I think everybody is in the room. Good morning, and welcome. A special word of welcome to Martin Prinsloo, and one of our non-executive directors that joined us today. Martin, really appreciate you to be here. Obviously, the rest of my executive team, thanks for also joining us, and then, obviously, everybody else. For those who don't know, my name is Peter Steenkamp, CEO of Harmony, and it's a pleasure to be here today to presenting the full year results of the financial year that ended on the 30th of June 2023. Of June, sorry, end of June. Please take note of our safe harbor statement. Let's start with the company strategy and the update on our excellent performance for this financial year. Our strategy is aimed at long-term value creation.
We achieve this through the production of safe, profitable ounces and improving margins through operational excellence and value-accretive acquisitions. Harmony is a specialist gold producer with a growing international copper footprint. We have over 73 years of gold mining experience in South Africa and have been operating for almost two decades in Papua New Guinea. During the financial year, we added a Tier 1 mining jurisdiction with the acquisition of Eva Copper in Australia. At 1.47 million ounces, we are South Africa's largest gold producer by volume and have a diversified portfolio of operating assets, which include gold, silver, and uranium. We have nine underground mines, two open-pit mines, and various tailings retreatment operations. Our gold tailings retreatment business, or recycling, as you may know it, is the largest global, and set to grow, by performance, in the circular economy.
Our latest mineral resource and mineral reserves declaration is 138 million ounces and 39 million ounces respectively. This is a substantial resource base, and our pipeline of projects presents an incredible opportunity to convert these resources to higher quality reserves. In addition to the various projects we have in South Africa, the Tier 1 Wafi-Golpu project in Papua New Guinea and Eva Copper in Australia provide us with a sizable international copper-gold footprint. Mining with purpose ensure that all our stakeholders share in the benefit of the minerals we extract, and in our presentation today, we will provide further insights on how we create long-term value for all. To ensure continued positive returns, we are directing major capital towards higher quality assets and projects. Our four strategic pillars support our planning and investment decisions.
These capital investments will drive down costs and improve margins, transforming Harmony into a high-quality gold and copper producer. Our South African high-grade and optimized underground mines are delivering strong operational Free Cash Flows to support our growth operations. Our high-margin South African retreatment operations in the Free State, West Wits, and Vaal River region are low risk and support our contribution to the circular economy. These operations all continue supporting our international copper gold growth aspirations. This financial year was a landmark year for Harmony. Not only did we again deliver against all guidance metrics, but our expansion into near-term copper took hold. We have built up an incredible momentum, supported by an improved safety performance. Group lost time injury frequency rate per million hours worked improved to 5.49.
This has remained below six for two consecutive financial years, a first in our 73-year history. This is a monumental achievement for deep-level mining in South Africa and affirms our commitment to improving safety. Gold production remained steady year-on-year. We produced 1.47 million ounces, which was towards the upper end of the guidance, despite the closure of Mponeng at the end of the 2022 financial year. Underground recovered grades exceeded the upper end of the guidance, improving by 8% to 5.8 grams a ton. Our costs remained under control, with all-in sustaining costs below the guidance of around 890,000 ZAR per kilogram. This was an increase of only 6% and well below our planned annual increase of between 8% and 9%.
I'm very pleased with this achievement, especially in the current inflation rate environment. We deployed ZAR 2 billion in major capital towards our high-margin growth projects. On the back of the good operational performance, we generated ZAR 6 billion in operating Free Cash Flow, an increase of more than 100%. This enabled us to maintain our strong, flexible balance sheet with net debt to EBITDA at 0.2 times. Although we are now in a period of high capital expenditure, it remains our goal to return capital to shareholders. This is in line with our dividend policy and alongside our overall growth strategy. I'm therefore delighted to announce a final dividend of ZAR 0.75, or $0.04, as a result of the strong group performance in the 2023 financial year.
This financial year marks seven years since we embarked upon our safety transformation journey. We have made tremendous progress, and risk management is now embedded throughout Harmony. Harmony has adopted a proactive approach to safety. We have a centralized operational risk management team providing support to all our operations. Through digitalization and modernization, we have real-time dashboards to monitor our leading indicators. In fact, we now monitor over 9 million grade and control data points … This ensures we prevent significant unwanted events before they occur. As a company, we have embraced a culture of learning and strive for continuous improvement. Our cultural transformation journey has reached 75% completion to date, and we are progressing with this through the regular visible felt leadership engagements, along with other safety awareness initiatives across our operations.
We continue to equip our teams through ongoing leadership development and training, and I'm confident we are on the right track and firmly believe that zero loss of life is possible. As I mentioned, our group lost time injury frequency rate is below six for two consecutive financial years. A loss of life injury frequency rate declined to 0.06 per million hours worked. Now, this is the lowest in the company's history. Despite this improvement, we tragically lost six of our colleagues through the financial year. Now, Harmony and its tripartite partners are continually engaging to learn from these tragedies and ensure that these incidents do not happen again. Each employee is part of the Harmony family, and we deeply mourn each and every loss of life. Taking care of the Harmony family requires a holistic approach to safety and health.
The prevention of work-related illnesses and mental well-being is of critical importance as we aim to go beyond zero harm. Our decarbonization strategy has gained significant momentum, and phase one of our renewable energy program is now complete. This program will deliver 360 megawatts renewable and alternative energy sources by financial year 2026. Phase one is now generating 30 megawatts of solar energy, delivering green electrons to our Free State operations. This represents approximately 20% of our peak Free State operations demand, and around 6% of our peak daytime demand for our South African operations. Construction of Phase II will commence in this financial year. This will add another 137 megawatts renewable energy generation capacity.
