Harmony Gold Mining Company Limited

Good morning, my name is Peter Steenkamp, I'm the CEO of Harmony, and it's a pleasure to be here today presenting the half-year results for the six months ended the 31st of December 2022, 23, 22. Okay, I'll just take note of our safe harbour statement. I would like to start with a brief introduction about Harmony and where we operate. Harmony is a 1.4 to 1.5 million ounce specialist gold producer with a growing copper footprint. We are South Africa's largest gold producer by volume with a diversified portfolio of operating assets and projects around South Africa, Papua New Guinea and Australia. These include nine underground mines, two open pit mines and various tailings retreatment operations. our projects present a substantial opportunity as we continue on our growth journey. Various early-stage exploration and advanced-stage projects offer near-term conversion potential, as seen with the Tier 1 Wafi-Golpi project and our recent Eva Copper project acquisition in Australia. Harmony has been operating as an emerging market gold mining specialist for over 72 years. We therefore understand the importance of sustainable mining. With close to 14 million ounces in reserves, Omni's operating model ensures the minerals we extract are converted into shared value for all our stakeholders. To ensure continued positive returns, we directed capital, major capital, towards lower risk and higher margins assets and projects. We have grouped our operations into four business areas, which are our optimized South African underground portfolio, These mines are optimized for cash generation, which will allow Harmony to pursue and fund key projects. Our high-grade South African underground assets, Moab, Katsong, and Mpuneng, and our high-margin South African surface and surface retreatment operations, and a growing international portfolio, which includes Hidden Valley and various other copper gold projects in Papua New Guinea, and the Riesli EVA copper in Australia. To our four strategic pillars of responsible stewardship, operational excellence, cash certainty, and effective capital allocation, Harmony will continue to create shared value for years to come. Harmony has its roots in deep-level South African gold mining. Our every acquisition of Wafi Gold Pool project in 2004 introduced copper to the Harmony story. The value of gold is well documented, dating back over 5,000 years as a store of value and form of currency. While gold remains core to Harmony, the transition to a green economy is a tailwind for copper, presenting good opportunities given our portfolio mix. Consumers tend to be metal blind, not always aware of the prevalence of metals such as copper and gold in production that they use each day. So investing in harmony is indeed investing in the future. 35% of our mineral reserves is now copper. There are two key copper projects, Eva Copper in Australia and Wafi Gold Pool in Papua New Guinea. These projects offer counter-cyclical diversification to our existing gold portfolio and position Harmony as an emerging copper player. Only 26% of our reserves is SI underground mining. The remaining 74% of our reserves are split between SI surface gold, PNG copper and gold, and Australian copper and gold. This illustrates how we have diversified and reduced our portfolio over the last few years. The key highlights for the first half of this financial year include the following. From a safety perspective, we have delivered improvement on both our last time injury frequency rate and our loss of life injury frequency rate. Group loss time injury frequency rate improved to 5.38 from the 5.74. The loss of life injury frequency rate also improved to 0.06 from the 0.13 per million hours worked. As we continue to decarbonize, the first 30 megawatts of renewable solar energy will come online in the fourth quarter of this financial year. Good underground recovered grades drove production in the first half. And operationally, we have had fantastic performances, specifically from Penang, Sepong, Tjepong South in particular, Joel and Massimong. This helped drive the 33% increase in operating free cash flow from our South African underground operations. We have therefore kept our FY23 production cost and grade guidance unchanged. Our derivative program continues to ensure cash