Harmony(HMY) - 2026 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Gold revenue increased by 20% to ZAR 44 billion, driven by a higher realized gold price and operational discipline [17] - EBITDA rose 39% to ZAR 18 billion, while cash generated by operating activities increased by 36% to ZAR 14 billion [17] - Operating profit increased by 61% to ZAR 16 billion, and net profit rose by 24% to ZAR 10 billion [18] - Basic earnings per share increased to ZAR 15.63, reflecting strong operational and financial results [5] - All-in sustaining cost rose to ZAR 1.18 million per kilogram or $2,115 per ounce due to lower volumes and higher royalties [5] Business Line Data and Key Metrics Changes - Gold production for the reporting period was 724,000 ounces, impacted by a cyanide shortage and lower plant recoveries [4] - The lost time injury frequency rate reached an all-time low of 4.23, indicating improved safety performance [4] - The South African high-grade underground mines produced at a solid 37% margin, while margins at the South African optimized underground assets doubled to 22% [8] Market Data and Key Metrics Changes - The company is geographically diversified with assets in South Africa, Papua New Guinea, and Australia, providing stability and growth potential [2] - South African royalties increased by 60% due to higher revenue and profitability [20] - The strong rand has lifted reported US dollar costs, but the company remains below the mid-range of all-in sustaining cost guidance [20] Company Strategy and Development Direction - The company aims to build enduring long-term value through safe, profitable ounces, quality reserve conversion, and disciplined copper scale alongside its gold portfolio [2] - Plans to bring approximately 100,000 tons per annum of copper online from CSA and Eva within the next 3-5 years to address cash flow stability [3] - The company is focused on optimizing long-life assets and prioritizing value over volume to enhance profitability and sustainability [3] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in meeting full-year production, cost, and grade guidance despite short-term headwinds [5] - The company is well-positioned for growth, with a strong balance sheet and significant cash reserves to fund its growth pipeline [21] - Management emphasized the importance of safety and operational excellence as foundational to the company's strategy [26] Other Important Information - The interim dividend has more than doubled to ZAR 3.4 billion, reflecting a revised dividend policy that allows for up to 50% of net free cash to be returned to shareholders [5][24] - The company is actively assessing its capital structure to maintain an efficient balance sheet aligned with funding needs and cash flow strength [22] Q&A Session Summary Question: Impact of cyanide shortage and lower recoverability - Management confirmed that the cyanide shortage was a one-off issue and has been resolved, with measures in place to mitigate future risks [34][35] Question: Details on the new dividend policy - The board has discretion over dividends based on net debt to EBITDA levels, with a base dividend increased from 20% to 30% of net free cash [40][41] Question: Synergies with existing assets and resource endowment - The focus is on returning resources and reserves to viable projects rather than pursuing new acquisitions at inflated prices [46] Question: Constraints on CSA mining operations - The main constraints are related to ventilation and infrastructure, with plans to address these issues over the next 18-24 months [52][56] Question: Status of Wafi-Golpu project - The project is viewed as a generational asset, with ongoing efforts to secure necessary permits and advance discussions with stakeholders [76][80]