Harmony Gold Mining Company Limited — FY2021 Form 20-F
Reporting period: Fiscal year ended June 30, 2021; filed October 29, 2021. Although the request metadata says “2020 Q4,” this filing covers the full 2021 fiscal year, not a quarterly period. Financial statements are prepared under IFRS in South African rand (R).
Business context
Harmony is a gold producer operating primarily in South Africa, with operations and projects in Papua New Guinea. The October 1, 2020 acquisition of AngloGold Ashanti’s remaining South African assets—including Mponeng and Mine Waste Solutions—contributed results for nine months of FY2021 and expanded the operating base.
Key financial and operating metrics
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | R41.733bn | R29.245bn |
| Operating profit/(loss) | R6.450bn | (R358m) |
| Profit/(loss) before tax | R6.382bn | (R595m) |
| Net profit/(loss) | R5.124bn | (R850m) |
| Basic earnings/(loss) per share | 842 SA cents | (164) SA cents |
| Operating cash flow | R9.179bn | R4.723bn |
| Investing cash flow | (R8.464bn) | (R3.558bn) |
| Financing cash flow | (R4.299bn) | R4.305bn |
| Total cash flow | (R3.538bn) | R5.364bn |
| Borrowings, current and non-current | R3.361bn | R7.718bn |
| Total assets | R48.803bn | R44.692bn |
Gold produced was 47,755 kg (1.535 million oz), and gold sold was 47,353 kg (1.522 million oz). The average realized gold price, including realized hedge gains or losses, was R851,045/kg (US$1,719/oz), versus R735,569/kg (US$1,461/oz) in FY2020.
Cash costs increased 8.5% to R600,592/kg; all-in sustaining costs (AISC, a non-GAAP measure) increased 11% to R723,054/kg. Reported cost pressures included wages, electricity, royalties, inflation and the acquired operations. Capital expenditure was R5.103bn, compared with R3.610bn in FY2020.
Material changes versus FY2020
- Revenue rose R12.488bn, reflecting increased gold production and a higher realized gold price. The acquired Mponeng and MWS operations contributed 8,948 kg of production during their nine months in the group.
- The company moved from an operating loss and net loss to operating profit and net profit. FY2021 results included a R303m bargain-purchase gain from the Mponeng acquisition and R1.124bn of asset impairments; FY2020 reported no impairment or reversal.
- Operating cash flow nearly doubled, while investing outflows increased, principally due to the R3.4bn acquisition payment and higher property, plant and equipment additions.
- Financing cash flow shifted to an outflow, including R3.5bn of debt repayments. Borrowings fell to R3.361bn from R7.718bn.
- FY2021 dividends recorded and paid were 110 SA cents per share; no dividend was recorded in FY2020. A further 27 SA cents per share was declared after year-end and paid in October 2021.
Liquidity, debt and capital commitments
At June 30, 2021, disclosed borrowings included US$200m drawn on the US$400m syndicated facility, R453m on the R2bn syndicated facility and US$7.6m (R109m) on the PNG equipment loan. The company reported no covenant breaches in FY2020 or FY2021. It stated that operating cash, cash on hand and committed or underutilized facilities were expected to support near-term liquidity; a cash balance and conventional current-liquidity ratios are not clearly provided in the supplied filing text.
The board-approved FY2022 capital expenditure budget was approximately R8.029bn, expected to be funded from operations and borrowings as needed. R7.798bn was authorized at year-end, of which R373m was authorized and contracted. The company expects Wafi-Golpu to require additional capital over the following two to five years; construction funding arrangements remain to be determined.
Outlook, commentary and risks
- The filing provides a FY2022 capital expenditure budget but no clear consolidated production or earnings guidance in the supplied text. Management said COVID-19 restrictions and future waves or variants made operating forecasts uncertain.
- Management identified gold-price, foreign-exchange, cost inflation, electricity supply and tariffs, labor relations, supply-chain disruption, safety, environmental obligations and political/regulatory changes as material risks. South African power constraints and above-inflation tariff increases could affect costs and production.
- The company recorded a R1.124bn impairment in FY2021, including R759m at Tshepong Operations, R187m of goodwill at Bambanani and R178m at Target 3. Management’s impairment tests depended on uncertain price, exchange-rate, production and COVID-related assumptions.
- A R854m provision was recorded for the South African silicosis and tuberculosis settlement; the final cost could differ from the estimate. Potential environmental rehabilitation obligations and future financial-provision rules could also increase costs; the filing says it had not recorded a provision specifically under the 2015 Financial Provision Regulations.
- The Mponeng acquisition included contingent consideration. The filing reports a R648m contingent-consideration obligation at year-end and describes payments linked to production thresholds and future-developed levels.
- The MWS streaming agreement requires delivery of 25% of its gold production to Franco-Nevada until the contractual gold cap is met. At June 30, 2021, 84,429 oz remained to be delivered; the recorded streaming contract liability was R1.218bn.
- Climate-related regulation could raise costs. The filing estimates carbon-tax impacts of R300m–R500m by 2030 in one discussion; elsewhere it gives a modeled range of approximately R70m–R160m for FY2023–FY2030. The estimates differ and should be checked against the underlying disclosures.
Most important facts for investors to verify
- Reconcile acquisition-driven growth with comparable, organic production, cost and cash-flow trends; confirm the full-year contribution and integration costs of Mponeng and MWS.
- Review the FY2022 operating outlook and capital plan, including funding needs and milestones for Wafi-Golpu; the supplied filing text does not give clear production guidance.
- Check the debt-facility terms, maturity dates, LIBOR transition provisions, available borrowing capacity and covenant headroom, as well as cash balances and liquidity outside the supplied text.
- Assess gold and foreign-exchange hedge volumes, prices and maturities, and their effect on realized revenue and future exposure.
- Review the assumptions behind impairments, reserve estimates, environmental rehabilitation provisions, silicosis settlement costs and contingent consideration.
- Confirm the status and financial implications of South African mining, environmental and carbon-tax rules, and proposed Papua New Guinea mining-law changes.