The first 100 MW will be constructed at Moab Khotsong, largely funded using the $1.5 billion green loan that was secured in June 2022. The remaining 37 MW will be delivered through a power purchase agreement, as with Phase I. Once complete, phase one and two will generate a combined 167 MW. Now, this is approximately 30% of our peak South African operations daytime demand and will save an estimated ZAR 425 million per annum electricity cost. This help us achieve our goal of carbon net zero by 2045 and reduces pressure on the South African grid. Mining with purpose is what we are all about. True sustainability is embedded in all our decisions, and at Harmony, we believe in actions over words.
As a result, we continue to receive positive external recognition for our efforts in sustainability. We have been included in the FTSE4Good Index for the sixth consecutive year, placing us in the 95% percentile. Our inclusion in the Bloomberg Gender Equality Index for the fifth consecutive year is testimony to how we foster gender diversity and inclusivity. We have received a score of A from the CDP for our best practice water management strategy, and our near-term and longer-term carbon reduction targets have been validated by the Science Based Targets initiative, as we aim for net carbon zero by 2045. Our decision-making is informed by our sustainable development framework. We balance all aspects of ESG. We support the circular economy through effective waste management through waste rock and tailings retreatment. We also donate waste rock dumps to our communities for aggregate production.
We promote good water stewardship, prioritizing the recycling and efficiency used by the scarce resource, and we contribute to the resilience and prosperity of our host communities through benefit, benefit sharing. This makes Harmony the partner of choice. Harmony continues its exciting growth journey, supported by a clear strategy to deliver on its, on its objective- objectives. Since we embarked on our growth strategy in 2016, we have demonstrated our ability to create shared value through effective capital allocation. This is an ongoing and integrated process to find the optimal mix, ensuring we deliver to our strategy. We have prioritized capital to drive safe and productivity improvements through our Safe 300 or S300 program. This program aims to achieve the safe blasting of 300 square meter per crew per month on average in the company
Not only will this further improve our safety performance, but will significantly enhance margins as a result of the various productivity and cost-saving initiatives. Now, in anticipation of Eva Copper and other key projects, we have maintained strong and healthy balance sheet and intend keeping our net debt to EBITDA below one time. Through effective capital allocation, we have, first of all, lowered our overall risk profile, improved our margins, demonstrated our ability to generate meaningful returns, and converted our resources to reserves, thereby extending our production profile. With 138 million ounces of mineral resources and 39 million ounces of mineral reserves, Harmony presents a substantial opportunity to invest in exciting gold, copper story. Our international copper projects now represent 23% of our mineral resources to the Eva Copper in Australia and Wafi-Golpu in Papua New Guinea.
Our 2024 financial year declared mineral resources have increased by 4% year-on-year, but our mineral reserves have remained steady. There is, therefore, upside potential to our reserves once the Eva Copper and Mponeng extension feasibility studies are complete. With only around 26% of our reserves in South African underground mining, our production profile has been significantly de-risked, and the balance of our future productions will come from, first of all, South African surface gold, PNG copper and gold, and in time, Australian copper. We therefore offer counter-cyclical diversification through our lower risk and well-diversified gold and copper portfolio. Our quality growth pipeline will unlock further value as we take our projects up the value curve. We are conducting various exploration drilling activities across all jurisdictions. These include the regional drilling in the Eva Copper surrounding tenements.
Drilling at Target North in the Free State is nearing completion, and we are also conducting brownfield exploration drilling at Joel to determine the possibility of deepening this mine. Pre-feasibility studies include the Kerimenge heap leach project near Hidden Valley, and expanding our surface sources to convert the 5.7 million ounces in mineral resource to reserves. We have communicated the Eva Copper feasibility study will be updated at the end of the year. We expect to have the results in the third quarter of the 2025 financial year. We are also finalizing the feasibility studies to determine whether we can extend Mponeng safely and profitably. Mponeng has 24 million ounces in mineral resources at an estimated reserve grade of 13 grams per ton. This could potentially add 25 years to the existing life of mine at Mponeng.
have signed a non-binding framework of, or MOU in April. This year, we have taken significant steps closer to obtaining the mining development contract for Wafi-Golpu. This is a prerequisite for the granting of a special mining lease. Our other projects in execution are Zaaiplaats, the 9 grams per ton high-grade life of mine extension project at Moab Khotsong. Kareerand, which is extending the mining surface facility at Mine Waste Solutions, adding 14-year life of mine. The Doornkop extension of 107 and 212 levels, and the Hidden Valley extension with Stage 8, cut back now underway. So we are investing in quality ounces now to deliver even stronger future cash flows and higher margins. This profile is purely for illustrative purposes and includes both approved plans and projects still in feasibility.
This paints a very healthy picture for the future of the company, assuming current gold prices and exchange rates. As things stand, Harmony could remain a 1.4 million ounce producer well into the future. This excludes any potential value accretive acquisitions that form part of our strategy. There is significant potential within the asset base for further value to be unlocked for all Harmony stakeholders. Now, in order to achieve our growth plans, high capital expenditure is necessary. Our growth capital will increase, but this is due to our sequence of projects, which we have already discussed. It is, however, important to illustrate that our sustaining CapEx or CapEx required to keep our operations going has remained consistent.
Sustaining capital will increase in the 2024 financial year due to development, as we maintain operational flexibility, and at Hidden Valley, we are investing in necessary fleet replacement and continue with Stage 7 and 8 cutbacks as we extend the life of mine. To benefit from future returns, investment in our assets is required now. An exciting growth story attracts the best talent. Now, early this year, we announced a change in operational structure in support of our growth ambitions. We have a diverse and highly skilled senior management team with over 320 years of combined experience. Note that 40% of our senior team is female. Something we continue to celebrate, especially as we near to the end of the Women's Month in South Africa.
Now, Beyers Nel is now our Group Chief Operating Officer, who oversees our global mining operations, and they will take you through the operational performance for FY 2023. Thank you, Beyers.
