Harmony(HMY) - 2026 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a strong financial performance supported by an exceptional gold price environment, leading to a revised dividend policy that includes a base dividend and an upside participation model based on pre-dividend net debt to EBITDA levels [2][3] - An interim dividend of ZAR 5.30 or $0.32 per share was declared, with a total payout of ZAR 3.4 billion or $204 million, representing 43% of net free cash flow [3] Business Line Data and Key Metrics Changes - Gold operations are guided to produce between 1.4 and 1.5 million ounces with underground recovered grades above 5.8 grams per tonne, and all-in sustaining costs between ZAR 1.15 million and ZAR 1.22 million per kilogram [4] - Copper production guidance for FY 2026 is set between 17,500 and 18,500 tons, with C1 cash costs between $265 and $280 per pound and recovered grades above 3.5% [4] Market Data and Key Metrics Changes - The company experienced a 27% decrease in silver revenue, down to ZAR 740 million from ZAR 1 billion in the previous period, attributed to a 15% reduction in silver production at Hidden Valley due to operational issues [25][28] Company Strategy and Development Direction - The company aims to reinforce its position as a higher quality, lower risk global producer of copper and gold, focusing on safety and sustainable operations while selectively growing its portfolio [2] - The company is excited about the Eva Copper project, with a final investment decision made and full construction ramping up, expecting first production by the end of calendar year 2028 [44] Management Comments on Operating Environment and Future Outlook - Management noted that the production decrease in gold was due to one-off events, including a mill motor failure at Hidden Valley and a force majeure on cyanide supply, but they expect recoveries to normalize [20][21] - The company is confident in its long-term prospects, citing a significant mineral reserve and ongoing organic projects to enhance gold production [22] Other Important Information - The company is actively working on increasing its cyanide distribution capacity to reduce reliance on external suppliers, which had previously caused operational disruptions [9][10] - Management emphasized the importance of maintaining a disciplined approach to capital allocation, balancing investments in operations with shareholder returns [29] Q&A Session Summary Question: Input cost inflation and cyanide supply issues - Management confirmed that the cyanide supply has normalized and they are working on contingency measures to mitigate future risks [9][10] Question: CSA mine production capacity - Management explained that the lower production guidance for CSA incorporates one-off stoppages for safety and maintenance, and they are confident in the ore body's quality [12][14] Question: Gold production levels and growth potential - Management attributed the decrease in gold production to specific operational issues and expressed optimism about future growth through organic projects [20][22] Question: Silver price exposure and hedging - Management acknowledged the decrease in silver revenue and confirmed that they do hedge silver but have not added new hedges recently due to current price levels [25][28] Question: Net debt situation and capital structure - Management expects to return to a net cash position by the end of the financial year and is evaluating options for managing their capital structure [29][30] Question: Update on Eva Mine and illegal mining concerns - Management provided an update on the Eva project, highlighting ongoing construction and expressed awareness of illegal mining activities but noted effective control measures in place [44][46]