Harmony reports flat production but improved cash flow from higher grades

JSE- and NYSE-listed Harmony Gold has reported relatively flat year-on-year gold production but announced significant improvements in operational cash flow owing to enhanced recovery grades.

In its quarterly update for the three months to September 30, Harmony recorded a minor decrease of 1% in total gold production to 422 172 oz, compared with 425 130 oz in the comparable quarter of the prior year.

Mponeng mine experienced a 28% increase in production, driven by higher grades and larger volumes milled, yielding $103-million in operating free cash flow. Underground recovery grades rose to 6.32 g/t from 6.29 g/t last year, with Mponeng and Moab Khotsong leading these results.

All-in sustaining costs (AISC) rose by 14% to $1 667/oz, aligning with Harmony’s guidance for 2025 financial year. Additionally, the company achieved a 21% increase in the average gold price received, reaching $2 356/oz, helping drive a 60% rise in group operating free cash flow to $288-million.

Elevated rand gold prices significantly enhanced cash flow generation, boosting the balance sheet and allowing the company to advance its mine-life extension projects and international copper/gold initiatives.

Total gold revenue increased by 23% to a little more than $1-billion, up from $793-million, and the balance sheet remained robust with net cash rising to $362-million and liquidity at $909-million in cash and undrawn facilities.

Production at the company’s South African high-grade underground operations rose by 15% year-on-year to 156 639 oz, largely owing to Mponeng’s 28% production increase to 96 356 oz.

Moab Khotsong held steady at 60 283 oz, though uranium by-product output there dropped by 10% to 139 094 lb owing to mining variations. The uranium price saw a 39% rise to $80.84/lb, yielding $11-million in revenue.

In contrast, Harmony’s underground operations experienced a 10% production decline to 157 121 oz, affected by lower grades at Tshepong North and Tshepong South. A continuous effort at these mines focuses on footwall reduction and improving belt grades, while Kusasalethu saw improved yield through ore processing at Mponeng.

Harmony’s South African surface mining operations maintained steady production at 69 703 oz, with Mine Waste Solutions (MWS) leading surface contributions and slightly increasing output by 1% to 28 228 oz. All surface retreatment operations reported year-on-year production gains.

Meanwhile, Harmony’s Hidden Valley operation in Papua New Guinea recorded an 11% decrease in production as expected, following depletion of high-grade ore from the Big Red lobe.

Silver output fell by 5% to 948 928 oz, but a 19% increase in the silver price to $29.21/oz led to $28-million in quarterly silver revenue, marking a 15% year-on-year increase. Hidden Valley’s average recovered grade declined by 30% to 1.24 g/t in line with the mine plan.

Underground grades across South African sites remained high, averaging 6.32 g/t, with top grades reaching 10.70 g/t at Mponeng. Surface operations maintained a steady yield at 0.20 g/t, while Hidden Valley’s grades normalised to 1.24 g/t.

Harmony reported that its yearly cost increases were attributed to inflationary adjustments in labour and seasonal electricity rates, while royalties increased by 47% to $28-million owing to heightened profitability.

Cash operating costs climbed by 14% to $1 407/oz, while AISC and all-in costs each rose by 14%, reaching $1 667/oz and $1 776/oz, respectively.

The average rand-denominated gold price Harmony received increased by 21% to R1.36-million per kilogram, enabling favourable hedging and improving free cash flows, particularly at MWS following completion of a streaming contract.

The average gold price at MWS in the first quarter was about 20% lower than the group average owing to streaming arrangements, which have now been fulfilled, Harmony reported.

The company also reported a 17% year-on-year increase in total capital expenditure (capex) for the quarter, driven largely by significant capital projects in progress.

Among these projects are the life-of-mine extension initiatives at Moab Khotsong and Mponeng, which are advancing steadily, supported by the ongoing procurement of additional trackless mobile machinery. In South Africa, Harmony’s Doornkop 207 and 212 level project is also underway.

On October 22, Harmony marked the first tailings deposition on Phase 1 of the Kareerand tailings storage facility extension project at MWS. The company reported that the project was completed on time and within budget, with the majority of its capex expected by the end of the financial year, after which MWS is expected to achieve enhanced margins and improved free cash flows.

The increase in quarterly capex also reflects higher development capital allocated to underground operations as part of Harmony’s long-term strategy.

Harmony also noted the construction of a 100 MW solar PV plant at Moab Khotsong, which is set to begin by the end of the 2024 calendar year.