Thank you, Peter. The strong full year results were predominantly driven by excellent recovered grades from our South African underground operations. However, most of our operations performed consistently throughout the year. Year-on-year, gold production was steady at around 46 tons, with a small decline, mainly due to the closure of Bambanani mine at the end of 2022 financial year. If you were to adjust for Bambanani, group production increased by 2%, and underground recovered grades increased by 8% to 5.8 grams per ton. Our all-in sustaining costs increased by 6%, mainly due to inflationary increases in consumables, the ongoing project at Target 1, and some lower grades at Kusasalethu. Now, despite global inflationary pressures, we kept the all-in sustaining costs below the guided ZAR 900,000 a kilogram.
Capital expenditure increased by 23% to ZAR 7.6 billion, as we progress well on our major capital projects. All-in sustaining costs, which include major capital expenditure, increased by only 9% to ZAR 940,000 per kilogram. I am pleased to report that operating Free Cash Flow increased by 108% to ZAR 6 billion in this financial year. Comparing the fourth quarter to the third quarter of 2023 financial year, all operating metrics improved. This strong momentum is continuing into the new financial year. Our South African high-grade underground operations have been the driver of our solid operating Free Cash Flows due to their good margins. These South African high-grade operations contributed 31% towards group production and generated ZAR 3.5 billion in operating Free Cash Flow at a margin of 23%.
This represents 57% of group operating Free Cash Flows. Our South African optimized underground portfolio contributed 42% to group production and ZAR 1.1 billion, or 19%, to group operating Free Cash Flow. Our South African surface operations contributed 18% towards group production and generated ZAR 835 million in operating Free Cash Flow. Margins at these South African surface operations, surface operations rather, remain suppressed due to the large capital project underway at Mine Waste Solutions. Hidden Valley, or our international quadrant, contributed 9% to total production, and ZAR 600 million in operating Free Cash Flow was generated at a 14% margin after a very strong fourth quarter from the Hidden Valley mine. Moab Khotsong and Mponeng continue to transform the Harmony portfolio due to their high grades and good volumes.
Production from these mines increased by 12%, while all-in sustaining costs decreased by 2%. Mponeng delivered a phenomenal performance, with recovered grades improving by 16% to 8.4 grams per ton. This is now our lowest cost underground mine, with all-in sustaining costs improving by 9% to about ZAR 784,000 per kilogram. As a result, Mponeng generated ZAR 2.1 billion, or 35%, of total group operating Free Cash Flow in this financial year. Moab Khotsong also delivered a strong performance, with grades improving by 7% to 7.3 grams per ton, and production increasing by 2% to nearly 6,700 kilograms. Moving on to the South African underground optimized operations. These underground mines are highly leveraged to the rand per kilogram gold price and play a critical role in funding our growth aspirations.
Operating Free Cash Flows increased fourfold to ZAR 1.1 billion, while average recovered grades increased by 6% to 4.9 grams per ton. All-in sustaining costs increased by 11% to almost ZAR 990,000 a kilogram, mainly as a result of the ongoing project at Target 1 and lower grades at Kusasalethu. Pleasingly, the unbundling of Tshepong operations delivered as we had planned. Both Tshepong North and Tshepong South delivered strong operational performances and positive operating Free Cash Flow. Joel was also profitable as margins normalized after the completion of the decline project. At Target 1, the optimization project is nearing completion, and the mine is regaining flexibility. We expect an improved performance in the second half of the 2024 financial year. Part of our strategy is to unlock value in our existing operations through brownfields exploration.
During our financial year 2024 planning cycle, despite depletion during 2023 financial year, the life of mine of Masimong remained the same at 2 years. At Kusasalethu, we added 1 year for a 3-year life. At both these mines, we have identified blocks of ground with good potential to support this expansion. The Harmony surface source operations remain high margin and low-risk assets with strong cash flows. Surface source production decreased by 8% to 7,500 kilograms - 7,500 kilograms, apologies, as we continue to mine out available surface sources. All-in sustaining costs increased by 12% to ZAR 764,000 per kilogram, mainly due to above-inflation price increases in consumables and specifically reagents. Very good operating Free Cash Flow margins were achieved at Phoenix, 39%, Central Plant Reclamation, 40%, and Savuka Tailings, 45%.
The operations returned ZAR 835 million in operating Free Cash Flow, and this, despite the ZAR 822 million in major capital, which was deployed at Mine Waste Solutions. At Mine Waste Solutions, the Franco-Nevada streaming agreement will end in the 2025 financial year. This will have a positive impact on revenue and margins, as 25,000 ounces of gold can be sold at spot gold prices. Lastly, let's touch on our international portfolio. Production from Hidden Valley Mine increased by 18% to 4,400 kilograms, while all-in sustaining costs remained steady at just over ZAR 1 million per kilogram. Hydroelectricity supply from the state utility normalized in the fourth quarter, reducing diesel consumption. There was a 56% improvement in recovered grades to 1.6 gram a ton in the fourth quarter.
For this financial year, recovered grades remained steady at 1.1 grams per ton. As a result-
... of the very strong fourth quarter, operating Free Cash Flow increased by over 100% to ZAR 600 million. I will now hand over to our Financial Director, Boipelo Lekubo, to discuss the financial performance. Thank you.
Okay. Thank you, Beyers and Peter, and well done to the operational teams for delivering stellar results. I'm delighted to report a strong set of financial results for the 2023 financial year. Please note that all U.S. dollar figures are in the annexure. Group revenue increased by 16% to ZAR 49 billion from ZAR 42 billion, on the back of higher underground recovered grades and a higher average gold price received. Headline earnings, on the other hand, per share, increased by an outstanding 60% to ZAR 8.00. Net profit also increased significantly to ZAR 5 billion, from a net loss of ZAR 1 billion in the previous reporting period. Although net debt increased to almost ZAR 3 billion, post the Eva Copper acquisition, EBITDA for the financial year increased by 55% to ZAR 12 billion.