certainty and currently stands at a net positive value of $503 million. We have maintained balance sheet flexibility and I'm pleased to report an 18% increase in headline earnings per share to 293 South African cents or 17 US cents per share for the reporting period. From a capital perspective, the Cyplus deepening project and the career on tailings extension in South Africa are now underway. The conclusion of EVA copper acquisition was a major milestone for Harmony in our pursuit of near-term copper. Safety is our number one priority and we continue to strive towards zero harm. We believe that zero harm is indeed possible. Now, 2016 was a landmark year for Harmony. It marked the beginning of our transformation from a reactive to a proactive safety organization. So Harmony has a risk foresight that proactively identifies the risk to prevent them before they occur. Risk management was identified as the best suited vehicle to drive a proactive safety culture. Now, this approach requires us to identify risks, assess the impact, and develop golden controls to mitigate those risks. Our focus was on identified leading indicators that could potentially result in significant unwanted events. Digitization and modernization provided us with real-time and granular data enabling us to take proactive decisions on risk. Now, the implementation of industry-leading best practices has further transformed our workplaces to reduce and eliminate risk. An example of this is incorporation of the International Council of Mining and Metals, ICMM, loss of life prevention guidelines into our risk management strategy. Having established the systems needed to advance the safety strategy, it is critical to ensure that the culture of that safety is embedded throughout Harmony. This is being done through our Tibakotsi Humanistic Culture Transformation Program, and the word Tibakotsi means preventing incidents, And through this program, we conduct training and continuously engage our employees through visible field leadership and safety days. Now, this proactive approach to safety is yielding positive results. South African operations LTI rate improved to 5.65 from a 5.99. Now, this was the fifth consecutive quarter that our LTI rate was below six, which is quite a milestone for us. Harmony achieved its second consecutive loss of life free in January, and here to date we are loss of life free. We are deeply saddened to report that three of our colleagues have lost their lives in a mine-related incident in the first half of the financial year. We pay our respect, send our heartland condolences to those families and loved ones. Our ultimate goal is to eliminate loss of life and to ensure our employees return home to their families each and every day. From a health perspective, we continue to monitor and manage occupational health-related illnesses through our well-equipped medical hubs. And we also extend care and support in non-occupational health-related illnesses to all our employees. And that also includes things like mental health. Now, true sustainability cannot be achieved by simply saying the right things. It has to be translated to actions and results. This is exactly what we do at Harmony. Sustainability is therefore embedded in all we do, and our culture encourages leadership excellence. All aspects of E, S and G are factored into our decision-making process, ensuring we always conduct ethical and transparent mining practices. This is demonstrated in how we care for our people and our consideration for their natural surroundings and environment. An integrated, risk-based approach to mining means Harmony will always mine responsibly, keeping the interests of all our stakeholders at heart. Our corporate culture promotes and encourages diversity throughout harmony, evident in our inclusion in the Bloomberg Gender Equality Index for the fifth consecutive year. We are measured against key performance indicators linked to ESG performance. Our commitment to responsible stewardship has resulted in improvements in our ratings at key external rating agencies. Creating positive change is about doing the right thing every day. This is what we do at Harmony, and that is what we call mining with purpose. I will now hand over to our group chief operating officer, Bayer Snell, to discuss the operating performance.

