The resuscitation of dividends would be considered at the June board meeting of Harmony Gold, its FD, Frank Abbott, told investors late last month, against the backdrop of the highly leveraged gold mining company’s market capitalisation having trebled since December 10.

Speaking during a Deutsche Bank virtual investor conference, in which Creamer Media’s Mining Weekly took part, Abbott said all the company’s surplus cash was currently going towards paying down debt.

“At the current gold prices, we can repay debt before the end of this calendar year,” the FD said of Harmony, which is currently flying high on 84%-better production profit from 7%-richer grades and 7%-lower costs.

“Our performance is being aided by a much higher rand per kilogram price,” said Abbott, who has hedged the currency to lock in the weaker rand for 12 months.

Harmony, he said, was on track to produce at a rate of 1.1-million ounces of gold a year and unit costs were poised to be shaved still further, with the company’s adjusted 5.33 g/t in sight from the 5 g/t guided.

It would not succumb to mining at lower grade on the high rand price and, with costs down, was also benefiting from a higher dollar gold price at $1 270/oz, which was strengthening cash flow considerably.

Continuing Exploration

Abbott made the point that Harmony remained one of the few mining companies that was continuing to spend on projects, notably in tandem with Newcrest at the copper/gold Golpu prospect, in Papua New Guinea (PNG), and at its 100%-owned Kili Teke.

The grades of the PNG workings were among the most notable copper and gold grades in South-East Asia.

The modular project approach being adopted at Golpu would provide future optionality for an asset with a 28-year life-of-mine that would take place on a reserve-classified deposit that feasibility studies had proved should be mined.

Golpu’s firs-phase net present value had been pushed to $2-billion, which would provide cash to develop Stage 2.

Graphics were flashed onto computer screens indicating Golpu’s plotted production would be head and shoulders above each of Harmony’s many South African operations.

Abbott calculated that Harmony could “more than afford” its share of capital required for the development of Golpu.

“If we fund half and the PNG government opts not to take up a share, we will only require external funding from 2021,” the veteran FD told the conference.

If the PNG government decided to buy up to 30%, which was its right, Harmony would fund Golpu from its own cash without the help of any external funding.

In response to questions on dividends, Abbott said that Harmony wanted to pay a dividend if it was affordable.

“The board would love to do that . . . and I’m sure it’ll be considered at our June board meeting,” he added

The JSE- and NYSE-listed Harmony, with more than six decades of experience, was South Africa’s third-largest and the world’s twelfth-largest gold producer last year, with an output of l.08-million ounces.

Responding to investor questions on why Harmony was not mechanising its mining in the same way as Gold Fields had done at South Deep, Abbott drew attention to Harmony’s narrow-reef orebodies being considerably different to the wide-reef orebodies of South Deep, which precluded mechanisation until a new technological solution became available.