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. In its results for the year to 30th June 2023 the company reported headline earnings per share (HEPS) of 800c compared with 499c in the previous year. Gold produced was virtually unchanged from the previous year, but all-in sustaining costs in rands fell by 6%. The company said, "Phase 1 of our renewable energy programme has been commissioned, delivering 30MW of generation capacity to our Free State operations." In an operational update for the 3 months to 30th September 2023 the company reported gold production up 17% and an 18% increase in recovered grades. Gold revenue increased 33% and the average gold price received was up 18%. The company said the improvement "...was mainly due to higher average underground recovered grades from our South African underground operations alongside a very strong quarter from the Hidden Valley mine in Papua New Guinea". In a report on the six months to 31st December 2023 production increased by between 12% and 14%. due to improved recovery grades and a better performance by South African surface operations. 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. Technically the share is in a volatile upward trend.