Thank you, Peter. The interim results were boosted by a strong second quarter performance from most of our operations in harmony. All production metrics improved from quarter one to quarter two in the financial year 2023. There are a few quarterly numbers worth noting before I move to the half-year figures. Firstly, there was a 13% increase in the underground recovered grade to 6g per tonne from 5.4g per tonne. This was mainly driven by our high-grade assets, Moab Kutsong and Mpuneng. Secondly, we have managed to reduce all-in-sustaining costs by 4% in the second quarter, despite the various cost pressures. As a result, operating free cash flow increased by 27% quarter-on-quarter. Year-on-year gold production was down 5%, mainly due to the closure of Bambanani at the end of the financial year 2022. But adjusting for Bambanani's contribution in the comparable period, production was largely flat. Underground recovered grades again increased by 5% to 5.7 grams per tonne from 5.4 grams per tonne. And all in sustaining costs increased by 11%, mainly due to inflationary increases in consumables, the ongoing project at Target 1 and lower mining grades at Kasasaletu. But despite the increase, we kept the all-in sustaining costs below the annual guide at R900,000 a kilogram. Capital expenditure increased by 15% to R3.6 billion as we progress our major projects, including the career-round tailings extension and Zyplard's deepening projects. Despite all-in costs, which include major capital expenditure increasing by 13% to R932,000 a kilogram, we still generated R1.9 billion in operating free cash flow. The strong operating free cash flows were driven by our South African underground operations in the first half of this financial year. Our high-grade mines contributed 29% to the total group production and R1 billion, or 54%, to the group operating free cash flow. Our optimized underground portfolio contributed 46% to group production and 815 million or 42% to group operating free cash flow. As expected in this period, the margins at our South African surface and international operations were low due to capital projects that are underway. These operations have significant upside potential once we complete the career round extension and the waste stripping at Hidden Valley Mine. Moving on to the South African optimized operations. This portfolio generates roughly 46% of our total production and consists largely of our older assets. These underground mines are cash generative and highly leveraged to the rand gold prices. The cash generation of these assets means that they play a critical role in funding our growth aspirations. Operating free cash flow increased by 96% to R815 million, and average recovered grades on these mines increased by 10% in this half. All-in sustaining costs on those increased by 8% to R914,000 a kilogram, mainly as a result of the ongoing project at Target 1 and the lower stated grades at Kasasa Letu. The disaggregation of Tupung operations has delivered as we had planned. Both Tupung North and Tupung South delivered strong operational performances and positive operating free cash flow. Joel is performing very well post the completion of the decline project and margins are beginning to normalize. The target one optimization project has been delayed due to some operational challenges, but is nearing completion. And after moving the infrastructure closer to the mining block at target, we expect volumes to increase and costs to improve significantly. This project is planned to be completed by the end of the financial year. At Kasasa Letu, recovered grades were impacted by higher than planned depletion in the high-grade areas in the previous period. And at current planning parameters, we expect these operations to deliver operating free cash flow margins of approximately 19% over life of mine. Our high-grade assets consist of Mpening and Mopkotsong. These two large, high-grade mines have excellent margins, transforming the Harmony portfolio. We expect these operations to deliver up to a 25% operating free cash flow margin over life of mine. As planned, production was flat year on year on these mines, operating free cash flow from these operations increased by 7% to just over R1 billion. We had a very strong performance from Mpuneng with recovered grade, improving by 6% to nearly 8 grams per tonne in the first half. And it's also worth highlighting that second quarter grades at Mpuneng increased by 20% to 8.7 grams per tonne, whilst the all-in sustaining costs increased by 7% to R814,000 a kilogram. Due to the high grades, these mines continue to offer excellent operating free cash flow margins. At Moukotsong, the major Zyplats project development is well underway. This is one of our key projects and extends the life of mine to 22 years. Once completed, Zyplats would further lower the oil and sustaining costs over life of mine due to the high reserve grades of approximately 9 grams per tonne. At Mpuneng, pre-feasibility studies are progressing well to determine whether we can convert the 24 million resource ounces into reserve. And further feasibility studies to mine the Savuka and Tautona shaft pillars are also underway. Harmony surface source operations remain high margin and low risk assets with strong future cash flows. As planned, operating free cash flow decreased due to the major capital deployed at Mineway Solutions for the extension of the career round project. In financial year 25, a quarter of mine waste solutions production will no longer be subject to the streaming agreement with Franco Nevada and will be sold at spot gold prices. This will substantially increase revenue from mine waste solutions each year. Surface source production decreased by 12%, mainly due to the depletion of waste rock dumps. and all-in-sustaining costs thus increased by 25% to just over R800,000 a kilogram, mainly because of inflation increases in the price of reagents. Combined operating free cash flow margins of our SA surface operations are expected to normalise at approximately 24% over life of mine. In addition, studies to determine the feasibility of extracting over 5 million ounces in mineral resources from old free-state tailings dams are progressing well. Lastly, let's touch on our international portfolio. Production from Hidden Valley Mine increased by 6% to 1,983 kilograms, while all-in-sustaining costs increased by 10%. These high oil and sustaining costs resulted in a negative operating free cash flow of R68 million in the first half of the financial year. The primary driver behind the high oil and sustaining costs were the ongoing waste stripping as we accessed the high-grade areas at Big Red and Cavaroy and an increase in diesel consumption as a result of on-site power generation. This was due to the prolonged drought in PNG. which negatively affected hydroelectricity grid supply. We do, however, expect operating free cash flow margin to normalize between 30% to 40% over life of mine. In line with our growth strategy, we're pleased that we concluded the acquisition of Eva Copper in Australia in December last year. The update of the feasibility study is underway, and we expect to have this completed before the end of the calendar year. We've also made progress on Wafi Goldpu regarding the potential terms of a mining development contract, which is required for a special mining lease. The parties are working to align on a range of fiscal and non-fiscal matters, and active engagement continues towards finalising the detailed terms of the mining development contract. I will now hand over to our Financial Director, Boepela Lekubu, to discuss the financial performance in the first half of this financial year. Thank you.