We were able to repay approximately ZAR 2 billion in debt on the back of strong operating Free Cash Flows of ZAR 6 billion. Net debt to EBITDA was reduced to 0.2 times after reaching 0.6 times post the Eva Copper acquisition. There was therefore minimal change in our net debt to EBITDA year-on-year, as we maintained balance sheet strength. As Peter and Beyers mentioned, costs continue to be well managed in a high inflationary environment. With planning foresight, our cost increases are predictable and controlled. Total cash operating costs increased by only 5% to ZAR 736,000 a kilogram. Labor and electricity form the largest component of our cost base. Labor increased by 6%, or roughly ZAR 20,000 a kilogram, mainly due to salary increases.
Electricity costs increased by 10%, or 13,000 ZAR a kilogram, due to annual tariff increases from Eskom. Electricity cost increases were offset by our effective energy efficiency program. Consumables increased by 23%, or 40,000 ZAR a kilogram year-on-year, mainly due to increased cyanide prices and diesel usage at Hidden Valley. In U.S. dollar terms, our total cash costs decreased by 10% to just under $1,300 an ounce. Our net debt to EBITDA has trended downward since 2018, and despite our various acquisitions, we've kept comfortably below 1x. Our balance sheet remains robust and flexible, with over ZAR 7 billion in available headroom. This places Harmony in a very strong position to fund future projects, including Eva Copper, and absorb, rather, any adverse changes in the gold price.
Harmony has always been a highly leveraged play on the rand per kilogram gold price, and you'll note that for every 100,000 ZAR a kilogram increase in the gold price, Harmony would generate between ZAR 3 billion and ZAR 4 billion in additional Free Cash Flow in the 2023 financial year. Currently, the gold price is at around 1,150,000 ZAR or, no, I wish, 1,150,000 ZAR a kilogram, providing us with significant tailwind and strong operating Free Cash Flows. It is because of this volatility that we have an effective hedge strategy in place.
The gold hedge book is currently filled to the 20% limit at an average hedge cover of 1.1 million rand a kilogram for the 2024 financial year, and an average of around 1.3 million rand a kilogram for the 2025 financial year. So please just refer to our hedge table in the annexure for further details. Our capital allocation framework has created a strong growth pipeline while allowing us to maintain a healthy balance sheet. As Peter mentioned earlier, we are pleased to announce a final dividend of ZAR 0.75, or $0.04 per share. This is a final dividend of about 1% yield. The payment of a dividend demonstrates confidence in our plans and our ability to pay a dividend alongside our growth aspirations. Thank you, and Peter, back to you to close.
Boipelo and Beyers for the presentation. It's you know, the financial directors used to be much longer in the past, you know? Although Frank was also a very short one at the time. So Harmony has a sizable and exciting project pipeline ahead. We have plans such that our projects capital is well sequenced, and manageable. Our projects are catalyst to meaningful expanding margins over the next four years as we continue driving costs down.
In the 2025 financial year, the Mine Waste Solutions extension is expected to come, to be completed, and the Franco-Nevada streaming contract will come to an end, as Beyers mentioned. Stage 8 waste stripping at Hidden Valley is expected to be completed by 2026 financial year, and this will result in a significant improvement in operating Free Cash Flow margins at this mine. We expect to deliver our first copper from the Eva Copper project in 2027 financial year, and this is subject to the updated feasibility study being approved. In addition, we will also see the first gold from Zaaiplaats project at Moab Khotsong in the financial year 2027. Production from Wafi-Golpu is contingent to the special mining lease, and once in production, it will move Harmony into the first quartile cost producer.
Our investment in our people, quality ounces, and operational excellence continue to yield results. Over the past few years, we have shown resilience and demonstrated our ability to deliver to plan, regardless of the challenges that we might face. We have created the necessary flexibility to maintain the strong momentum we have built at our mines. Our cost base is stable and predictable, and we have implemented good controls in ensuring our cost increases are in line with our plans. In short, we have improved our safety performance and engineered a higher quality and diversified portfolio. We have delivered operational consistency and strong Free Cash Flows. What we achieved in this financial year demonstrates us succeeding in our goal. So Harmony is a specialist gold producer with a growing international copper footprint.
Embedded sustainability practices, combined with quality ounces and long reserve life, enable us to continue delivering long-term value to all our stakeholders. Our mining team have strong technical skills and exploration capabilities to take our projects up the value curve. Their exposure to the ZAR per kilogram gold price provides us with strong tailwinds, but we focus on what we are able to control. With a flexible and robust balance sheet, we are well positioned to deliver on our operational plans. Production guidance for the group for a financial year 2024 is between 1.38 million-1.48 million ounces, at an all-in sustaining cost of less than ZAR 975,000 per kilogram. Underground recovery grade is guided to between 5.6 and 5.75 grams per ton.
Now, I am incredibly proud of what our team achieved in this past financial year, and would like to take this opportunity to thank each Harmonite for their contribution. I'm confident that we will achieve new heights in the year ahead. Thank you to our shareholders and stakeholders for your support and sharing in the Harmony story. So let us take questions from the audience, after which we will attend to the questions posted online on the conference facility. Jared, you will take the questions of our audience. I think they just sit there, and we can attend to.
Hi, Peter, it's René Hochreiter from Noah Capital. Well, once again, well done with your results. Excellent. Thank you. Could you give us some guidance on the net debt to EBITDA over the next eight years as you roll out your various projects?
