Despite the decline in SA’s gold output, Harmony Gold remains upbeat about the growth potential of its SA mines after reporting operating free cash flow at R12.7bn for its latest financial year — more than double that of the previous year and the highest in the company’s history.
This was largely thanks to Harmony’s SA surface operations, whose operating free cash flows were more than three times that of the previous financial year, at R2.6bn for the year to end-June.
These operations, particularly the tailings retreatment business, have benefited from substantial investment into their expansion. Harmony CEO Peter Steenkamp said the progress made at Mine Waste Solutions in the four years since its acquisition reflected the potential that SA mining still held for the group.
“When we bought Mine Waste Solutions, it had very little value. What we now have is a long-life asset that, through capitalisation, is going to be a very profitable asset, showing that it’s still worth your while to invest in SA and make good money in the assets we have here,” Steenkamp said.
With SA surface operations delivering substantially improved operational metrics, the group said it continued to explore and capitalise on opportunities in tailings retreatment.
Harmony’s extensive resources in old gold tailings dams across the SA gold belt offer potential, underscored by the lower risk profile and high margins of tailings retreatment. The group said feasibility studies to convert 5.7-million ounces (Moz) of mineral resources to mineral reserves in the Free State were evidence of its ability to allocate capital effectively.
Record operating free cash flow was also thanks to Harmony’s underground high-grade operations, where operating free cash flow increased by 73% to R6bn, with all-in-sustaining-costs flat year on year.
This came as production at Mponeng and Moab Khotsong increased 9% to 15,350kg, while the mines delivered a combined 15% increase in underground recovered grades to 9.02 grams per tonne (g/t).
“Our SA underground high-grade assets are highly profitable and have a life-of-mine of 20 years due to approved extension projects,” said the group. “These mines have transformed the portfolio due to their high-quality ounces and resulting positive free cash flow generation.”
“The Mponeng life-of-mine (LoM) extension started in the first quarter of the group’s 2025 financial year. The extension to 20 years will access high-grade ore bodies while avoiding lower-grade areas, adding 2.34Moz to our mineral reserves, securing a steady stream of high-quality ounces at a competitive cost. Similarly, Moab Khotsong continued to perform exceptionally well, further validating our strategy of investing in high-grade, high-margin assets.”
Driven largely by the outperformance of Mponeng and Mine Waste Solutions, Harmony reported a 6% increase in underground recovered grades at 6.11g/t, with total output also up 6% at 48,578kg.
Higher grades, together with a 16% increase in the average gold price, saw revenue from gold rising 23% from the previous year, while headline earnings per share rose by a striking 132%.
While Harmony’s total capital expenditure outside the country was moderately lower for the year, SA capital expenditure increased to R6.8bn, from R5.9bn the previous year. The combined total of R8.3bn was driven primarily by increased investment in its high-grade underground and high-margin surface retreatment operations in SA, the company said in its integrated report.
Investing in SA also provided cost benefits due to the rand’s depreciation against the dollar, said Harmony, with 90% of the group’s operating costs in rand — enabling costs to remain predictable and stable despite rising labour costs and electricity tariffs.
Local and preferential procurement
As part of its commitment to the domestic industry, Harmony spent R14.7bn on local and preferential procurement in the country. This included business development assistance to 218 suppliers, funding and other business support initiatives to 26 enterprises and an incubation programme comprising 209 entrepreneurs.
“Investing in our SA optimised operations plays an important role in maintaining our social licence to operate and in generating the internal capital needed to fund our high-grade projects,” Harmony said.
“Our surface operations present substantial opportunities to maximise our contribution to the circular economy. By reprocessing old tailings facilities, we are able to not only move the tailings to an area that better accommodates our local communities but also build a much more secure structure.”
With operating free cash flow margins rising to 22% from 13% the previous year, Harmony said: “We believe these improved margins are sustainable due to higher recovered grades and the increased contribution from our high-margin surface source operations (under existing gold price assumptions). We expect margins to increase further once our international copper-gold projects are in production.”
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