Thank you, Bayers and Peter, and good morning to all. Please note that all U.S. dollar figures are included in the annexures. Harmony reported a strong financial performance in the first half of the financial year 2023. Revenue increased by 6% to 23.3 billion rand from 22 billion rand and headline earnings per share increased by 18% to 293 SA cents. EBITDA decreased by 12% to 8.1 billion from 9.3 billion rand. Due to the major capital projects, there was a 14% decrease in group operating free cash flow to 1.9 billion from 2.3 billion rand. This was expected as we invest in quality ounces and higher margins. However, this figure was boosted by good recovered grades and the higher average gold price received. The acquisition of Eva Copper, which costs US$170 million or R3 billion, was funded using available facilities. This resulted in net debt increasing to R4.7 billion from R757 million. Net debt to EBITDA is still at comfortable levels below one times and well within our covenant thresholds. Net free cash flow declined 73% to R338 million from R1.3 billion, mainly as a result of the Bambinani closure, the Tsepong North restructuring and mergers and acquisition costs attributable to Eva Copper. Harmony's dividend policy is to pay a return of 20% of net free cash generated to shareholders at the discretion of the Board of Directors. As Harmony invests in margin expansion, life of mine extension and various other growth opportunities, it is prudent to maintain a strong balance sheet and good liquidity. A decision has therefore been taken to not pay an interim dividend for this reporting period. Cash operating costs in the first half of the financial year 2023 increased by only 6% to R17 billion from R16 billion in the comparable reporting period. This increase is below inflation and importantly below 8% used in our planning parameters. The closure of Bambanani reduced annual cash operating costs by R612 million. Total labour costs, which represents 42% of cash operating costs, increased by only 3% in this half compared to the comparable reporting period. This was mainly due to a reduction in the number of employees who left Harmony, either voluntarily or for medical reasons. Consumables, which represent 27% of cash operating costs, increased by 26%. This increase was driven mainly by diesel at Hidden Valley and other inflationary increases such as reagents. All other cost increases were in line with our inflationary forecasts. Addressing energy security has been an increasingly important focus area for all companies operating in South Africa. Our energy efficiency program has resulted in over 1.4 billion rand in cost savings since 2016. We are looking at further optimizations, especially at our newly acquired assets. We've been able to make use of excess capacity to ensure limited impact on production during load curtailment. This includes making use of the large dams for water storage, hoisting during off-peak times and stockpiling. Our renewable energy program is also progressing well. In addition to helping with our decarbonisation efforts, these projects will lower electricity costs, alleviate pressure on the grid and lower energy supply risk. We anticipate full commissioning of Phase 1 of 30 MW by the end of the financial year. Feasibility studies have been approved for the 137 MW Phase 2 project, with construction expected to commence soon. The first 100 megawatts will be on balance sheet and largely funded using the 1.5 billion or 88 million US dollar green loan and is expected to be completed in September 2024. As with phase one, the remaining 37 megawatts will be delivered under power purchase agreement. Moving to our balance sheet, The acquisition of Eva Copper has resulted in an increase in net debt to EBITDA from 0.1 times to 0.6 times. We're very comfortable at these levels, and it's important that we utilize our balance sheet to grow and create value in the long term. Since 2018, we've been actively growing our business through value accretive acquisitions. Net asset value has increased by 23% since 2018 through effective use of capital. Our strategy remains to allocate capital in a manner that will continue benefiting all our stakeholders. With $4.5 billion in available headroom through cash and available facilities, our balance sheet remains flexible. I'll now hand back to Peter to conclude.