I'll take that, Renée. I'm not gonna guide net debt to EBITDA over the next 8 years. What we can do, I mean, currently we're sitting at 0.2. We target levels below 1, but with an acquisition or, you know, obviously with the funding of Eva looming, we can stretch that up to 1.5. If you have a look at the EBITDA that we generated for the FY 2023, there is a significant headroom to increase that. So I think that's as far as I'll take it. We do provide guidance for capital going forward, but we obviously have to come back to the market on the updated feasibility for Eva and what that capital is.
So, once we bring that forward, you know, there'll be more light in terms of where debt and things will sit, given when we articulate what that funding package will look like. 1x is where we're comfortable.
Yeah, I think what, what Bella said, that we will stretch it to 1.5 for short periods, you know, but I mean, we've done it in the past.
Yeah, I think with Moab, we stretched it as far as three times when we did the acquisition of Moab. But yeah, I think it's important for a gold company to maintain flexibility. We're not too sure where, yeah, where the gold price will go.
Thanks, Sanda. It's Leroy Mnguni from HSBC. Your medium-term CapEx profile, if I look at the next three years, has come up quite significantly. And I was just wondering, just for us to kind of think about the potential for it to increase further. We've seen a ballpark number for Eva Copper, because there was a previous feasibility study. But for some of the other projects that you're currently considering, so like the Savuka, Tau Tona, pillar and the Mponeng extension, do you have an idea of, you know, what those numbers could be in terms of CapEx? Just ballpark, we won't hold you to it. And then it looks like there's a significant portion of your kind of project CapEx is going to be outside of South Africa, and into predominantly copper projects.
Now, one of your peers earlier this week spent quite a bit of time talking about driving a re-rating from diversifying into other commodities and to other geographies, and I was just wondering if that's sort of part of your thinking or aim in your diversification strategy? Thanks.
Yeah. Let me quickly take some of the questions. I think, I mean, obviously, Leroy, that copper, the guidance that we give in the next few years doesn't include Eva and also Mponeng potential expansion. Now, we haven't approved those projects, so we don't know what that numbers are for now. There are quite a number of options, specifically on Mponeng, in terms of how we're gonna deepen the mine. That they, you know, the potential of digging one big decline down or putting smaller declines down may be a little more cost effective, and also targeting on higher grades in the first place. And remember, there's also quite a big chunk of the reserves that is above current infrastructure, which is a Carbon Leader, and also, obviously, the shaft pillars.
So, it doesn't take a lot of capital to really develop those. So we... I don't wanna speculate on what it's gonna be. Let us do the work, and then we'll come back to the market, and that will be at the next reporting cycle, which will be in February, around about February. That's when we will do that. In terms of our long-term strategy, we are a proudly South African company, and we do not have any intentions of moving out. As a matter of fact, we spend a lot of capital as we speak in South Africa with, you know, predominantly Doornkop, Zaaiplaats project, and also obviously the Kareerand extension and the Mine Waste Solutions. So we are not afraid to diversify or to be in South Africa.
To diversify out of South Africa, yes, we are. We are now 20 years, close to 20 years in Papua New Guinea, so I think we know how to operate in Papua New Guinea. We've been very successful in operating there. I mean, if you look at the Hidden Valley mine, since we take it over as a sole owner, you know, in my view, we have done very, very well at Hidden Valley mine, and we still have a very, quite number of good years in front of us. So, yes, we are, you know, would not mind diversify in that jurisdiction because we are familiar with it, and et cetera. We do have a very strong office operating from Brisbane in Queensland. And obviously the mine is, that Eva Copper mine is in Queensland. It's northern part of Queensland.
So, you know, it's a very easy, you know, adjustment for us to operate in that environment. So, yes, but we are South African. We don't necessarily believe that we should not invest in South Africa. As a matter of fact, you know, if you look at our portfolio in front of us, there are gonna be good investments in South Africa. And, yeah, and I mean, we, of course, again, we operated here for 73 years, so we know how to operate in South Africa. We, you know, we don't battle to get approvals and things done and done and et cetera, et cetera. So, and we are well respected, I think, also in this country, but also well respected in Papua New Guinea.
Hi, Peter. It's Arnold van Graan from Nedbank. I guess this is probably a bit of a follow-up, and you've answered most of the question, but I note your exploration projects and, you know, Target North, Green fields, Joel deepening. So, I mean, you make the point that you are a proudly South African company, but I just wanna get a sense of, you know, how you see this playing out. You know, your future capital allocation investment, given that you are, you know, putting exploration dollars into projects that, underground mines, that have historically been quite challenging. So, yeah, maybe, I guess you've already said a lot about that, but just give us a thinking of what opportunities you see and, you know, what are we missing? Thank you.
Yeah. Obviously, Target North is an exploration. We restarted, I think, in 2007, around about that stage, all the exploration at Target North stopped. When I joined back in 2016, we had a look at it and said, "What- why don't we just..." Because there was a theory that we didn't prove at the time in terms of what potentially can be that ore body. So we spent a money, not a lot of money, but we did spend, we've drilled two big hole or three big holes and deflections out of that to try and prove up a specific theory, which we think we've done. Now, obviously, that, all that work will be done, like, next, starting next year. So, you know, in the calendar year, talk about this financial year.
So we will, you know, have a look, and then we'll have a, a model and a thing that, that we can look at to see what we can want to do. What we're gonna do, I don't know yet. I've got no idea if we're gonna develop it or we're gonna find, you know, co-partners that want to develop it with us. We think it's quite a big, or what is the last big sort, sort of, area in this, this Wits Basin that still need to be developed. And there's a lot of work from, I think, from the forties. There were drill holes put into that by the old Anglo vaal and, and other companies and that thing.
