JOHANNESBURG (miningweekly.com) – Gold mining company Harmony Gold on Tuesday declared a final dividend in line with dividend policy despite lower earnings.

The JSE-listed company, headed by CEO Peter Steenkamp, declared a final dividend of 22c a share on operating free cash generated throughout the financial year to June 30.

This, in addition to the interim dividend paid, translates to a full-year dividend yield of 1.1%.

Headline earnings per share (HEPS) decreased by 49% to 499c from a comparative HEPS of 987c in the 2021 financial year.

The board based its decision on the dividend payment not inhibiting future expansion opportunities, the company stated in a release to Mining Weekly, in which it added that investment in the company’s high-grade underground assets to deliver improved cash flow generation would continue.

Major capital allocation for underground assets is prioritised based on grade and returns. Underground assets have been grouped as high-grade, long-life assets comprising Moab Khotsong and Mponeng; and short- to medium-life assets with a focus on free-cash generation being Tshepong North, Tshepong South, Doornkop, Joel, Target 1, Kusasalethu and Masimong.

Harmony has nine underground operations located within the Witwatersrand basin, the Kalgold opencast mine on the Kraaipan greenstone belt, and several high-margin surface treatment operations. Surface operations made up 30% of total production in the 12 months to June 30.

In Papua New Guinea, Harmony has Hidden Valley, an opencast gold and silver mine in the Morobe province where it also holds half of the Wafi-Golpu copper/gold project, a joint venture with Newcrest Mining.

South African underground production decreased 2% year-on-year to 1 103 605 oz. Mining-related constraints, as a result of adverse ground conditions and seismicity, contributed to lower grades and volumes.

The Joel underground mine returned to profitability in the last quarter of the 12 months to June 30, following the completion of the decline project and the implementation of a turnaround strategy.

ZAAIPLAATS PROJECT

Total underground capital expenditure increased by 25% to R4 395-million and non-sustaining capital increased 47% to R901-million.

Progressing at Moab Khotsong is the Zaaiplaats underground project and underground projects at Doornkop and Target 1 are ongoing.

Average underground grade decreased by 3% to 5.37 g/t from 5.51 g/t owing to adverse ground conditions at Moab Khotsong and the impact of seismicity at some high-grade panels at Mponeng.

With grade being king, development grades, described as being excellent, have been obtained from all operations, specifically Mponeng and Moab Khotsong, which is very encouraging for future grade profiles of the South African underground operations. At all operations, development grades are higher or in line with reserve grades.

Development metres increased by 9% to 46 705 m in the 12 months to June 30 from 42 871 m in the 2021 financial year.

Reef metres remained flat year-on-year at 9 590 m. Capital development increased 55% to 6 696 m from projects at Target 1, Doornkop and Moab Khotsong.

All-in sustaining costs increased to $1 749/oz from $1 515/oz mainly as a result of the lower production. Production profit decreased by 16% to R6 139-million and operating free cash was 58% lower at R1 570-million on higher capital expenditure and lower production.

South African surface production rose 1% to 263 730 oz in the 12 months, with Mine Waste Solutions benefitting from a 7% increase in recovered grades to 0.124 g/t. However, volumes were impacted by cyanide and water supply constraints in the last quarter of the financial year to June 30. Kalgold's production was impacted by lower grades owing to shale dilution, heavy rainfall and power outages throughout the year.

Total South African surface capital expenditure, which increased by 64% to R547-million, is expected to remain elevated for the next two years.

LATEST RESULTS

In the 12 months to the end of June, Harmony had a 2% increase in revenue to R42 645-million, 20%-lower production profit of R9 546-million, stable net debt to earnings at 0.1x, a 3% decrease in underground recovered grade to 5.37 g/t from 5.51 g/t, a 3% decrease in gold production to 1 486 517 oz, a 6% decrease in total mineral resources and reserves to 132.6-million ounces, and 55%-lower operating free cash flow of R2 905-million.