Thank you, Boipelo and Bayer. In conclusion, the Harmony growth story presents an incredible opportunity for all our stakeholders. As Boipelo mentioned, Harmony creates shared value through its clear and effective capital allocation strategy. We have prioritized capital to drive safety and improvements as we aim for zero loss of mine. We are investing in inorganic growth to build a pipeline of projects which we can take up the value curve. In addition, capital has been redirected towards the high-grade and higher margin projects. And we have a clear set of investment criteria on which all projects are ranked. All projects or acquisitions must, first of all, lower our overall risk profile, including ESG risks such as safety and climate change. Improve margins by targeting acquisitions with an all-in sustaining cost of less than $1,250 per ounce. And the projects must generate real internal rates of above 15%. And then lastly, improve the production profile of Harmony. We have a clear roadmap to drive margins expansion over the next few years. This slide illustrates a timeline of key projects to further help us deliver on our strategy of safe profitable ounces. This sizeable brownfield investment in South Africa and greenfield opportunities internationally will improve margins over time. Our project pipeline dovetails ensuring capital allocation remains affordable and effective. Harmony is a 1.4 to 1.5 million ounce specialist gold producer with a growing copper footprint. Our strategic objective is to produce safe, profitable ounces and improve margins through operational excellence and value-accretive acquisitions. For the remainder of this financial year, the following focus areas are key to our meeting these objectives. First of all, continuing our safety initiatives as we aim to zero harm remains a non-negotiable priority. We are progressing our renewable energy projects with feasibility studies approved for the 137 million megawatt phase two solar project and maintaining the momentum to meet the annual guidance at operations is of critical importance. Completing our projects on time and on budget is a key driver of value creation and we remain focused on a quality project execution. Delivering positive operational free cash flow through operational excellence will further drive value creation for all our stakeholders. We aim to continue taking Eva Copper and Wafi Gulpu up the value curve, while M&A remains core to our strategy. We are supported by strong partnerships with our stakeholders and we promote active engagement. By doing what we know best, we remain well in our way to deliver on our annual guidance as we continue to mine with purpose. I thank you, and we will now take some questions. So, Jared, you will guide us on that, so would you please guide us on the questions? Thanks, Peter.