The geologists are extremely excited about this opportunity, and, you know, I'm equally excited about, you know, if it was South Africa in 1980, it would have been a fantastic mine to develop, I think, going forward. But we understand all the, you know, risks and everything else that goes with a brand-new mine that goes with it. So yeah. So that exploration is a kind of a greenfield. It will actually require brand-new shafts to be sunken and probably a twin shaft, because you have to have a second outlet that needs to be sunk in an ore body that 3,500 meters deep, around about that. So it's a big decision to be made in the future.
But I think in the meantime, we need to take this thing and actually try and prove it, and take it up the value curve, because it's lying there in our portfolio as a resource now for a long period of time. Joel is actually just an extension of the current Joel. I mean, we've but since we've deepened Joel, Joel has done fantastically well. We are, it is just a, you know, it's actually more of a brownfields things about, can we extend for another level or two? Which obviously it's a fairly shallow mine, it's not difficult to do that.
Certainly, you know, you can, you know, the mine is generating good cash, so you can take some of that cash back and put it into the decline system that we're going to put in place. So we're drilling that now to understand that. You know, I'm more excited about also all the tenements out there at Eva, because it's quite a big, big area that we've got, that we bought as part of the acquisition of Eva. It's actually not drilled. So there's a lot of opportunity to actually find more and probably bigger copper mine in that area, potentially, that can create a, you know, over the long term of that particular mine.
But yeah, so we had, I think, a strong pipeline of, you know, from exploration to project feasibility studies to project execution. We've got quite an, you know, quite a nice mix in.
Thanks for that. Yeah, maybe my first one is just around the 1% dividend yield. Would that maybe be an indication of Harmony's approach to being stakeholder, whole stakeholder oriented, instead of being, I mean, some shareholder capitalism company of some sort? And same, I mean, on the results. The results, I mean, we will all agree that it's a stellar results. However, I mean, looking at the events that have happened in the past few weeks, where your peers in the generally industrials that they've been complaining about the external factors like Transnet and Eskom. But with Harmony, I mean, the case is different.
Would that also be an indication that Harmony has actually learned to be less reliant on those two parties, which are actually majorly impacting anyone who's either in the mining or any heavy industrial sector? And maybe just the last one is. I think the last one, maybe the bias is around some of the declines that are reversing, and you probably can have one or two that can come up again. So would that potentially lead to some sort of a strategic shift?
Maybe... Okay, maybe I'll start with the dividend. I mean, in line with our capital allocation priorities, it's important for us to return back to shareholders in line with our dividend policy. You'll recall at interim, we did not declare an interim dividend, and that was really on the back of we had just done the Eva Copper acquisition in December. We didn't deem it prudent at that point to declare a dividend. So in line with the strong cash flow performance for the year, with the dividend policy that we have, we've declared that final dividend. So I think that, yeah, I'll leave it at that.
Yeah, you can take that next.
Thanks for the question. I'll take Eskom and Transnet. We're not in the bulk commodities space, where we necessarily very reliant on, rail to ports, like, like, and the Transnet service. So, you know, that doesn't really have an impact on Harmony's operations, right now. As far as Eskom goes, you know, load curtailment, again, you know, we're not subject to load shedding, we're, we're subject to load curtailment, so we get a notification of dropping demand, you know, depending on the level of load curtailment. So, you know, we do get forewarning. And, you know, if you consider our operations, we're not necessarily the typical open cast operation that's got, you know, the crusher and the mill and the belt, everything in series. So we typically have large infrastructure, you know, mines that were developed with scale.
Some of these mines are fairly late in their life cycle, so they run at levels lower than nameplate capacity or infrastructure capacity. That being the case, it gives you a bit more flexibility to switch certain things off and delay certain loads, and shift certain loads during the day. So you don't have to waste the whole day to get the tons out. You don't have to pump the whole day to get the water out. You don't have to refrigerate the whole day to cool the mine down. So we use the spare infrastructure capacity wisely, you know, to manage load curtailment. Now, coupled to that, you know, we've got a fairly robust energy optimization or efficiency program, where we've continuously, over the years, invested in less energy-intensive equipment, you know, which obviously also assists.
Then there's the renewable program, I guess, sitting on top, on top of that. So that's how we basically manage it in Harmony. Not to say it's not an issue, I mean, clearly, you know, uninterrupted power is good for mining. But that is how we manage to manage it at our mines.
And then the last question-
Yeah. Do you mind just repeating the last question about declines? I just didn't get the full, full scope of it.
Yeah. To check because the-
... those, some of the declines that are approaching the end of the, their life.
Yeah.
There's some that you don't know what, which may surface somewhere. Now, while you check, would that result to—what would be the potential of that resulting into the strategic shift?
Yeah, I can, I can take it. So, you know, we've got quite a lot of IP around deepening mines and, you know, whether it be subverticals or extending declines. I think fair to say, you know, we as a company at the moment, are spoiled for choice when it comes to projects, and that is a good thing. So these projects all compete, you know, against our investment criteria, but they also compete against one another. So at the end of the day, it's only the best ones, you know, that get the investment decision. So yes, we've got lots of declines in the company. You know, as Peter indicated, Mponeng extension might, you know, be an extension of current declines.
As I say, they're all just in the pot of investment decisions, and you know, those ones that meet the criteria of the strategy will get the nod. I don't necessarily see a strategic shift or anything like that. I mean, we've been out saying what our investment criteria is and how we evaluate these things. Yeah, it's a good position to be in, to be spoiled for choice when it comes to future projects.
I mean, I mean, there are a time when a decline becomes suboptimal.
