Harmony performing strongly amid high gold prices

Harmony Gold Mining Company has reported a strong operational performance in the first quarter of financial year 2021. In a nutshell:

  • Total gold production increased by 38%
  • Free operating cash flow margin increased by 20%
  • Net debt to ebitda reduced from 0.8x to 0.5x normalised

“A solid operational performance, further aided by the gold price, has significantly strengthened our balance sheet, allowing us to achieve an operating free cash flow margin of 20%. We are in the process of integrating our newly acquired assets in line with our growth strategy and believe that we will be able to unlock further value through increased ounces and various surface and service synergies”, said Peter Steenkamp, chief executive officer of Harmony.


Quarter-on-quarter, production increased by 38% from 7 049kg (226 632oz) to 9 758kg (313 725oz), with a 64% increase in gold production at the South African underground operations from 4 578kg (147 187oz) in the June 2020 quarter to 7 528kg (242 029oz) at the end of September 2020.

This is mainly as a result of all underground operations resuming work at 100% of  capacity after the COVID-19 lockdown restrictions were lifted.

During the COVID-19 lockdown, Harmony mined higher grade panels, which impacted the quarter-on-quarter performance of the South African underground operations and resulted in a 7.2% decrease quarter-on-quarter.

The September 2020 quarter reflects a return to a more normalised grade of 5.31g/t, which is more or less in line with the underground recovered grade achieved in the comparable period in September 2019.

Gold production at Hidden Valley decreased by 19% quarter-on-quarter to 983kg (31 604oz) from 1 212kg (38 967oz). Production was impacted by a planned major shut down of the processing plant as well as a result of lower mined grade as the mine transitioned between various stages of the open pit.

The key focus in FY21 will be to safely mine the current cutback to produce between 172 300 to 177 700 ounces, while starting the next planned pushback of the main Hidden Valley pit.

All-in sustaining costs (“AISC”) were 7% lower at R728 465/kg (US$1 341/oz) compared to R783 336/kg (US$1 358/oz) in the previous quarter, due to higher production.

Harmony’s operating free cash flow almost tripled quarter-on-quarter to R1.8 billion, compared to R603 million in the previous quarter, due to higher production and a 5.4% increase in the R/kg price of R922 398/kg (US$1 698/oz, 12% higher) quarter-on-quarter.

The Company’s operating free cash flow margin doubled in the same period, from 10% to 20%.

Stronger production cash flows enabled us to reduce our net debt to EBITDA ratio from normalised 0.8x in June 2020 to 0.5x by quarter end. Before normalising for the equity placement, the ratio stood at 0.2x at 30 June 2020. Net debt at 30 September 2020 was at R3.25 billion (US$194 million) after paying for the newly acquired assets.

With current favourable market prices and current levels of production prevailing, Harmony expects to be in a net cash position by the end of March 2021.

Leave a Reply

Your email address will not be published. Required fields are marked *