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Picture: 123RF/CHONTOCHA
Picture: 123RF/CHONTOCHA

A higher gold price helped push Harmony Gold’s profit about 33% higher in the first six months of its current financial year, while the final acquisition of a copper mine in Australia is solidifying its diversification into the base metal.

The purchase price of about R3bn for Eva Copper saw Harmony’s saw net debt increase to R4.7bn and net debt to earnings before interest, taxes, depreciation and amortisation increase to 0.6 times from 0.1.

“Our strategy of allocating growth capital towards high-margin, long-life assets has already started to deliver the desired results,” Harmony CEO Peter Steenkamp said.

“Our copper journey has begun in earnest with the conclusion of the Eva Copper acquisition in the tier 1 mining jurisdiction of Australia. This near-term project complements our tier 1 Wafi-Golpu copper-gold project in Papua New Guinea.”

The race for copper mining assets globally is getting increasingly competitive, Steenkamp told Business Day, as companies scramble to add the metal to their portfolios in anticipation of supply shortages and subsequently higher prices.

“We were very fortunate to get our hands on Eva. If you are going to look for copper assets now you will face a lot of competition,” Steenkamp said.

Harmony is confident that the demand for copper will start increasing within the next two to three years, especially as more countries move towards electric vehicles.

Last year the EU reached a political agreement that will effectively ban the sale of non-electric vehicles from 2035.

“Our shift into copper comes at a critical time for the global just energy transition. Higher quality gold reserves, near-term copper, alongside a growing international footprint will continue to de-risk Harmony,” Steenkamp said. “Our portfolio of gold and copper is positioned to provide shareholders with countercyclical diversification alongside improved margins.”

A report published by S&P Global last year predicts that the copper market will endure persistent supply deficits through most of the 2030s, ranging from 1.6-million tonnes to 10-million tonnes by 2035 under different scenarios.

Harmony, which operates gold mines in SA and South America, said gold production in the six months to end-December was 23,000kg, down 5% year on year, mainly due to the closure of its Bambanani mine in the Free State last year. Adjusting for Bambanani, output was down 2% in the period.

Gold revenue was up 6%, which the company ascribed to higher underground recovered grades and an increase in the average gold price. Headline earnings per share increased by 18%.

The average gold price has increased by 12% to R963,000/kg, while cash operating costs rose increased by 11% to R741,000/kg. All-in sustaining costs were also 11% higher, at about R890,000/kg.

Harmony kept its production and cost guidance for the year unchanged at 1.4-million to 1.5-million ounces from its SA operations, and all-in sustaining costs at less than R900,000/kg.

The company decided against a dividend, saying that as it invests in “margin expansion, life-of-mine extension and various other growth opportunities, it is prudent to maintain a strong balance sheet and good liquidity”.

Its shares were down 2.3% to R54.55  at 2.15pm on the JSE, taking the losses since January to just over 5% and to 20.7% over the past year.

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