Analyst recommendation

                                                                                                           As at 24 February 2025

Executive Summary

Harmony Gold released a half-year operational performance information on 3 February 2025. In this report,
we discuss the trading statement and provide revisions to our valuation. Since our last report, Harmony has
gone up roughly 17%, while the gold price has increased by about 13%. Key highlights from the trading
statement includes the following:
• Gold production is between 790 000 and 805 000 oz.
• Underground recoverable grades are expected to have improved higher than the guided 5.80g/t.
• AISC will be between R960 000/kg and R985 000/kg.
• Production remains on track to exceed the full-year guidance of between 1.4 – 1.5 million oz, but it is
still lower than H1FY24 as anticipated by management.
We have updated our valuation to account for a higher gold price and slightly higher gold production.
Additionally, we have considered the long-term CAGR in the ZAR gold price to determine the long-term growth
rate used in the DCF valuation. This resulted in a change in intrinsic value from R150 to R196. We therefore
change our sell recommendation to a hold.

Analyst thesis

While Harmony is the most affordable out of SA gold producer peers (GFI and ANG), it has the highest
exposure to South Africa, where electricity has historically been unreliable and labour costs are unstable.
Additionally, it has a high-cost relative to peers due to its underground mines. Harmony has mined through
high-yield ore bodies, and in the future, we think it will be difficult to grow production due to declining yields.
Moreover, Harmony has significantly outperformed its peers recently, but our view is that the
outperformance is unlikely to continue as tailwinds run out.

Results

Harmony has provided an operational performance update for the half-year, with full results scheduled for
release on 4 March 2025. The update reflects strong operational progress, underpinned by higher mined grades and improved efficiencies across its operations.

Production for the half-year is expected to range between 790 000 and 805 000 ounces, suggesting that
Harmony may exceed its full-year production guidance. Notably, underground recoverable grades are
anticipated to surpass 5.80g/t, further supporting higher production levels. This positive trend highlights the
effectiveness of Harmony’s ongoing optimisation strategies and operational discipline. In addition to strong production figures, all-in sustaining costs (AISC) remain well-contained and below previous guidance, reinforcing management’s commitment to cost control and margin expansion. AISC is projected to be between R960 000/kg and R985 000/kg, reflecting disciplined cost management despite industry-wide
inflationary pressures. By maintaining costs at these levels strengthens Harmony’s profitability and competitive position within the sector.

Looking ahead, we expect continued balance sheet strengthening, driven by sustained profitability amid
favourable gold prices. With improved grades, there is also potential for an upward revision to full-year
production guidance. As the company moves forward, we will closely monitor management’s outlook and any
further operational enhancements that could support long-term growth. 

Valuation

Table 3: Valuation

Table 3: Valuation multiples

Source: FactSet