Summary

• Harmony Gold Mining Company Limited is a South Africa-based gold mining and exploration company.
• The Company is engaged in gold mining and related activities, including exploration, extraction, and processing. The Company's segments include South Africa Underground, Surface, and International.
• In South Africa, its underground operations are located within the Witwatersrand Basin, which include one in the Klerksdorp goldfield, three in the West Rand and five in the Free State, in the southern portion of the Witwatersrand Basin.
• The company's operations involve exploring economically viable gold-bearing ore bodies and seeking value-accretive acquisitions in gold and copper through exploration and acquisitions. They are engaged in the establishment, development, and operation of mines, along with managing reclamation sites and related processing infrastructure.
• In the fiscal year ending June 30, 2023, the company witnessed significant growth in sales, as total sales reached R49,275 million. This marked an increase of R6,630 million or 15.6% compared to the sales figure of R42,645 million in the previous year, 2022.
• The gross profit for the financial year 2023 demonstrated strength, amounting to R9,740 million. This represents a substantial difference of R9,022 million or an outstanding 1,155.3% from the gross profit of R718 million in the fiscal year 2022.
• The operating profit for the year 2023 exhibited a remarkable increase, totaling R7,922 million. This amount was notably higher by R8,403 million or an extraordinary 1,747.3% compared to the operating profit of R-481 million in 2022.
• The net profit for the financial year 2023 amounted to R4,820 million, showcasing a commendable increase of R5,872 million or an exceptional 1,556.5% compared to the net profit of R-1,052 million in the year 2022.
• Moreover, the diluted earnings per share (EPS) for 2023 were reported as R7.77, indicating a significant increase of R9.49 or an outstanding 1,554.1% compared to the diluted EPS of R-1.72 in 2022.

Brief Company Overview

Harmony Gold Mining Company Limited (NYSE:HMY) is a South Africa-based gold mining and exploration company. The Company is engaged in gold mining and related activities, including exploration, extraction, and processing. The Company's segments include South Africa Underground, Surface, and International[1]. In South Africa, its underground operations are located within the Witwatersrand Basin, which include one in the Klerksdorp goldfield, three in the West Rand and five in the Free State, in the southern portion of the Witwatersrand Basin. In addition, it has an open pit mine, Kalgold, on the Kraaipan Greenstone Belt as well as several surface treatment operations. In Papua New Guinea the Company operates Hidden Valley mine and Wafi-Golpu project. In Australia the Company owns Eva Copper Mine Project. The Eva Copper Mine Project is an iron-oxide copper-gold resource located in Northwest Queensland, Australia.

The company's operations involve exploring economically viable gold-bearing ore bodies and seeking value-accretive acquisitions in gold and copper through exploration and acquisitions. They are engaged in the establishment, development, and operation of mines, along with managing reclamation sites and related processing infrastructure. The mined ore undergoes milling and processing in gold plants to produce gold doré bars. Revenue is generated through the sale of the produced gold, and financial management focuses on optimizing efficiencies for maximum financial returns. The company places a strong emphasis on stewardship and responsible mine closure, aiming to empower communities and employees throughout the mining life cycle. Environmental responsibility is a key consideration during operations, and efforts are made to restore mining-impacted land for alternative economic use post-mining, adhering to approved mine closure commitments.

As of November 2023, the company had a 52-week share price range of $5.60 to $2.93. The trailing P/E ratio of the company is 12.74 times, the price-to-sales ratio (ttm) is 1.25 times, the profit margin is 9.78%, the operating margin is 20.16%, the return on assets (ttm) is 9.46%, the return on equity is 15.03%, and the diluted earnings per share (ttm) is $.42.

Recent Developments

• In October 2022, Harmony Gold has an agreement to acquire 100% ownership of the Eva Copper project and associated exploration tenements from Copper Mountain Mining Corporation. The upfront cash consideration is US$170 million (about R3 billion), with a contingent payment of up to US$60 million (approximately R1.1 billion). Located in the North West Minerals Province in Queensland, Australia, Eva Copper adds 1.718 billion pounds of copper and 260,000 ounces of gold to Harmony's Mineral Reserves. This move extends Harmony's diversification into copper, a crucial metal in the energy transition. The acquisition is seen as strategically significant, reducing risk, providing scale, and positioning Harmony for future growth[2].
• On August 15, 2023, Harmony Gold Mining Company Limited announced the commissioning of its 30 megawatt (MW) solar photovoltaic plants in the Free State. These plants are actively supplying green energy to Harmony's shafts, contributing approximately 70 gigawatt hours of renewable energy annually to the Free State operations. Phase 1 is expected to reduce carbon dioxide emissions by around 65,000 tonnes in its first year[3].

