Harmony Gold Mining Company Limited Q1 FY2023 earnings call

Management Statement and Operational Highlights:

• Safety: Lost time injury frequency rate improved, aiming for zero loss of life. Proactive safety culture with lost time injury frequency rate trending lower.
• Financials: Group revenue up 35% to ZAR 31 billion, EBITDA up 114% to ZAR 17 billion, headline earnings per share up 226%. Net cash position ZAR 74 million.
• Operational: Improved underground recovered grades to 6.29 grams per tonne, record operating free cash flow.
• Sustainability: Included in FTSE4Good Index, Bloomberg Gender-Equality Index for five consecutive years, CDP score A, net carbon zero by 2045.
• Projects: Mponeng life of mine extension approved, feasibility studies completed for Mponeng and Tau Tona, Eva Copper and Wafi-Golpu projects in pipeline.

Segment Performance:

• South African high-grade underground mines: Contributed 51% of total production, delivered 45% of operating free cash flows at a margin of 34%.
• South African optimized underground assets: Produced 40% of total production, generated 90% of group operating free cash flows at a margin of 11%.
• South African surface sources business: Produced 17% of group production, generated 11% of operating free cash flow at a margin of 17%.
• Hidden Valley (international copper gold): Produced 12% of group production, contributed 25% to total operating free cash flows with a 50% margin.
• Group all-in sustaining cost improved to ZAR 843,000 per kilogram or US$1,403 per ounce. Group operating free cash flow was ZAR 7.1 billion or $381 million, margin 24%.

Guidance:

• FY 2024 guidance unchanged, confident to reach upper-end of production guidance and lower-end of cost guidance.
• Capital guidance for FY 2024 unchanged, FY 2025 onwards includes Mponeng extension project.
• Dividend policy: Pay 20% of net free cash to shareholders, record interim dividend declared with ZAR 1.47 per share.

Risks:

• Potential production drop in Q4 due to seasonality and lower grades at Hidden Valley.
• Safety incident at Mponeng impacted culture but not major on production.
• Permit amendments for Eva Copper project could delay execution.

Q: Can Harmony sustain performance, need to fill production gap, M&A plans, CapEx for Mponeng extension, uranium potential?

A: Looking at M&A, Eva Copper CapEx, uranium exploration.

Q: Sustainability of higher grades in SA?

A: Grades sustainable, middle mines performing well, Hidden Valley to see lower grades but still within guidance.

Q: Seasonality impact, Target turnaround, Mponeng incident impact?

A: Seasonality expected, Target turnaround completed, Mponeng incident had cultural impact but not major on production.

Q: Benin life extension project deferred consideration?

A: Deferred consideration applies, accounted for in feasibility study.

Q: Gram per tonne costs and inflation?

A: Electricity, wage, royalty increases contributed to inflation, managed via grade improvement.