Harmony Gold Mining Company Limited Q2 FY2025 earnings call

• Strategic pillars: Responsible stewardship, operational excellence, cash certainty, and effective capital allocation are core to Harmony's actions.
• Safety: A proactive safety culture is embedded, with a lost time injury frequency rate of 5.52 and a loss of life injury frequency rate of 0.02 in the half. Systemic changes and the Thibakotsi program support safety.
• Operational highlights: Solid mining discipline led to excellent grade control and consistent production. Recovered grades at South African underground operations increased to 6.4 grams per tonne. Cash operating costs were well managed, with total cash operating costs in rand terms increasing 9% due to inflation. Royalties rose 46% due to higher gold prices, and all-in sustaining costs were on track to meet full-year guidance.

Harmony's segment performance included the South African underground assets where recovered grades increased to 6.4 grams per tonne. Group production for the first half was about 25,000 kilograms (800,000 ounces), ahead of guidance. All-in sustaining costs were well controlled at just over ZAR 972,000 per kilogram (US$1,690 per ounce). Operating free cash flow was a record ZAR 10.4 billion (US$579 million), with an operating free cash flow margin of 29%. Headline earnings per share grew 33% to ZAR 12.70 per share (US$0.71). The South African surface and tailings retreatment operations are high-margin and low-risk. The international copper-gold portfolio is part of the growth strategy, and the South African underground optimized assets contribute to production though their portion is expected to decrease over time.

• Full-year production is on track to meet the upper end of guidance.
• Planned FY 2025 total capital intensity is affordable at around ZAR 225,000 per kilogram (US$415 per ounce).
• A record interim dividend of ZAR 2.27 per share was declared, demonstrating commitment to returning value to shareholders while funding growth.

• Permitting challenges for international projects like Wafi-Golpu, as the process involves aligning interests among parties including the state, Kumul, and landowners.
• Execution risk for greenfield projects such as Eva Copper, given it is a new type of mine in a different jurisdiction requiring careful project management and derisking.

Q: What change does the new CEO bring to the role and strategic perspective?

A: The CEO emphasizes creating value for shareholders, with a focus on responsible and balanced decision-making. The management team is strong, and they aim to take the company further while maintaining the current momentum.

Q: How does Harmony think about returning value to shareholders while ramping up CapEx for Eva Copper?

A: Value to shareholders is seen as a combination of dividends and share price appreciation. Eva Copper is a key catalyst, and they will assess the situation after gating the project through the Board later in the year.

Q: Can grades at Hidden Valley be improved, and what's the status of Wafi-Golpu?

A: Pushing grades beyond 6.4 grams per tonne could affect sustainability, so they focus on optimizing ore bodies to average reserve grades. Wafi-Golpu is in the permitting process, with a key date being the permit, and they aim to bring it to fruition for shareholders.

Q: What are the remaining sticking points for the special mining lease of Wafi-Golpu?

A: The state's option to exercise up to 30% equity in the project is a key factor, involving equitable splitting of the pie among parties. Permitting in PNG, while frustrating, is a standard process for greenfield projects, and they are aligned to progress the process.