Good morning, ladies and gentlemen, and welcome to the Harmony FY26 results analyst call. All participants will be in a listen-only mode. There will be an opportunity to ask questions later during the call. If you should need assistance during the call, please signal an operator by pressing star then zero. Please note that this event is being recorded. I would now like to hand the conference over to Beyers Nel. Please go ahead, sir.
Good morning, and thank you for joining us for Harmony's results for the six months ended 31 December 2025. During the period under review, we reinforced Harmony's position as a higher quality, lower risk global producer of gold and copper. We continue to grow selectively, sequentially, and affordably during today's gold price tailwind into durable compounding value. Our first rand or dollar spent goes to safety and sustaining our operations. We then allocate to organic projects and advance copper and gold scale only where risk-adjusted returns clear our hurdles. Every initiative in Harmony competes on risk, margin, and cash conversion. We continue preserving balance sheet strength for disciplined and consistent through the cycle dividends. Operationally, we remain on track to meet our full-year production cost and grade guidance, and the exceptional gold price environment has further supported another strong financial performance.
As a result of our strength in cash flow generation, we are pleased to announce that we have revised our dividend policy to provide shareholders with enhanced upside participation. The revised policy now includes a base dividend and an upside participation model based on pre-dividend net- debt- to EBITDA levels. In line with our new dividend policy, we have declared an interim dividend of ZAR 5.30 or $0.32 per share at a rolling 12 months dividend yield of 2.2%. The interim dividend payout has doubled to a record ZAR 3.4 billion, or $204 million. This represents a payout of 43% of net free cash. Looking ahead to our FY 2026 guidance.
For our gold operations, we reiterate our previous guidance of production between 1.4 million ounces-1.5 million ounces, underground recovered grades above 5.8 grams per tonne, and all-in sustaining costs of between ZAR 1.15 million-ZAR 1.22 million a kilogram. Our copper production guidance only includes the CSA mine. The guidance for the financial year 2026 is as follows. Production of between 17,500 tonnes-18,500 tonnes, C1 cash costs of between $265-$280 per pound, and recovered grades above 3.5%. Group CapEx for financial year 2026 has been updated to ZAR 18.5 billion and now include capital expenditure for CSA and Eva. Updated CapEx for gold operations have been reduced by ZAR 1 billion to ZAR 11.8 billion.
CSA CapEx guided at ZAR 1.1 billion, or $65 million. Eva Copper's CapEx is projected to come in at ZAR 5.6 billion, or around $320 million this financial year. Total project capital for Eva Copper is expected to be between $1.55 billion and $1.75 billion over three years, with an estimated 20/40/40 split over the three years. We will provide longer-term guidance for the CSA mine at the time of our full-year results release. Thank you. We will now take your questions.
Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star and then one now. You will hear a confirmation tone that you have joined the queue. If you decide to withdraw the question, please press star and then two. Again, if you would like to ask a question today, please press star and then one now. The first question that we have comes from Rene Hochreiter of Noah Capital. Please go ahead.
Morning, Beyers and team. Nice, congrats on the maiden entry into copper production. Well done. Got a few questions. Stop me if I'm asking too many. The underground grade at Moab went down 24% and at Mponeng went down 6%. Is that because you're out of the high-grade channel in the VCR at Mponeng, and what's the problem at Moab?
Good morning, Rene. Did you wanna ask all your questions, Rene? Then I'll have a go. Or did you wanna ask them one by one? Also good from my side.
No, I'll ask them all if you like. The CapEx profile for the next three years for gold, and an update on the cyanide shortage. How is that going? Oh, and also, what's the latest on this Special Mining Lease at Wafi-Golpu.