Recent Financing Activities

• US$400 Million Syndicated Facility: During fiscal 2023, US$170 million (R2,919 million) was drawn down on the US$400 Million Syndicated Facility. US$300 million (R5,592 million) remained outstanding as at June 30, 2023[4].
• US$24 Million Wespac Loan:  During fiscal 2023 US$2 million (R26 million) was repaid on the US$24 Million Westpac Loan therefore settling the loan with the final payment.

Financial Performance Highlights

Q2 2023 Highlights

In the first quarter of FY23-24, ended in September 30, 2023, the company reported sales of R14,780 million. This indicates a substantial increase of R3,554 million or 31.7% compared to the first quarter of FY22-23, which had sales of R11,226 million. The net profit for the first quarter of FY23-24 was reported as R841 million, reflecting a decrease of R66 million or 7.3% compared to the net profit of R907 million in the first quarter of FY22-23. Furthermore, the company's diluted earnings per share (EPS) for the 1st quarter of FY23-24 decreased to R0.83. This represents a negative change of R0.06 or 6.7% compared to the diluted EPS of R0.89 in the first quarter of FY22-23.

Annual Performance Highlights

In the fiscal year ending June 30, 2023, the company witnessed significant growth in sales, as total sales reached R49,275 million. This marked an increase of R6,630 million or 15.6% compared to the sales figure of R42,645 million in the previous year, 2022. The gross profit for the financial year 2023 demonstrated strength, amounting to R9,740 million. This represents a substantial difference of R9,022 million or an outstanding 1,155.3% from the gross profit of R718 million in the fiscal year 2022. Furthermore, the operating profit for the year 2023 exhibited a remarkable increase, totaling R7,922 million. This amount was notably higher by R8,403 million or an extraordinary 1,747.3% compared to the operating profit of R-481 million in 2022. The net profit for the financial year 2023 amounted to R4,820 million, showcasing a commendable increase of R5,872 million or an exceptional 1,556.5% compared to the net profit of R-1,052 million in the year 2022. Moreover, the diluted earnings per share (EPS) for 2023 were reported as R7.77, indicating a significant increase of R9.49 or an outstanding 1,554.1% compared to the diluted EPS of R-1.72 in 2022.

The increase in gold revenue during the 2023 financial year is primarily attributable to the depreciation of the Rand/US$ exchange rate, shifting from an average of R15.21/US$ to R17.76/US$. This led to a 17% rise in the average gold spot price received, climbing from R883,453/kg in the 2022 year to R1,036,682/kg in 2023. However, this revenue boost was partially offset by the closure of Bambanani in June 2022, which contributed R1,286 million in revenue in 2022.

In terms of silver, which is derived from the Hidden Valley mine in Papua New Guinea, the rise in silver revenue in the 2023 financial year is attributed to a 38% increase in production to 82,093kg from 59,489kg in 2022. This improvement resulted from a general enhancement in the operating environment at Hidden Valley, with the average silver price increasing by 11% to R12,505/kg in 2023

Regarding uranium, sourced from the Moab Khotsong operation, uranium production increased by 42% to 237,438kg from 167,696kg in 2022, accompanied by a 30% increase in the average uranium price to R1,960/kg in 2023.

Cash flows from operating activities: Net cash provided by operations is primarily affected by the quantities of gold sold, the gold price, the Rand/US$ exchange rate, cash costs per ounce and, in the case of the international operations, the Australian dollar and PNG Kina versus US dollar exchange rate. A significant adverse change in one or more of these parameters could materially reduce cash provided by operations as a source of liquidity. Net cash generated by operations increased from R6,924 million in fiscal 2022 to R9,948 million in fiscal 2023. This increase is mainly due to higher revenue generated through the year as a result of higher gold prices received.

Cash flows from investing activities: Net cash utilized by investing activities increased from R6,200 million in fiscal 2022 to R10,596 million in fiscal 2023. The increase principally relates to the Eva Copper acquisition (R2,996 million) that occurred during fiscal 2023 and an increase of R1,426 million in additions to property, plant and equipment.

Cash flows from financing activities: Financing activities generated R1,194 million in fiscal 2023, compared to cash utilized of R1,151 million in fiscal 2022. This was mainly due to borrowings raised and lower repayments in fiscal 2023. A total of R2,919 million was drawn down on the US$400 Million Syndicated Facility. In fiscal 2023, borrowings repaid amounted to R2,071 million as compared to repayments of R3,601 million made during fiscal 2022. The draw down mentioned above was partially offset by the repayments made during the year, resulting in a net inflow on the borrowings of R1,548 million compared to the outflow of R544 million seen in fiscal 2022. In fiscal 2023, a total dividend of R154 million (2022: R430 million) was recognized and relates primarily to the final dividend of 22 SA cents for the 2022 year, amounting to R136 million which was paid on October 17, 2022.