I think we'll start with the audience. Start with you, Arnold.

Morning. Thank you very much. It's Arnold van Gron from NetBank. Two questions. First one goes to Bayers. Bayers, the grade variability at Moab, what's driving that? Is that a function of the ore body or is it other issues? Can you give us some comfort that the grades will stabilize going forward? And that's both Moab and Mpuneng. And then second question for Boy Pelo. No, it's probably tough to give an outlook, but what's your view on a final dividend at year end? Assuming the gold price stays where it is now. Let's work that in. It makes it easier. Thank you.

Yeah, thank you, Arnold, for the question on the grade variability. I think it's spatial in nature. And if I can first speak to Moab Kutsong, I mean, we've got the middle mine section, which we're mining there, which is the gold pot. That's the primary driver of the good grade at Moab. So flexibility in the middle mine, good mining practices, clean mining practices, and maintaining the correct mining mix in the middle mine is the key driver of good grade management at Moab. And, you know, we're fairly comfortable that our icebergs, which is our flexibility tool, is well maintained at Moab. Umpuneng, again, I would say spatial in nature. You know, we're moving the mining front on the two levels, 123, 126, obviously further out to the east and the west of the mining perimeter. The 123 mining fronts are in the high-grade lobes. The 126 fronts are approaching the high-grade lobes. So from that perspective, we're fairly confident that as mining progresses, the mining fronts, the good grades will be maintained. The other two common denominator between the two mines is seismic response to mining. So if you've got spatial high-grade areas, it's important to manage the seismic response of mining. So, you know, the rate at mining, the tempo of mining, you know, not over-congesting areas where you've got high-grade is key in managing the average mining grade. So, yeah, seismicity and making sure that the mining volumes, mining mix and flexibility in those key areas at the two different mines are maintained at all times. So, yeah, confident on the grades at those two high-grade mines. Thanks, Anand.

Thanks. On the dividend, I mean, our dividend policy is quite clear. However, it is at the discretion of the board. We did have free cash generated, and I do foresee that we'll have that in the second half as well. However, if you look with the acquisition of EVA, our net debt to EBITDA pushed up to 0.6. Obviously, we're trying to maintain that below 1%. And given the capital requirements for EVA, et cetera, the decision at this stage was not to declare. I can't guide on whether or not a final would be declared.

Thank you very much. I'm the shareholder, just a micro shareholder. Two questions for me. One is around, for instance, what Peter has presented in terms of the renewable energy programs. And then one would be interested to say, how are those comparing, especially with the current situation that we're going through in South Africa? How are those comparing in terms of the cost of capital and also the risk premiums that is asked by investors compared to the other conventional energy sources that we had in the past? And secondly, the impact of them in terms of the working capital. And the second one is mainly on the operations to say what may be in terms of providing or achieving the operational excellence that, Bayaz, you've talked about. How has been the investment by Bayaz? a harmony in terms of ensuring that they use the latest digital technologies to complement the existing operational technologies. Thank you.

You can go first.

Yeah, thank you for the question. I can take the second part of it with your permission, Peter. So when it comes to deep level conventional mining, I think, you know, as a premise, there's no silver bullet in technology necessarily. But we have got a very strong business improvement platform actively operating in Harmony at the moment. And we're looking at more micro-level technologies to progress things like you know, more, you know, mechanical excavation of rock, manless box holding, logistics improvements with the use of technology, you know, people tracking technology, you know, locomotive technologies, et cetera, et cetera. So, yes, very active in the technology space. We are, however, you know, making sure that the technology is fit for our application, which I think is very important. Another area of technological advancement is maybe in the modernization of our safety protocols. with the Harmony Risk Management and the Miners' Work Note. So, you know, what you would have seen on a mine 10 years ago around a paper-based safety system is pretty much now converted into a modernized digital safety system that presents information in as close as possible to shift Miners' One in real time. So you get information in the hands of people to make, you know, employees to make, you know, better safety decisions with the use of technology. So, yes, you know, actively, you know, keeping an eye on what is happening in the technological space and, you know, through the business improvement platform trying to be, you know, stay abreast and to implement where we deem appropriate for our conditions at Harmony.

Yeah, on the solar, I mean, you can also refer to just in the next slide, 38. So the first 30 megawatt, that's obviously with a PPA, so off balance sheet. And there we anticipate to have about approximately 30 to 40 million in electricity cost savings. The second phase, the 137 megawatt will be a combination. We have a 1.5 billion rand green loan. And so 100 would be utilized on balance sheet with that and the remaining 37 with a PPA. And those savings are estimated at around 395 million rand in line with the feasibility study.