Thanks, Rene. Good morning. As I said, thanks for the question, Rene. I'm gonna start at the back end and work my way up. As to the Special Mining Lease, unfortunately, there's no, you know, concrete updates on that, but there has been a significant development, and I'll try and be brief on that. You have been aware that the negotiations with the state negotiating team and the JV partners, you know, have been ongoing for quite some time. A recent development towards the end of last year was that the Prime Minister of Papua New Guinea appointed a PRT, which is an independent review team or a review panel to investigate why the negotiations between the SNT and the JV partners have seemingly stalled.
Albeit, you know, I can't report on more progress in terms of where we are, it is encouraging and we view it as a positive step, Rene, that there's a third party appointed to unlock, you know, where things are. We've been engaging the PRT on multiple occasions since about November last year. I mean, there's been many meetings with the PRT to the point where the PRT is due, there's not exactly a line of sight on that, but they're due shortly to give their feedback back to the Government of PNG in terms of, you know, how they see it.
I guess, you know, if you and your spouse are fighting and there's been a mediator appointed, not that we were fighting, but there is, you know, this step that is, we view as very positive in terms of getting, you know, to the SML and the mine development contract, to get that concluded, Rene.
O-okay.
Apologies Rene?
No, that's fine. Okay, good.
As to the cyanide shortage, there was an industry-wide force majeure issued by the cyanide supplier during this period under review. It related to a plant shutdown and some plant availability issues on their part. Cyanide supply was reduced. We have, you know, managed through the situation. As you know, sodium cyanide is the main reagent we use to extract the gold out of the gold-bearing ore in our metallurgical plants. Our recoveries have come under a little bit of pressure in this last quarter as a result of that. I would say more so at the surface re-mining operations. Now, let me just put that in perspective. I mean, Mine Waste Solutions, for example, is the biggest, you know, is our biggest surface re-mining project.
That uses more cyanide than the whole of Harmony together because of the high volumes that get treated. When we suffered a shortage of cyanide, you know, we were not able to, you know, extract all our gold. We were firstly basically at the high cyanide consumers, which is our, you know, our surface re-mining operations. We played musical chairs through the process and, you know, sent cyanide batches around and to keep all the wheels rolling. We did suffer that impact, you know, on our metallurgical recoveries. As to the underground recovered grade, you'll see the underground recovered grade in total dropped quite a bit during this quarter.
What is important to note there is that on average, and I'm talking company SA operations, the face grades mined were in line with plan still. It's not that we're feeding the mill with lower grade, it's just that, you know, the recoveries in those plants, have come under pressure. Two of our big, underground reef plants, you know, also suffered some lockup during this process, you know, due to some operational issues, which by now has been sorted out. Long and the short of it, Rene, is that on the cyanide issue, we are trying to reduce our dependency on a sole supplier of liquid cyanide. We've already commissioned a cyanide dissolution plant at Mine Waste Solutions, which is our biggest consumer. We're looking at fast-tracking the building of more cyanide dissolution plants.
Now, what a cyanide dissolution plant provide you is the ability to dissolve cyanide briquettes, you know, which you can export, or import rather, and stock. We're working on that. The supply from the supplier has normalized, so you know it is behind us now. We want to set ourselves up to avoid you know suffering a similar impact going forward. Hence we you know we're reducing our reliance on the liquid cyanide. Gold CapEx, we have, we've got it in the deck. We basically maintained our gold CapEx guidance, albeit we reduced the gold CapEx guidance by ZAR 1 billion in the first year. That is just moneys that we haven't been able to spend.
I mean, we're close to the financial year-end. We've added the copper CapEx for year one, you know, the remainder of this financial year into the guidance, which is ZAR 1.1 billion for CSA, and then the first batch of Eva CapEx for the remainder of the financial year. Underground grades at Moab and Mponeng, I mean, the underground grades at Mponeng continued to be strong, and they still are. I mean, that is going well. Moab had some lower grade, and there were some impacts at Moab around managing the seismicity response and managing, you know, around some, you know, mining-related issues, I would say.
I'm comfortable, Rene, that the stated reserve grades at these assets are there, and that we can safely and comfortably mine to those grades going forward.
