Our opinion on the current state of HAR

Harmony (HAR) is probably South Africa's most marginal gold mine. A marginal gold mine is one which has a cost of extraction which is relatively close to the current gold price. This means that small movements in the rand price of gold can have a radical impact on the mine, pushing it from profit to loss and back to profit very quickly. The result tends to be a volatile share price and a lot of uncertainty which investors generally do not like.

Their margin is relatively thin and there is not much room for cost increases or a fall in the rand gold price. In the future, Harmony will be relying on the Wafi-Golpu mine in Papua New Guinea which it owns 50% of, together with Newcrest Mining. Harmony and Newcrest have signed a "memorandum of understanding" with the government of Papua New Guinea which gives the development of the mine a firm time frame. The development of this mine and its processing plant are expected to cost around US$2,8bn - and Harmony does not at this stage have its share of that cash (about R20bn).

During 2021 the company purchased Mponeng gold mine for R4,2bn. Mponeng is the world’s deepest mine and has all the problems of ultra-deep level mining. The company is building a 30mw solar park in the Free State and has plans to build a further 80mw of green power.

On 9th May 2022, the company announced that 4 of its employees had been killed at Kusasalethu mine. On 6th October 2022, the company announced that it had agreed to buy 100% of the Eva copper project in Australia for R4,1bn. Harmony remains a volatile, marginal gold producer and hence risky - although recent acquisitions could change its direction significantly, taking it out of precious metals.

Eva is only expected to commence production in 3 years and is expected to add 260 000 ounces of gold and 1,7 billion pounds of copper to Harmony's reserves. In its results for the six months to 31st December 2023 the company reported a 14% increase in the amount of gold produced and an 8% decline in the rand leading to an 18% increase in the average price received. The result was that headline earnings per share (HEPS) increased by 226% and the company declared a dividend of 147c per share. The company said, "Mponeng extension project approved, extending mine life from 7 to 20 years and increasing margins - Hidden Valley generated operating free cash flow of R1 769 million (US$95 million), due to excellent recovered grades."

On 3rd April 2024 the company announced that it had signed a wage deal with all of its unions for the next five years. Technically the share is in a volatile upward trend and remains a commodity play based on the international price of gold.