Indaba: Harmony Gold hews to cash, portfolio discipline

Harmony Gold Mining (JSE: HAR; NYSE: HMY) is using record yellow metal prices to strengthen its balance sheet and expand into copper while maintaining strict spending control, CEO Beyers Nel told delegates at the Mining Indaba.

The Johannesburg-based miner has benefited from a surge in gold prices, delivering strong free cash flow from its more than 1.4-million-oz.-per-year capacity, ranking it among the world’s top-10 gold producers and the largest in South Africa.

“Capital allocation discipline is what it is about,” Nel said in an interview on stage Monday, the opening day of the annual convention. “It is important to always start with the quality of the metal in the ground. The ore body dictates.”

The company is focused on protecting cash flow through the cycle by pairing gold’s defensive characteristics with growth in copper, including its CSA underground mine in Australia and the Wafi-Golpu copper-gold project in Papua New Guinea.

Complementary

“Gold is that store of value, that hedge against uncertainty,” he said. “Copper is, of course, doing well in times of good economic growth. So we think both copper and gold together – and the jurisdictions we now operate in – is a really good mix for our stakeholders.”

On balancing shareholder returns with benefits to employees and host communities during periods of strong commodity prices, Nel said: “One has to take care of both.”

The CSA mine is a deep underground copper operation that plays to Harmony’s technical strengths, Nel said. Underground mining expertise differentiates it globally as shallower ore bodies are depleted and technical complexity rises. The company uses real-time safety data to improve decision-making and remove people from harm’s way where possible, describing the underground mines as “laboratories” for innovation.

Finding value and controlling spending are designed to ensure the company doesn’t overextend during periods of elevated commodity prices, Nel said.

New jurisdictions

The diversification into copper and new jurisdictions is about protecting value through commodity cycles rather than chasing short-term margins, he said. The company remains measured when expanding. Harmony avoids new areas with a single asset and seeks scale before committing capital, applying risk-adjusted filters that incorporate both commercial and non-tangible factors.

“Mining is a long game,” he said. “We are custodians of investors’ money.”

Social partnerships and labour relations remain central to Harmony’s operating model, particularly in its labour-intensive South African operations.

“It is absolutely mission critical for successful operations,” Nel said, referring to relationships with employees, communities and governments.

Looking ahead, Nel said Harmony aims to be recognized for leadership in underground mining and safety while advancing Wafi-Golpu.

“What I’d like to see in 10 years from today is Wafi-Golpu being built, and for Harmony to be one leader when it comes to underground mining and underground mining safety,” he said. “We choose to focus on what we can control. What we can control in our business is not the copper price or the gold price. It is the underlying health in the business.”