Okay, thank you very much. Thanks, Beyers.
Thank you.
Thanks, Rene.
Thank you. The next question we have comes from Arnold Van Graan of Nedbank CIB. Please go ahead.
Yes. Good morning, Beyers and team. Yeah, well done. It's good to see you printing so much cash. Two questions from my side. Beyers, the first one is at CSA, is it turning out to be more challenging than you expected? I know we've talked about this before, but it seems you ran into several hiccups there. So yeah. How many unexpected things were there? And will it take you longer to turn this into a proper Harmony mine than you expected? And then the second one, again, related to the recoveries and the cyanide, the lost recoveries or lost gold. Is that gone? Has it gone to tails or I don't know practically whether you could stockpile it or, you know, stick it through the plant again, or is that gone forever? Thank you.
Thanks, Arnold. Good morning. I'll start with CSA. I wanna start with the ore body. I mean, we are very happy with what we bought in terms of the ore body. You'll see later on in the deck, slide 21 of the results presentation. I mean, there are additional phenomenal intercepts from a grade point of view that are coming through. You know, as far as the quality of the metal in the ground and the ore body, I mean, we are actually more than satisfied with what we you know, what we bought. Those recent intercepts there indicates you know, potential for upside going forward. You know, very, very happy with that. Arnold, what we found in terms of our DD, I mean, this is the type of mining that we do.
I mean, we mine the deepest mines in the world, as you know, in South Africa. I would say, in the mine, I mean, what we see now is what we found in the DD, in the mine. You'll see we did some six things there, since we've taken over, and I'm gonna briefly talk through them. One, you know, obviously I was out at the mine. We welcomed all the CSA employees, aligned them to Harmony's culture and values. What I must say is the employees welcome a company like Harmony taking over the asset, which is, you know, a multi-asset company. It's a company that's got operations in multiple jurisdictions.
It's a company that the employees perceive to be able to bring, you know, the necessary value to the mine and do to the mine what needs to be done to the mine to set it up for long-term success. We had to implement a seven-day safety stoppage, you know, on a second escape or second egress system. That is all fixed up now. What we've got, which is important to note in this guidance we're providing, is a 30-month stoppage of the mine.
This is to basically upgrade steelwork in the shaft at two levels in the shaft that is, you know, corroded, and steelwork that we need to sort out to make sure that the shaft is safe and that the shaft can, you know, hoist the tons and, you know, service the people, and that it's safe to do so. The other thing that we also are doing is we're moving the upper [Merrin mine out slightly further. I mean, we say, yeah, we pause it. I mean, we feel we need to do a little bit more drilling to improve the orebody confidence on the Merrin mine. We're still excited about it, and we still think it's there. It's just important that we make sure that the confidence level on that is high enough.
We've taken out some corporate costs since acquisition, and we are in the process of, you know, getting our head around the asset and making sure that the opportunity for value that Harmony could bring to this asset, as identified in the due diligence, would be brought to fruition. We said previously that this would take, you know, anything between 18-24 months, you know, to do that. As we know, you know, decongesting underground mines is not an overnight exercise. I mean, these are things that do take time. We're spending a lot of time at the moment in terms of making sure that we've got the right solutions, technical solutions for the problems, and that those technical solutions are implemented to set the mine up.
Thanks. The gold lost?
Oh, apologies. Yeah, I was just working through my notes here. Apologies, Arnold. Yes, as you know, a metallurgical plant is a creature of momentum. You know, it is just the nature of these things. You know, unfortunately it's not like boxes of stock in a store and, you know, if you had 10 and you sold two, you know, the stock level is eight. You know, we have seen a normalization of the recoveries and, you know, some releases in some of the plants. Yes, I mean, we are working, flushing those tons through the systems to make sure and see what we actually get.
