Harmony Gold Mining Co Ltd (HMY) (FY 2026) Earnings Call Highlights: Record Revenue and ...

Negative Points

• Harmony Gold Mining Co Ltd ( NYSE:HMY ) reported a significant realized gold hedge loss of R9.6 billion within revenue, which negatively impacted reported earnings despite locking in margins.

• The company faces a period of elevated capital expenditure, with FY27 total CapEx planned at R28 billion, a 64% increase year-on-year, which could pressure near-term free cash flow and dividend growth.

• Moab Kotsong is entering a previously flagged ore gap, which is expected to put pressure on costs and production over the next five years, impacting the company's high-grade underground operations.

• The Eva Copper project's timeline is subject to regulatory approvals related to an endangered species find, creating potential execution risk for the project's schedule and capital guidance.

• Harmony Gold Mining Co Ltd ( NYSE:HMY ) experienced a 16% increase in electricity costs, which the company is only partially mitigating through its renewable energy programme, adding to cost pressures.

• The company's dividend yield of approximately 3.5% is lower than some peers, and with the significant capital investment phase ahead, maintaining the current dividend payout level may be challenging.

• Harmony Gold Mining Co Ltd ( NYSE:HMY ) tragically lost six colleagues during the year, underscoring the persistent safety risks in deep-level mining operations despite overall safety improvements.

Q & A Highlights

Q: Given the significant realized loss from the hedging program this year, can you reconsider the strategy to eliminate large swings, especially with the gold price at current levels? A: Boipelo Lekubo (Finance Director): Our hedging program is consistently applied and not speculative. While we realized a loss of nearly R10 billion this year, our net derivative liabilities have decreased sharply from around R12 billion at the half-year to roughly R2 billion now. We have locked in favorable hedges, and as the mature ones roll off, the realized losses will decline. The balance sheet position provides a good guide for future losses.

Q: Why is the SA surface growth opportunity, which seems compelling, further out? What are the constraints? A: Beyers Nel (COO, South Africa): The surface assets are very attractive, with a 46% adjusted free cash flow margin. However, they are constrained by permitting for new tailings storage facilities, which are massive projects. Additionally, the Free State Reclamation project is water-intensive, and water is scarce in that region. We are exploring solutions, such as piping water from Boitaville, to bring these operations into the portfolio and add the potential 100,000 ounces.

Q: With the significant increase in total CapEx for FY27, can you maintain the dividend payout at similar levels to 2026? A: Boipelo Lekubo (Finance Director): The dividend is directly linked to free cash flow generation after all CapEx. We are comfortable that we can fund the capital through cash and available facilities. Beyers Nel (COO) added that while our dividend yield of ~3.6% is slightly behind peers, this reflects the timing of our Eva Copper investment phase, which is ahead of us, unlike some peers who have concluded similar investments.

Q: Can you provide an update on the Eva Copper project's approvals, execution risks, and the impact of a potential permitting delay on first production and costs? A: Beyers Nel (COO, South Africa): We are actively managing the endangered species process with regulators using a staged approach. The copper concentrator plant area was largely pre-stripped, so that work continues undisturbed. We have submitted the necessary referrals to Australian authorities and currently see no reason to believe we cannot meet our capital guidance of US$1.55-1.75 billion or the first production target by the end of calendar 2028. We are confident the mine can coexist with the endangered species through responsible environmental management.

Q: Why is there no cost benefit at CSA with the volume increase in FY27, and what costs can we expect at the 40,000-ton steady state? A: Beyers Nel (COO, South Africa): It is early days as we fully integrate CSA. We have mapped a clear pathway to 40,000 tons per year by solving ventilation and flexibility constraints. We do not guide longer-term costs beyond year one, but as production ramps up, costs will follow suit. The exploration success, with intercepts of up to 12% copper and a potential extension of more than 500 meters below the current mine, suggests this asset could be around much longer than currently planned.

Q: Are you contemplating further M&A in copper or gold, or are you focused on delivering current projects? A: Beyers Nel (COO, South Africa): Our plates are full with exciting organic opportunities. Our priority is execution on current projects. While our new business team continuously looks for value, finding it at current commodity prices is not easy, and we will remain disciplined. Our main focus is on the blue-sky potential within our control, which offers compelling value.

Q: What is your stance on uranium, and are you considering reprocessing uranium from gold tailings? A: Beyers Nel (COO, South Africa): Uranium is currently a by-product from our gold operations at Great Noligwa and Moab Khotsong. We hold an active watching brief but it is not a primary focus. We own the only licensed uranium calcining facility in South Africa (Nufcor) with spare capacity. While reprocessing uranium dumps is an opportunity, the technology is not well developed. Currently, using our infrastructure to reprocess gold tailings at high margins is far more lucrative, but this could change in the future.

Q: How are you addressing the challenge of long travelling times at deep-level mines, which can reduce effective face time and lead to shortcuts? A: Beyers Nel (COO, South Africa): We have adopted a five-day work week with 12-hour shifts at mines like Phakisa to ensure adequate face time for proper drilling, support, and cleaning. This prevents sacrificing quality, such as drilling fewer holes, which can lead to safety issues. At other mines, we are implementing technological solutions like chairlifts to transport crews to the face faster. Understanding these deep-level mines is key to maintaining productivity and safety.

Q: Can you provide color on the tax expense, which remained flat in H2 despite a substantial increase in profit before tax? A: Boipelo Lekubo (Finance Director): I don't have the half-year numbers in front of me to provide a specific breakdown. We will have to take this offline and revert to you with the details.

Q: What is the offtake arrangement for Eva Copper, and how critical is it to the strategy? A: Beyers Nel (COO, South Africa): The copper concentrate from Eva Copper will go to the Mount Isa smelter. This is critical within the context of the Mount Isa mines' closure and the competition for concentrate. There is a supportive environment to ensure the Eva Copper mine proceeds, as it is important for the smelter's continued operation. Stakeholders are focused on getting the sequencing right to keep the smelter competitive and operational.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .