Harmony Gold Poised for Organic Growth, International Expansion

• Harmony Gold Mining is South Africa's largest gold producer by volume.
• The company has a diversified portfolio with operating assets and projects in South Africa, Papua New Guinea, and Australia.
• Harmony aims to return 20% of net free cash to shareholders as dividends, subject to debt and project considerations.
• Their capital allocation prioritizes high margin projects, organic growth, and in-production assets.
• Harmony is focused on being an emerging market copper-gold specialist, with a near-term focus on copper.
• They emphasize a strong ESG (Environmental, Social, and Governance) ethos, having operated in South Africa for over 70 years and understanding the unique challenges and opportunities in emerging markets.

Harmony Gold Mining Company Limited (HMY) is South Africa's largest gold producer by volume with a diversified portfolio of operating assets and growth projects in South Africa, Papua New Guinea and Australia. In South Africa, Harmony Gold is a significant operator of gold tailings retreatment facilities. In Papua New Guinea, Harmony owns and operates the Hidden Valley mine and owns 50% of the Wafi-Golpu copper-gold project. Harmony recently acquired 100% of the Eva Copper project, a near-term copper project in Queensland, Australia.

Interview with Boipelo Lekubo, Financial Director

Turnaround Strategy Driving Margins, Growth

After years of struggling with aging deep level mines, Harmony has embarked on a transformational growth strategy aimed at repositioning itself as an emerging market gold and copper specialist with higher margins, lower risk and significant upside potential.

In the interview, Financial Director Boipelo Lekubo maps out Harmony's strategic pillars which have focused capital allocation on optimizing legacy South African assets for cash generation, acquiring higher grade assets domestically, expanding surface and re-treatment operations, and growing the international portfolio.

The acquisitions of Mponeng and Moab Khotsong from AngloGold in 2018 quintupled Harmony's South African reserves and more than doubled annual production, providing higher grade ore and improved profitability.

Copper Assets Offer Growth, Diversification

Meanwhile, the $170 million purchase of the Eva copper project in Australia last December and the advancement of the Wafi-Golpu project in Papua New Guinea have rapidly accelerated Harmony's transition to a globally diversified mining company, with 35% of reserves now in copper.

With copper prices expected to rise amid surging demand from electric vehicle and renewable energy markets, these copper assets offer significant counter-cyclical diversification from Harmony's core gold operations.

Near-Term Growth Drives Margin Expansion

Eva could begin generating cash flow as soon as 2025 from an estimated 220,000 gold equivalent ounce per year operation with a 15 year lifespan and exploration upside. Harmony expects to finalize an updated feasibility study for Eva by the end of 2023 and will fund the estimated $600 million development cost through a combination of cash reserves and project financing.

Wafi-Golpu, though further from production, boasts world-class grades and scale with permits advancing following a memorandum of understanding signed recently with the Papua New Guinea government.

Between this near-term growth and optimization of legacy operations, Harmony aims to improve margins and transition from a high cost South African gold miner into an emerging market copper-gold producer within the next few years.

Natural Hedging Provides Stability

With its cost base almost entirely in South African Rand, Harmony also benefits from a natural currency hedge as a Rand gold price near all-time highs offsets dollar price weakness. The company expects to generate free cash flow through its hedged operations even amid rising capital investment in growth projects over the next two years before dividends can resume.

Conclusion

For investors seeking leveraged exposure to rising copper and gold prices along with turnaround potential as Harmony unlocks higher grade, higher margin production globally, the company offers an attractive value proposition. With expansion plans progressing smoothly and balance sheet flexibility remaining strong, Harmony appears poised to transition successfully into a world-class diversified mining company in the years ahead.