You know, you don't always get all the gold back, you know, as we know, 'cause, you know, what a gold plant wants, in mining is consistent tons, consistent grade all the time. You know, then you get predictable and consistent recoveries. Unfortunately, we suffered a break in that constant feed. You know, so some of that gold will, you know, we would unfortunately not be able to recover. I mean, we, as I said, we're working, you know, those tons through the system in this quarter and, you know, seeing what we get out of the plants. I can say that, you know, we're not locking up gold in those plants anymore. I mean, the recoveries have normalized now.
Okay. Thanks, Beyers. Good luck. Cheers.
Arnold.
Thank you. Ladies and gentlemen, just a reminder, if you would like to ask a question, please press star and then one now. The next question we have comes from Adrian Hammond of SBG. Please go ahead.
Thanks, operator. Good morning, Beyers and Boipelo. I have some questions for Boipelo, if I may. Firstly, the free cash flow of ZAR 6 billion, could you reconcile that to the implied ZAR 7.9 billion based on the dividend?
Payouts. And secondly yo u lost about ZAR 1 billion in the silver hedge. What should we expect for 2H going forward? Were there any streaming, cash streaming payments relating to CSA during the time you owned it in this result? Or will there be any stream payments going forward? Cash payments. Thanks.
Thanks, Adrian. I think let me start with CSA. So we did assume a few streams. Well, two streams, a silver stream and a copper stream, as well as contingent payments to Glencore. There were two $75 million contingent payments that were due. We did settle the one, and you'll note in our subsequent events, the second has been settled. Then it's quite well set out in terms of what the silver. It's 100% silver stream. Then there's the copper stream as well. With regards to the silver, yes, we did have a loss of ZAR 1.1 billion that was recognized, and this was predominantly on the back of the significant rise in the silver spot price, and largely Hidden Valley.
In terms of what that will look like going forward, I can't guide, but we do provide a detailed hedging table in terms of the silver hedges that are rolling off in the next half and subsequent periods. We haven't locked in any other hedges, as you'll see in the book, because we're just not seeing the opportunities as it is. With regards to the cash flow and the dividend, the dividend was paid on a net free cash of ZAR 7.9 billion. You wouldn't reconcile it completely, but if I can guide you to our cash flow statement where we had cash generated by operations of ZAR 17.1 billion, the additions to PPE of ZAR 8.1 billion, and then you would also have to look at your changes in working capital.
We don't provide that full recon, but yeah, it's guided by those.
Okay.
Those three metrics.
Yeah. That helps enough. Thanks.
Thank you. The next question we have comes from Chris Nicholson of RMB. Please go ahead.
Hi. Morning, everyone. Thanks for the call. I've got one for you, Beyers, and one for you, Boipelo. Beyers, just on those Moab grades, if we could just go back to it. I mean, it sounds like from the way the release is worded that you've obviously changed the mine sequence there, but it looks like you've got some seismicity issues. Just, you know, should we expect lower grades going forward from Moab? I mean, I guess that's the blunt part of the question. Just on the revised dividend policy, Boipelo, am I to understand that the policy is free cash flow after all CapEx? Effectively you will only be paying out kind of once, you know, you've considered all the project CapEx and the Eva Copper Project CapEx. I think that's quite key. Thank you.
Can I maybe go first, Beyers?
Sure.
A quick one. Thanks, Chris. Yes. It's after all CapEx, so you're leaving the capital.
Okay.
Thanks, Boipelo. Chris, yeah, as to the Moab grades, you know, we are approaching what is termed the Moab gold gap. Let me just sort of briefly explain that again. The recapitalization or the deepening of Moab was obviously delayed in the hands of the previous owners due to strategic reasons and capital allocation priorities at the time of acquisition. We have started the project. I mean, as you know, we bought the mine, and we immediately did our own feasibility on the deepening project, which is a site class project and approved that, and that is in execution. There is a gold gap between, you know, the current mine, and I'll talk now about your actual question, and then the new mine. We are basically in the final, you know, depletion of the middle mine.
