HARMONY Gold generated record operating free cash flow of R12.74bn for its 2024 financial year ended June but it opted against a special dividend for shareholders ahead of major capital spend in the coming years.
“We have got a number of prospects that we are pushing ahead on including the deepening of Mponeng in South Africa,” said outgoing CEO Peter Steenkamp. “But we think 20% (of net free cash generated) is a good return,” he said.
The firm has planned capital expenditure of R10.8bn in the current (2025) financial year, more than it had ever spent before, said Steenkamp. This includes much higher sustaining capital of R5.1bn in South Africa (R3.7bn) relating to increased development at its South African underground mines.
Capex over the next three years including 2025 is R30.4bn (until 2027). The company ended net cash at R2.8bn as of June 30
Steenkamp, who leaves the company after nine years in December, was commenting following the publication of the firm’s full year results in which it posted full year share earnings of R13,86 per share, a 78% year-on-year improvement.
The improvement year-on-year was owing to higher grades, 6% higher gold production which came in at 1.56 million ounces, and a higher gold price – up 16% to about R1.8m per kilogram or $1,999/oz. The gold price is currently trading at $2,496/oz.
Harmony is also taking on significant growth capex of R3.8bn (2024: R2.8bn) this year. In addition to Mponeng, which is projected to cost R7.9bn, Harmony expects to embark on the development of its Eva Copper project next year once it has completed the optimisation of a feasibility study.
According to a study by the project’s previous owner Copper Mountain, Eva Copper would require pre-production development capital of about $597m. “The world has moved on in that time so you can expect that to cost more,” said Boipelo Lekubo, the firm’s CFO at a presentation to analysts today. Harmony paid $170m in cash up front for Eva.
There was some raised eyebrows regarding Harmony’s all-in sustaining cost (AISC) guidance of R1.02m to R1.1m/kg. “We think the market will now focus of FY25 guidance – in particular the 13 to 22% guided increase in AISC,” said RMB Morgan Stanley.
Steenkamp said the company has taken a conservative approach on guidance – which also forecast gold production of 1.4 to 1.5 million oz and an average grade of 5.8g/t (2024: 6.11g/t) – saying that there signs so far this year were already promising.
There was no mention of Steenkamp’s successor. “The process is far along and there are still four months to go before the end of the year,” said Steenkamp. “But it’s up to the board,” he added.