Yeah.
and, you know, you look at the old Evander mines and things like even Impala, when they started, it was quite difficult because decline and decline and decline and decline. So now we are, in many cases we actually have the, like, the first generation and maybe the second generation decline. So there will be a time when, you know, just trying to expand your mine by decline mining is not always the best way to do it, because your-
Mm.
of your traveling time and the logistics problems and stuff that you create by doing that. So, yes, for now, it is still okay, and still will be okay for the next year or two. I mean, the Mponeng by creating two levels and mining the Carbon Leader and mining the VCR, you could potentially add another 25 years to the life of mine of the current life of mine of 7 years, so over thirty years. But then, of course, after that 30 years, you know, will it still be effective to do declines? And you want to have to look at the time, you know, where it is, where the price is, and obviously, you know, the logistics supportive stuff, that type. But yes, we got...
I think, like Beyers said, that we are very good at developing these one-level extra declines and keep on extending the life of mine. So we've done it for many years and, and, yeah, but there will be a day when that's not very, you know, a good decision to make any longer.
All right. Thanks. It's Leroy again. I've got two more questions. So, the first one is around your decision to sort of fund your CapEx using debt, as opposed to, equity. And I'm mindful of that old clichéd saying that, you know, sometimes the best time to come to the market for funding is when you don't need it. You're a single commodity producer with no control over that, commodity price. We're not too far off record high rand gold prices. Would now not be the best time to sort of come to the market, raise, a bit of funding so that you can fund your, your CapEx, your project CapEx pipeline?
Because the concern is that if the macro environment turns, immediately, your debt ratios come under pressure, your profitability is under pressure, and then it becomes a bit more difficult. So I was wondering if you had any comments on that. And then the second question, just really out of interest, a lot of mining companies have complained that it's been very difficult with their renewable energy projects to feed power back into the grid and agree on some of those tariffs. I was just interested in what your experience has been and if that is something that's sort of been resolved or getting close to it.
I think just on the debt, the funding, I mean, Harmony is quite leveraged to the rand per kilogram gold price, so we do watch that closely. I think what you would have seen, for instance, when we did the Eva Copper acquisition, I mean, we deleveraged from 0.6 to 0.2 within a six-month period, just on the ability with which we were able to generate EBITDA. So we're quite comfortable that we can take on a bit of debt, just given where we are. If we look going forward, I mean, the big decision is around funding, is around Eva Copper. And where I sit at the moment, you know, going to the market is not something that's on the cards.
It's possible, yes, but we don't have the full picture as to what that capital looks like. It will only be articulated once the feasibility is updated, and then there's also things like Mponeng Deep that have to go, you know, through rounds of approvals, et cetera. So, we don't deem it appropriate at this point to come to market without a, you know, full story. You know, what is this for? Et cetera. So at the moment, that's not on the cards.
I can quickly take this. Or, Beyers, would you like take the next one?
I can take it, Peter.
Yeah.
Leroy, thank you for the question on renewables. So we've opted more for a modular approach. So you find that a lot of these plants that we're building are at the headgear, specifically designed for the headgear, and it ties in directly into the mine grid. So we're not necessarily, you know, building, you know, big plants in the Northern Cape and wanting to wheel the energy across, you know, which depends on infrastructure and distribution. So yeah, for now, I mean, these things sit right next to the headgear. I think the opening slide had a perfect picture of where this plant sits. That's actually the one at Tshepong, so right next to the headgear, feeding directly into the mine.
Yeah. Yeah, and the other thing is that, I mean, obviously, we have our first phase was a PPA, so we buy the energy, so that's what we buy. The second phase is another megawatt that we built, so that is going to be in the Moab Khotsong area, and in the Orkney area. And that, all of that energy will be consumed by the mine at the time. So it's none of that. And another megawatt goes either to the mine or to the plant. So it's, you know, so it's not necessary for us to try and to deliver some of that to Eskom.
Because I think it is a problem at the moment, people are trying to, you know, I've seen a lot of commentary on that, on people trying to get in. So but so far, the things are all in, you know, it's like Beyers said, next to their headgear, next to our, for our own consumption.
Thanks. Arnold, I'm just gonna give it to you now, and then we're gonna take questions from the telephone, the web call and the webcast. I know we are running a bit short of time, so if I can just give it to Arnold, then we'll just see what other questions are coming in.
Thank you, Peter. Many of your peers have commented about, or raised alarm about, criminality and illegal mining impacting the operations. So you manage an extensive footprint throughout South Africa, in what could be considered, in some areas, hot spots. Can you comment on the impact of this, if any, and how you are dealing with it? Thank you.
I think we're always obviously under constant threat of illegal mining into our operations and things like that. That's always a threat. But I think over time, we've managed to reduce that risk quite significantly. And, I mean, we actually took down 50 holes in the ground in South Africa in total, that we closed up, and so there's no access into these holes any longer. So most of them in the Free State area. And since we've done that, you know, the access into the working areas are really on through, you know, through our own shaft systems. And for that, we have got obviously the state-of-the-art access control systems in the world to make sure people don't get in and out there.
So since we've done that in the Free State, you know, obviously, the illegal mining issue kind of moved away from the Free State to other parts of the world. Now, at the moment, in where we operate, we, you know, from time to time, have issues. Of late, but it was at the old Deelkraal area. People managed to get into Kusasalethu. We closed the Deelkraal shaft up, so there's no, you know, you can't go in down that tunnel any longer. We had to use it in the past for ventilation. We don't have to use it any longer because we've made other plans. Yeah, so we obviously had this incident at the old Harmony shaft, but that was miles away from where we operated.
These mines were operated in the nineties, and there was one hole that kind of bled methane in what we call the Harmony 5 Vent Shaft. But, I mean, that hole, that mine was never operated. It was a hole that was sunk, and then in some way, there was an explosion at the bottom many years ago. And that hole stayed open to bleed out methane in the Harmony area, as per a risk assessment that was done. So it was the only hole available, and unfortunately, people went down that hole, and then obviously went into the methane areas. So other than that, we've had, you know, very little impact on our operations. We can't say that any of these illegal activities had an impact on our results.
