Business context and reporting period
Harmony Gold Mining Company Limited filed this annual Form 20-F on October 31, 2022, for the fiscal year ended June 30, 2022. Despite the request metadata, this is not a 2021 Q4 filing. Harmony is a South African gold producer with operations in South Africa and Papua New Guinea; its financial statements are prepared under IFRS in South African rand.
Financial and operating performance
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | R42.645bn | R41.733bn |
| Production costs | R33.099bn | R29.774bn |
| Cost of sales | R41.927bn | R35.489bn |
| Impairment charges | R4.433bn | R1.124bn |
| Operating cash flow | R6.924bn | R9.179bn |
| Investing cash flow | (R6.200bn) | (R8.464bn) |
| Financing cash flow | (R1.151bn) | (R4.299bn) |
| Gold produced | 46,236 kg | 47,755 kg |
| Gold sold | 46,153 kg | 47,353 kg |
Revenue rose 2.2%, mainly because the hedge result improved from a R2.296bn loss to a R497m gain; lower gold sales partly offset this. Average realized gold price, including hedge effects, increased 5.1% to R894,218/kg. Production costs rose 11.2%, reflecting inflation, labor and energy costs, supply pressures, and a full year of Mponeng and MWS contributions.
Cash costs increased 16.7% to R701,024/kg produced; all-in sustaining costs, a non-GAAP measure, rose 15.6% to R835,891/kg sold. The filing text supplied here does not provide a clear consolidated net profit, gross margin, or cash balance value. The effective income and mining tax rate was 4%, compared with 20% in FY2021, primarily due to unredeemed capital allowances and assessed losses.
Liquidity, debt and capital
Operating cash flow declined by R2.255bn year over year. Capital expenditure was R6.214bn, compared with R5.142bn in FY2021; the filing also reports total capital expenditure of R6.192bn in its business overview, so the precise reported basis should be checked. At June 30, 2022, borrowings included R3.180bn of non-current debt under the new US$400m syndicated facility and R25m current debt under the Westpac loan, repaid in July 2022. Of the US$400m facility, US$200m remained available; the R2.5bn revolving facility was undrawn, and the R1.5bn green term loan had not yet become available for drawdown.
Management said working capital needs were expected to be met by operating cash generation, cash on hand and existing facilities. The facilities include covenants requiring interest cover above 5 times and net debt/EBITDA no higher than 2.5 times. The filing does not provide a clear June 30 cash balance or quantified covenant headroom in the supplied text.
Material changes, outlook and risks
- Gold production declined 3.2%. Results varied by mine: Hidden Valley output fell 23.0% after a conveyor failure and pit geotechnical constraints; Mponeng sales increased 14.0% with a full year of production; Bambanani closed in June 2022 amid seismic safety concerns.
- Impairments were R4.433bn, including R3.622bn for the newly separated Tshepong North and South cash-generating units. Other impairments included Moab Khotsong, Kusasalethu and Bambanani.
- Attributable gold and gold-equivalent reserves were 39.8m ounces, down from 42.5m ounces, reflecting depletion, the Tshepong restructuring and Bambanani closure, partly offset by additions.
- Fiscal 2023 operational capital expenditure was budgeted at approximately R8.453bn, with total capital expenditure including other items budgeted at R8.496bn. Management expected continued cost increases; no clear consolidated production or earnings guidance is provided in the supplied text.
- After year-end, a final dividend of 22 SA cents per share was declared and paid in October 2022. Harmony also agreed in October 2022 to acquire Copper Mountain’s Eva Copper Project for consideration of up to US$230m, subject to customary conditions and approvals.
- Key exposures include volatile gold prices and currencies, inflation and supply-chain disruption, South African power shortages and tariff increases, mine safety and labor risks, reserve-estimation uncertainty, environmental rehabilitation obligations, and regulatory and political uncertainty in South Africa and PNG.
- The silicosis and TB settlement provision was R820m at June 30, 2022; ultimate settlement costs may differ. Environmental obligations were reported at R7.126bn in the contractual-obligations table. Wafi-Golpu remains undeveloped; its permits and proposed deep-sea tailings placement face legal, regulatory and community-related risks.
Most important facts for investors to verify
- Audited consolidated income statement and balance sheet figures, especially net income, cash, and liquidity; these are not clear in the supplied filing text.
- Reconciliation of the reported capital expenditure figures and confirmation of the FY2022 cash-flow and non-GAAP cost calculations.
- Debt covenant headroom, facility availability, and funding needs for planned capex, Wafi-Golpu and the Eva Copper acquisition.
- Updated mine plans, reserve assumptions, and the effect of restructuring, depletion and safety constraints on future production.
- Potential changes in environmental rehabilitation, silicosis settlement and other contingent liabilities.