Executive Summary

In this report, we review Harmony Gold’s interim results for the period ended 31 December 2024, released in March 2025, alongside the current global macroeconomic environment.
Financial:
•    Gold revenue increased from R29 705 million to R35 447 million, an increase of 19% over the period 
•    Headline earnings per share increased by 33% to 1 270 cents in 1H25, up from 956 cents in 1H24.
•    An interim dividend of 227 cents was reported for 1H25.
•    AISC increased by 20% from $1 403/oz (R843 043/kg) to $1 686/oz (R972 261/kg) mainly due to inflationary cost increases in operations and lower production numbers. The AISC remains well within the guidance provided by management, as outlined below. 
•    The average gold price received improved by 28% to $2 437/oz during the period.

Production:
•    Gold production declined by 4% to 797 854 oz, as expected due to lower recovered grades from certain mines and reduced production from South African optimised operations. 
•    Underground recoverable rates improved by 2% from 6.29g/t to 6.40g/t, slightly offsetting the lower production numbers as mentioned above. 

The gold price has risen by approximately 10% since the last report, prompting an updated valuation to account for a higher gold price. 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 R196 to R246. We maintain our hold recommendation.

Analyst thesis

While Harmony is the most attractively priced among its South African gold producer peers (GFI and ANG), it also has the highest exposure to South Africa, where electricity has historically been unreliable and labour costs are unstable. Additionally, Harmony has a high-cost relative to its peers due to its underground mines. The company 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, and our view is that the outperformance is unlikely to continue as tailwinds run out.