What you have is you've got more isolated areas being targeted now. Mining is getting trickier, you know, as we get to the last part of the middle Mine and we set up the mine in Zaaiplaats for the future. You know, what we see in this period was to some extent, you know, a little bit of a symptom of that. Also the plant that treats the ores of Moab was also a plant which had some underrecovery in the period here. If you look at recovered grades, you know, the grades that came from underground was slightly better than what we did recover. Long story short, Chris, I mean, we're confident with the stated reserve grade, you know, for Moab.
I mean, that is a grade that we think we will be able to get. Navigating this period through the end of the Middle Mine into building Zaaiplaats and getting through that Moab gold gap, you know, is the tricky period. I mean, our team is, you know, fully committed to execute on, you know, the best possible outcomes we've got there, and those outcomes are the outcomes that we've got in our current life of mine plan.
Okay. Great. Thanks so much, Beyers.
Chris.
Thank you. Ladies and gentlemen, just a reminder, if you would like to ask a question, please press star and then one now. We'll pause a moment to see if we have any further questions. Sir, at this stage, there's. Apologies. We have a question from Jonathan du Toit of Oyster Catcher Investments. Please go ahead.
Congratulations on the results. If we just talk about Hidden Valley, I mean, what is the possibility of extending it at Hidden Valley, extending the life of mine there? What are the kind of challenges to doing that, and is it possible?
Hi, Jonathan. Yeah, I mean we certainly do believe it's possible, and let me just, the Hidden Valley thing is in this year's guidance and this year's plan that we communicated with the market. There was an incremental extension to the life of mine of 18 months. Jonathan, you would've noted the previous life of mine. Let me just talk to the 18 months again. The 18-month incremental mine life extension, you know, was we, you know, we could lift the tailings dam a little bit, you know, and find, you know, other on lease or on property tailings solutions, remembering that this mine is actually tailings deposition constrained. The ore body is there, the infrastructure's there, but it's what to do with the mine tailings that is constraining the mine life.
That incremental extension we could do by just, you know, lifting the tailings dam, et cetera, as I said. The next study, actually, it's in study at the moment, is to recapitalize the mine potentially for a, you know, another significant extension of the mine life. That's not gonna be incremental in nature. That would be typically build a brand new tailings facility, you know, around the mine, which would be, you know, would have a lead time to it, you know, it would have CapEx to it. It is possible. I mean, the ore body is there. It's finding solutions to place tailings and, you know, thinking of the mine life extension and the scale thereof, you know, that can stand up to that requirement in terms of building new, big infrastructure is what is in study at the moment.
As soon as we have got answers on that, we would obviously communicate that, you know, to the market if it bothers our hurdles. If you look at the reporting period, I mean, phenomenal margins at Hidden Valley. I mean, it's a good mine. It's a mine that's running well, you know, despite that whole issue that we had with the earthquake, you know, PNG had. I mean, the mine still performed very, very well. You know, it would be great for us if we could extend the mine life of Hidden Valley with eight or 10 years, you know, if we can prove that.
Would there be a gap? Would you have to stop the mine and then kind of shut everything down and then well, you know, assuming the study is favorable, would there be a gap? Or would you be able to mine-
Yeah. It's too early to tell. Yeah. Sorry, go ahead.
No, no, that's yeah, I'm just trying to work out if there would be a, you know, you'd have to shut the mine down and build the tailings plant and then reopen the mine or if it would be continuous.
Yeah, probably too early to say. I mean, the idea would be that, you know, it's continuous, but probably too early to say definitively.
Okay. Thank you.
Thanks, Jonathan.
Thank you. Thank you, sir. At this stage, there are no further questions on the conference call, sir. Would you like to make any closing comments?
Yes. In conclusion, we are intentionally transitioning into a significant global gold and copper producer. This journey is grounded in mining with purpose, ensuring that everything we do creates value for our stakeholders wherever we operate. I thank you, and also please reach out to our investor relations team, should you have any further questions. Thank you, everyone.
Thank you. Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines.