponeng mine is seen near Carletonville, west of Johannesburg. Photo: Reuters

A general view of Mponeng mine is seen near Carletonville, west of Johannesburg. Photo: Reuters

Published Feb 29, 2024


Harmony Gold is maintaining a long-term outlook on South Africa, where it has just approved an expansion project, but would consider acquisitions in other jurisdictions when necessary, finance director Boipelo Lokubo said yesterday.

The gold producer, which is also diversifying into copper, yesterday announced board approvals to kick-start a life-of-mine extension project at its flagship Mponeng mine in the West Wits region.

The life of mine extension at Mponeng will add about 3 million ounces of mineral reserves to the Harmony Gold portfolio. This will help ramp up production from the mine to an estimated 260 000 ounces per year at recovery grades of over 9 grams per ton.

“Harmony has always been pro-South Africa; we been operating for over 73 years and we will continue to invest. We see a very long future in South Africa given the investments we have made into our assets,” Lokubo. said in an interview with Business Report.

The life of mine extension will extend Mponeng to a 20-year minable tenure, up from the current seven years. The Mponeng mine raised underground recovered grades by 30% to 10.34 grams per ton in the half year period to end December 2023, translating to a 30% increase in gold production to 4 499 kilograms for the period.

This helped to steer up Harmony Gold’s production for the interim period by 14% to 25 889 kilograms. Lokubo said the company had not been spared the impacts of electricity load shedding in South Africa although the company had not been scathed by port and rail inefficiencies.

“Electricity is a countrywide issue but we are managing it; trying to manage our efficiencies as best as possible. We also have a renewable energy program,” she said.

There was additional stronger recovery grades from Harmony Gold’s Moab Khotsong, Hidden Valley and Mine Waste Solutions operations during the half year period under review.

Revenue from gold for the period firmed up by 32% to R29.7m, attributable to the higher recovered grades and an 18% increase in the average gold price received.

This has enabled Harmony Gold to declare an interim dividend amounting to R1.47 per share in the previous contrasting period, Harmony did not pay a half year dividend. This was after the company lifted headline earnings per share (Heps) by 226% to R9.56 per share against the backdrop of elevated operating free cash flow that soared 265% to R7.1bn.

CEO Peter Steenkamp said. “While strong commodity prices have provided Harmony with good tailwinds, improved safety, good mining discipline and operational flexibility with a stable and a predictable cost structure, remain fundamental to creating the long-term value expected by our stakeholders.”

Harmony Gold’s Eva copper project in Queensland, Australia is currently under a feasibility study, with the company aiming to diversify into renewable energy metals.

Harmony Gold was now engaging with the Queensland government about environmental permit amendments at the project.

Although the company top performed in terms of earnings, its operating costs for the half year period were 10% higher at R18.5bn. This has been attributed to annual inflationary increases as well as electricity cost increases in South Africa.

“The main drivers during the reporting period were electricity costs for South Africa, which increased by 19% to R3.7bn, South African labour costs which increased by 9% to R7.8bn due to annual increases and incentives (and) royalties for South African operations, which increased by 266% to R534 million,” the company said.

Shares in Harmony Gold traded nearly flat yesterday, falling by a marginal 0.22% to R108.48 on the JSE. The gold miner is currently engaging workers unions under wage negotiations.

Lokubo said, “We are engaging with the union so it’s a bit too early what the outcome will be.”