Business Overview

Harmony Gold Mining Company Limited engages in the exploration, extraction, and processing of gold. The company explores for uranium, silver, copper, and molybdenum deposits. Its operation can be categorized based on geographical area. Major Operation is as follows:

South African

Major Operation area Located in the Witwatersrand Basin and Kraaipan Greenstone Belt, South Africa. In the fiscal year ending June 30, 2023, this opearation achieved a gold production of 1.33 million ounces, representing 90.4% of its total output. With a workforce totaling 43,175, Harmony’s African operation manages a diverse portfolio, including eight underground operations, one open-pit mine, and various surface source operations. The assets are strategically grouped based on grade and life-of-mine (LoM) considerations, aligning with the company's equity strategy. High-grade underground operations like Moab Khotsong and Mponeng receive major capital allocations based on grade and returns, while underground optimized operations focus on free-cash generation. Harmony Gold's surface assets, including Mine Waste Solutions, Phoenix, Central Plant reclamation, and dumps, contribute to high-margin operations. As of June 30, 2023, the South African operations accounted for 65.6% of the group's Mineral Resources and 51.3% of Mineral Reserves, encompassing both gold and gold equivalent ounces.

Papua New Guinea

Situated in the New Guinea Mobile Belt in Morobe, Harmony Gold's Papua New Guinea operation plays a significant role in the company's global portfolio. With a total gold production of 0.14 million ounces in the fiscal year ending June 30, 2023, this operation contributed 9.6% to Harmony Gold's overall production, reflecting an increase from 8.0% in FY22. The Papua New Guinea workforce totals 2,267 individuals and oversees key assets such as the Hidden Valley, an open-pit gold and silver mine, and the Wafi-Golpu Project, a substantial copper-gold portfolio. Additionally, the operation encompasses multiple exploration areas, emphasizing Harmony Gold's commitment to ongoing growth and resource discovery. As of June 30, 2023, the Papua New Guinea operation accounted for 27.5% of the group's Mineral Resources and an even more substantial 48.7% of group Mineral Reserves, both figures inclusive of gold and gold equivalent ounces.

Australia

Situated in the Mt Isa Inlier, Queensland, Australia, Harmony Gold's operations are currently in the project feasibility stage and exploration phase. With a total workforce of 104 individuals, including the Australia head office, the key assets in this region include the Eva Copper Project and the Rosby exploration tenements. Harmony Gold recently announced the inaugural resource estimate for the Eva Copper Project, revealing a substantial resource base comprising 1.5 million tonnes of copper and 431,000 ounces of gold. This remarkable find contributes significantly to the group's Mineral Resources, representing 5.9% of the total. Since the acquisition of the Eva Copper Project, Harmony has initiated an extensive drilling campaign and conducted comprehensive studies to enhance the project's data profile. These efforts aim to provide a solid foundation for an informed update of the feasibility study, with results expected to be released in FY24.

Revenue Stream

Revenue from metal sales include the sale of gold, silver and uranium. Revenue from metal sales is recognised when the group satisfies its performance obligations under its contract with the customer, by transferring such metals to the customer's control. Transfer of control is generally determined to be when the risk and title to the metals passes to the customer. Revenue is measured based on the consideration specified in the contract with the customer and is driven by the quoted market prices of the metals.

In the fiscal year 2023, Harmony Gold Mining Company generated a total revenue of R49,121 million. The primary contributor to this revenue was gold, accounting for approximately 96.43% of the total, with a revenue of R47,366 million. Silver, on the other hand, contributed around 2.08% to the total revenue, amounting to R1,021 million. Uranium constituted a smaller portion, contributing roughly 0.62% to the overall revenue, with a total of R304 million. Additionally, the company reported R430 million from toll treatment services, representing a supplementary aspect of its revenue streams. These figures highlight the significant reliance on gold as the primary revenue-generating commodity for Harmony Gold in the specified financial period.

Moreover, the South African operation generates most of the revenue, totaling R43,080 million in 2023. Among this, surface operations generated R7,634 million, with the rest of the revenue coming from underground operations. International operations, including Papua New Guinea and Australia, generated the remaining amount of R5,041 million, resulting in a total revenue of R49,171 million. Therefore, the South African operation generates approximately 87.6% of the total revenue, while international operations generate about 12.3% of the revenue.

Other Business Information

The group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar (US$). Foreign exchange risk arises when future commercial transactions or recognised financial assets or liabilities are denominated in a currency that is not the entity’s functional currency. Harmony’s revenues are sensitive to the R/US$ exchange rate as all revenues are generated by commodity sales denominated in US$. Harmony may enter into hedging transactions to reduce this risk. The limit currently set by the board is 25% of the group's foreign exchange risk exposure for a period of 24 months.