And, you know, and I think we've got a good control at, at this point in time on that. It is obviously a massive issue if we look at, you know, what's happening on the, on the West Rand, East Rand, you know, and South, you know, it's still... I mean, it's something that needs a real attention from government and police, and, you know, and the judicial system. But, you know, I think we had a nice blueprint in the Free State how to handle it, and we need somebody to take that blueprint and try and apply it somewhere else.
Thank you. Are there any calls, that we want to take from the, from the conference call, Dion?
Yes, sir. We have a question from Jared Hoover of RMB Morgan Stanley. Please go ahead.
Morning, Peter and team. Thanks for the call. Most of my questions have been answered, but maybe two more from me, please. Just on your cost performance, obviously fantastic cost performance in 2023. Your AISC is going up by about 8% odd in 2024. But I, I'm just trying to understand how we should be thinking about cost a little further out, given that your wage agreements come due relatively soon, and typically, you settle those at above inflation. And on top of that, I think you've extended the mine life of Kusasalethu and Masimong a little longer. Those mines were pegged for closure at the end of 2024, and I guess the expectation might have been that those large fixed costs would have fallen out of the profile, given the margins are relatively low on a consolidated basis.
So just some commentary there on your costs and how that might evolve post-2024. And then my second question, I think on one of your slides, talking about your acquisition criteria. I think it looks like you've changed your, the AISC that you will now look at for target assets. I think it looks like it changed to $1,400, whereas previously, your target assets or target mines would have been having an AISC of about $1,250. Can you just talk to why that criteria has changed? Have you actually changed the gold price at which you are targeting a 15% IRR? Or if I was to be a little bit more skeptical, is that being aligned to some of the target assets you're seeing in the market right now? I'll leave it there. Thanks.
Okay. I'll take some of that, Jared, quickly. Yes, I mean, our cost performance is correct, that our three-year wage agreement comes to the end of this financial year, and then obviously we have to renegotiate another tranche. I'm not sure if it's gonna be three, four, five years or one year. I mean, it's still out there, out there. We haven't started any of that negotiations as yet. Yeah, I think two things. I mean, it's obviously there was quite an inflationary if one look at our cost increases from last year to this year, it was basically two things that drove the cost up the curve. And one is, you know, reagents was very quite a steep increase in reagent cost.
And there was a lot of corporate activity taking place in South Africa between Sasol, which is one of the, you know, the only supplier, and obviously that was for sale and all the other kind of things that happened with that. Now, we saw a little bit of an easing of that and of late, so that we don't see, we don't think that that kind of inflation will continue at that trend. The other one was actually we had to burn a lot of diesel at Hidden Valley on the back of not having hydropower. Now, that situation have reversed, so the rain did come in, well, in PNG, so that we are okay with that now as we speak.
But, having said that, I mean, there are some obviously unknowns. I mean, one of the biggest one is always the Eskom increases that we're gonna see going forward. You know, we see obviously read the same papers that you read about Eskom think that they undercover their costs. And so there's always pressure on that side. Obviously, from our side and from the industry side, we will obviously push back as fast, as hard as we can. We do have renewables coming in that will make it a little bit easier for us. But, yeah, so that, that is, that... These are the things that we get on the nose. Yeah, I mean, luckily, the inflation kind of, kind of stabilized in a way.
So we from a, you know, so pressures in terms of, of increases will, you know, will obviously also now not be not as high as it used to be before. On the, Kusasalethu, Kusasalethu and some of the mines that, that we keep, keep on having, adding on these extra years, we actually got very good grades to the eastern side of our ore body in, in Kusasalethu that we didn't expect. We actually, first of all, drilled a hole into the VCR and got a very high grade. Then we started developing because we stopped development, then we developed into the area, and that development has proven that we can actually extend the life of mine. We don't know the full extent of terms of how far we can extend it.
We know at one point in time that that pay shoot will cut off, and then we will be in a situation where the place will be not profitable. But we will not continue with Kusasalethu or develop or spend, you know, sustaining CapEx if we're not certain about the grades that we're gonna have going forward. So for now, we have a three-year life and we're happy with that. Yeah, our investment criteria, the, you know, the sales, you talk about $1,550, I think we use now, and then we now are looking at $1,400, you know, and all-in sustaining cost. Yeah, it's also a thing about trying to find the right assets that you can buy, but, you know, that's only one of the criteria.
I mean, there's other criteria like IRR, life of mine, you know, prospectivity, being, you know, safety issues and all other kind of criteria. So we've done that. Yeah, we have to, you know, obviously be realistic in terms of what is available. There's not that many mines available at $1,250 any longer. That's, you know, that's not something that you... We will pick up, and if it's there, they will probably not be able to pay for it. So we need to look at, you know, where would this thing actually go to? But again, like I said, it's one of a suite of criteria.
We do want to. We do believe that we, whatever we buy must be better quality than we currently have, and must actually take up the value curve, not down the value curve, in terms of, you know, buying things that make money now, but long term is not the right decision for Harmony. So, you know, we have to look at our current all-in sustaining cost of the company is about, on dollar terms, is about $1,550, so that the $1,400 will be a better.
I think we've broken our connection with everyone. So I think on that note, let's call it, call a timeout. Peter, I don't know if you've got any concluding remarks?
No. From my side, just to everybody, thanks so much for joining us today. Please mingle with our team here. We are very glad to have you here. Again, I want to thank my team for a good result. So I think I'm very proud of the team that we have in Harmony. We have a, first of all, a diversified team. I think a very committed team. I think like the Springboks, we also believe that we together we are stronger.
And that is why, you know, I'm very proud of the team in terms of not only race diversification, but also in terms of our gender diversification that we have, you know, it is our ladies keep us really on our toes, and we're very, very thankful for that. And yeah, hard task masters, thanks for the... Thanks.