Unpacking Harmony Gold's Exciting Ventures in Queensland and PNG

• Harmony Gold has transformed itself in recent years through acquisitions in Papua New Guinea, Australia, and South Africa. This has improved quality of assets and cash flow.
• The Eva copper project in Queensland, Australia is viewed as lower risk with good infrastructure. It will help diversify into copper.
• Harmony aims to integrate new acquisitions into its culture, which is focused on leadership and open communication.
• Shareholders are happy with asset improvements and excited about growth projects in the pipeline like Eva and Wafi-Golpu.
• Harmony is now in a healthy financial position and feels it can finance Eva project with current cash flow and some project financing. Wafi-Golpu funding will be project specific.

About Harmony Gold

Harmony Gold is a South African mining company with assets in Papua New Guinea and Australia. The company has been operating for over 60 years and is one of the largest gold mining companies in South Africa. Harmony Gold is dual-listed on the Johannesburg Stock Exchange (JSE:HAR) and New York Stock Exchange. The company has 17 underground and open-pit gold mines in South Africa, as well as several exploration projects across Africa and Papua New Guinea. Harmony Gold recently acquired the Eva copper project in Queensland, Australia, expanding its operations outside of Africa.

Interview with Peter Steenkamp, CEO of Harmony Gold Ltd.

Improving Margins and Production Reliability

Despite a tough environment for precious metals equities over the past few years, Harmony Gold has managed to improve margins and production reliability at its South African operations. The strong US dollar against the South African rand has lowered US dollar costs, while the company has kept rand costs under control through strict maintenance procedures and infrastructure investments. Production has been consistent and predictable, with Harmony meeting guidance targets. Flexible mining operations have allowed accessing higher grade ore when needed. The focus on costs and production has provided a tailwind for Harmony.

Queensland Copper Acquisition

The acquisition of the Eva copper project in Queensland is an exciting new development for Harmony Gold. The project provides commodity diversification into copper, while being located in the safe mining jurisdiction of Australia. As CEO Peter Steenkamp notes, starting a new mine is always risky, but Eva's low strip ratios, conventional processing plant, and proximity to infrastructure should make it an easier startup than other projects. Steenkamp believes copper will be crucial for Harmony's growth. The copper exposure also balances the company's gold portfolio amid volatile precious metals prices.

Advancing Papua New Guinea Growth

In Papua New Guinea, Harmony Gold operates the Hidden Valley gold mine in joint venture with Newcrest Mining. Harmony also acquired a 50% stake in the Wafi-Golpu copper-gold project in PNG. Wafi-Golpu is one of Harmony's most anticipated growth projects, with tremendous upside if development goes to plan. However, PNG does entail political risks and project execution challenges that must be managed carefully. Harmony is taking a prudent approach by first establishing cash flows from Hidden Valley before advancing Wafi-Golpu.

Strong Cash Flows Support Growth Projects

Thanks to rising production and margins from its African mines, Harmony Gold finds itself in a strong cash position to fund growth. The balance sheet is now very healthy after paying down debt from the Eva acquisition quickly. Continued dividend payments demonstrate Harmony's confidence. CEO Steenkamp stresses the importance of securing the right project financing for the Queensland and PNG projects. Cash on hand gives flexibility in financing options, rather than relying solely on debt or equity. Growing cash flows will also facilitate increasing the dividend over time.

Culture and Leadership Key to Integration

Harmony Gold has emphasized integrating new acquisitions into its corporate culture. The successful transition of former AngloGold Ashanti assets and people into the Harmony family indicates the focus on culture is paying off. Harmony actively engages with new leaders during acquisitions to align them with the desired culture. The appointment of acquired managers into senior Harmony roles shows the emphasis on continuity. As Harmony expands abroad, this integration approach will be crucial in Queensland and PNG.

Conclusion

The operational improvements and acquisitions have fundamentally enhanced Harmony Gold's portfolio from just a few years ago. Cash flows are now driven by longer-life, lower-cost assets. Exciting copper projects add commodities and jurisdiction diversification. Harmony appears well-positioned to navigate volatile precious metals markets. The company has brought its balance sheet under control after recent deals. A focus on culture should facilitate integrating the new projects. Overall, Harmony Gold offers investors excellent leverage to an improved production profile and potential growth from Queensland and PNG assets.