Harmony Gold churns out the cash, boosted by world’s deepest gold mine

Gold’s price hit a record late last year of around $2,300 an ounce and scaled record highs in rand terms. It’s all been music to the ears of South African producers of the precious metal.

Harmony Gold on Wednesday unveiled cracking interim results. Group operating free cash flows soared by 265% to a record R7.1-billion ($381-million), while headline earnings rose by 226% to 956 SA cents per share.

Investors will receive a record interim dividend of 147 SA cents per share.  

One key driver has been Harmony’s Mponeng operation in western Gauteng, the world’s deepest mine, which extracts ore at astonishing depths of almost 4km below the N12. Harmony acquired Mponeng from AngloGold Ashanti in October 2020 and has never had buyer’s remorse.  

Mponeng’s recovered grades in the six months to the end of December 2023 increased by 30% compared to the same period the previous year, lifting production by 30%. In such a price environment, that is basically cash getting churned out.  

And Harmony announced that its board had approved a mine extension project at Mponeng.

“This major project will add 3.05 million ounces of mineral reserves over the life of the mine, delivering average expected steady-state production of approximately 260,000 ounces per annum. The life of the mine will be extended from seven to 20 years, ensuring Mponeng remains a top performing asset in our portfolio until at least 2044,” Harmony CEO Peter Steenkamp said.

That adds 13 years of employment for the 5,000-strong workforce at the mine, making the project a rare piece of good news in South Africa’s declining and volatile mining sector.

Harmony COO Beyers Nel told Daily Maverick that the extension, which will require estimated expenditure of R7.9-billion over the life of the project, will add 270m to Mponeng’s depth profile, taking it to 4.2km underground.

“We have spent two years working on the feasibility study which existed under the previous owners, and we are happy to say that we have found an optimised mine design with improved fundamentals. It’s a historic moment for us,” he said.

“And there’s further resource that is not even exploited by this project at this ore body. There’s even further potential later on to continue this mine even further into the future ... but this will probably require technologies that we need to work on.”

Indeed, especially if Mponeng eventually goes below 4.2km.

The mine is already a feat of engineering and South African ingenuity, and the fact that it still sits on a mountain of untapped gold seems incredible after more than a century of industrial-scale mining on the Witwatersrand reefs that has yielded about a third of the precious metal produced in recorded history.

There is still a lot of gold down there. It’s just very deep. DM