Release Date: September 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Harmony Gold Mining Co Ltd (HMY, Financial) reported a record year with gold production increasing by 6% to 1.56 million ounces, surpassing their upwardly revised guidance.
- The company achieved a significant improvement in underground recovered grades, which increased by 6% to 6.11 grams per tonne.
- Operating free cash flow increased by over 100% to a record ZAR13 billion (USD681 million) at a margin of 22%, driven by higher recovered grades and strong gold prices.
- Harmony Gold Mining Co Ltd (HMY) has strengthened its balance sheet, now in a net cash position of ZAR2.9 billion (USD115 million).
- The company is making substantial investments in high-quality assets and key projects, such as the Eva Copper Project and Wafi-Golpu, which are expected to be transformational and move Harmony further down the global cost curve.
Negative Points
- Despite the positive financial performance, Harmony Gold Mining Co Ltd (HMY) reported the loss of seven colleagues during the financial year, indicating ongoing safety challenges.
- The company expects lower grades at the Hidden Valley mine in FY 25, which could impact production levels.
- Capital expenditure is set to increase significantly to ZAR10.8 billion (just under USD600 million) in FY 25, indicating a period of higher capital intensity.
- The all-in sustaining cost is expected to rise to between ZAR1.02 and ZAR1.1 million per kilogram in FY 25, reflecting higher development capital spend and inflationary increases.
- The company faces challenges in securing permits for the Wafi-Golpu project, which is critical for its long-term growth strategy.
Q & A Highlights
Q: Could you share some thoughts on your underground operations where you've had an improvement in grades? Was that due to transitioning to higher-grade ore, targeting higher-grade areas, or focusing on cleaner mining?
A: The major driver was acquiring higher-grade assets in Mponeng and Moab Khotsong. Additionally, we have a strong focus on quality and operational excellence, ensuring we maintain high-grade discipline across all operations. (Peter Steenkamp, CEO)
Q: Regarding your FY 25 guidance, is there optimism that certain parts of the portfolio might perform better than planned? How conservative is this guidance?
A: We aim to be conservative in our planning to ensure we meet or exceed our guidance. While we don't plan to over-promise, our current operations are performing well, and we are confident in our ability to meet our guidance. (Peter Steenkamp, CEO)
Q: Can you provide more details on the old tailings opportunity in the Free State? Would you need to build another plant there? How do the grades compare to your current tailings retreatment operations?
A: The Free State project is exciting, with a significant resource base. It will likely involve building a new plant, though not as large as Mine Waste Solutions due to water constraints. The feasibility study is ongoing, but we are optimistic about its potential. (Peter Steenkamp, CEO)
Q: Your CapEx has increased substantially for FY 25 and FY 26. Can you unpack the drivers for these increases?
A: The increase is primarily due to growth capital for projects like Mponeng deepening and sustaining capital for ongoing development. We are confident in our ability to manage these projects effectively. (Boipelo Lekubo, Finance Director)
Q: Peter, you've been instrumental in reshaping the company. How long do you intend to stay, and what is your succession plan? What is the most important thing you want to complete before you leave?
A: I plan to step down on December 31st. The Board is well advanced in finding my successor. My main goal before retiring is to secure the Wafi-Golpu permit, which would be a significant milestone for the company. (Peter Steenkamp, CEO)
Q: What are your intentions with the cash you are generating? How do you think about the capital structure of the company going forward?
A: While we are in a high CapEx phase, we maintain a balanced approach to capital allocation, focusing on safety, maintaining a strong balance sheet, and returning capital to shareholders. (Boipelo Lekubo, Finance Director)
Q: Can you unpack the grade evolution over the next two to three years?
A: We expect to maintain high grades, especially with the development of higher-grade assets like Mponeng and Moab Khotsong. We are confident that our underground grades will remain above 5.8 grams per tonne for several years. (Peter Steenkamp, CEO)
Q: What are the plans for Harmony in terms of new business and expansion opportunities?
A: We have a strong pipeline of projects that will sustain our production levels. We are also constantly looking for new opportunities that meet our criteria for quality and profitability. (Peter Steenkamp, CEO)
Q: Is the FY 24 uranium production base sustainable, and is there potential to do more from a uranium perspective?
A: Our uranium production is tied to the grades at Moab Khotsong. Given the current high grades, we expect similar production levels for the next few years. (Peter Steenkamp, CEO)
Q: What is the timeline for Wafi-Golpu, and when do you expect it to become cash flow positive?
A: We aim to secure the mining development contract soon. Once operational, Wafi-Golpu will be a significant contributor to our production and cash flow. (Peter Steenkamp, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