Company History

1950 – 1995: The Early Years

Harmony Gold Mining Company Limited traces its roots back to its establishment on 25 August 1950. Initially operating the Harmony mine in the Free State as a subsidiary of Rand Mines, it marked its presence on the Johannesburg Stock Exchange in 1951. The early years saw the company producing its first gold in 1954 and venturing into uranium production in 1955. In 1972, Harmony underwent a transformative merger with Barlow Rand Group, becoming one of South Africa's industrial giants. By 1992, the gold interests of Barlow Rand, including Harmony, were spun into Randgold & Exploration. Over the decades, Harmony displayed a remarkable ability to turn assets into sustained value, focusing on longevity and responsible mining practices.

1996 – 2001: Forging an Independent Path

The late '90s marked a pivotal period for Harmony. It achieved independence in 1997, terminating its service agreement with Randgold & Exploration. Embarking on an acquisition spree, Harmony transformed from a single-lease mining operation to a global gold producer. Notable acquisitions included Lydenburg Exploration Limited, Unisel, Grootvlei, and Consmodder operations. The early 2000s saw legislative changes in the South African mining industry, and Harmony shifted its listing to the New York Stock Exchange in 2002. Notably, the company entered Papua New Guinea, acquiring a stake in the Hidden Valley exploration project. This era also witnessed a heightened commitment to sustainability, with initiatives aimed at uplifting host communities and minimizing environmental impact.

2002 – 2009: Creating a Diversified Asset Base

The legislative landscape evolved further with the Mineral Resources and Petroleum Development Act of 2002. Harmony expanded its portfolio with the acquisition of Freegold, including mines like Joel, Phakisa, Tshepong, and Bambanani. Sustainability remained a core focus, exemplified by a landmark deal in 2003, where African Rainbow Minerals Gold acquired a 20% stake in Harmony. Dr. Patrice Motsepe assumed the role of chairman in 2003, marking a milestone in black economic empowerment. Harmony's acquisition spree continued in 2004 with the purchase of Avgold, owner of the Target mine. The company ventured into Papua New Guinea with the establishment of the Morobe Mining Joint Venture in 2008, a partnership with Newcrest Mining Limited.

2010 – 2015: Becoming South Africa's Foremost Gold Producer

In 2010, Harmony celebrated the opening of Hidden Valley, its first offshore greenfields project, in collaboration with Newcrest Mining Limited. The company reported a significant portion of its shareholders being based in the United States by June 2010. Initiatives like the Tlhankanelo Employee Share Trust in 2012 underscored Harmony's commitment to its workforce. The company continued its strategic acquisitions, demonstrating its dedication to responsible operations and economic regeneration. Harmony's sustainability efforts culminated in reporting the first-ever fatality-free period for its South African operations in the December 2014 quarter.

2016 – 2022: Low-Risk, High-Quality Global Acquisitions

Entering the 2010s, Harmony pursued low-risk, high-quality acquisitions globally. Full ownership of Hidden Valley was secured in 2016, followed by acquisitions of Moab Khotsong and Great Noligwa mines in 2018. Harmony's commitment to environmental, social, and governance (ESG) practices was evident in the commencement of solar photovoltaic plants in the Free State in 2022. The acquisition of the Eva Copper project in Australia in December 2022 marked Harmony's strategic diversification into a future-facing metal.

Harmony Gold: A Global Presence

As of 2023, Harmony Gold stands as the largest gold mining company in South Africa, with operations extending to Papua New Guinea. The company's portfolio includes nine underground mines, one open-pit mine, and various surface operations in South Africa. In Papua New Guinea, Harmony holds Hidden Valley, an open-pit gold and silver mine, and a 50% interest in the Morobe Mining Joint Venture, encompassing the Wafi-Golpu project and extensive exploration tenements. Harmony's commitment to sustainability is reflected in its employment practices, drawing from local communities and diverse regions.

[1] https://markets.ft.com/data/equities/tearsheet/profile?s=HMY:NYQ

[2] https://www.harmony.co.za/investors/news/company-announcements/2022/1403-harmony-transforms-by-adding-near-term-copper-production-in-a-tier-1-mining-jurisdiction/

[3] https://m.engineeringnews.co.za/print-version/green-electrons-being-delivered-to-harmony-golds-free-state-mine-shafts-2023-08-15

[4] https://www.marketscreener.com/quote/stock/HARMONY-GOLD-MINING-COMPA-1413368/news/Harmony-Gold-Mining-concludes-ESG-linked-loans-and-starts-construction-of-three-10MW-solar-photovo-40622795/