Good morning. It's Leroy from HSBC. My first question is relating to your dividend policy, right? So some of your peers pay a percentage of earnings. Some of them pay free cash flow before growth, CapEx. Yeah. And I understand that you adhere to your policy, but by implication, it shifts your shareholders down the pecking order quite a bit because acquisitions and growth capex comes before the dividend. Maybe just your thinking around that and, you know, if it is an appropriate policy. And then coupled with that, Does the dividend matter? So if you were to pay a dividend versus not pay, do you believe that, you know, you'd re-rate or trade on a higher multiple? And then on Wafi, if... If there's a change of ownership with your partners and that asset is no longer key to the broader portfolio, would you have the capacity to develop that yourself, both financially and in terms of expertise? Yeah, I'll leave it at that for now. Thanks.

I'll start with the dividend. I think our policy is, it is, what's the word? We believe it's substantial. We did benchmark it against what other mining houses are doing. So 20% of free cash, we believe is appropriate. We did indicate, you know, that when the board considers their discretion, what they look at, major future capex, which, you know, again, I'm giving the argument of EVA, net debt to EBITDA being below one, obviously the normal companies act requirements. So, you know, we were sitting here last year and we declared a dividend and shareholders were up in arms because we didn't generate cash in the last half of that financial year. So we're sitting here again. We're not declaring shareholders are up in arms. I think what I'm trying to say is we obviously have to do what's right for the company. And given what's facing ahead of us, the decision at this time was not to declare a dividend.

But I think obviously our intention is always to, where we can, to pay a dividend. So we do want to be a dividend payer, a consistent dividend payer. That's the intention. I'll take the discussion on Wafi Golpu. Yes, obviously we take note of the corporate action that's currently between Newmont and Newcrest. There's obviously a very long, in my view, quite a A lot of water need to go into the sea before it's actually being finalized. So what are the legal stones of that? If there's a new owner of Wafikolpu, a portion, 50% currently, and is up for sale, we have the right of first refusal as Harmony. But, I mean, you know, there's such a long period of time still and things happening. You know, I think Wafi Golpu is a key long-term project for Newcrest. So whoever takes it over or, you know, if there's corporate action, most likely would like to, you know, actually monetize that. So... So yes, but I mean, that is a legal stance. I mean, if it's up for sale by a partner or Newcrest, we have the right to first refusal as Harmony.

Thanks, Peter. Just a follow-up. Do you have a sense of what you'd be willing to pay or what it's worth to you? Sorry, do you have a sense of what you'd be willing to pay for what it's worth to you?

No, we don't even think, we don't break our head with that now. I mean, that's still a long way before we get to a point of discussion. And again, like I said, we had to write the first refusal, so it depends on what everybody else is prepared to pay. So are we prepared to pay an equal amount? But I mean, that's just a legal stance in terms of where we are. But we're not, you know, we're not break our heads about that now.

No, fair enough. And then maybe if I could sneak in one more question, please. I understand that load shedding is a challenge for you as well as your peers, but you seem to be managing it a lot better, or at least are a lot less vocal about it, or load curtailment. Do you have a sense of what you are doing differently, or could you maybe share some of the measures you have in place to help you sort of deal with that?

Yeah. You can never underplay the... impact that load curtailment do have on us I mean it do have a massive impact and we have to constantly be able to maneuver make plans you know people work and I take my hats off to Bayes and his team especially the engineering fraternity within Harmony that are able to juggle all the balls in the air and to do things I think like anything else in life, you can scream about the external factors that impact you or you can make a conscious decision that you will not allow it to impact on you as a thing. Now we do have the luxury in harmony and that is we're very fortunate that most of our minds are underground minds and we can play a little bit around with things. Like for instance, If we have six pumps running at Mpuneng pumping water, we can switch one or two off and pump with four for the time being and then, you know, catch up again when there's no load containment to take things up. You know, I think it's quite difficult if you have an operation that has got one crusher, one conveyor belt, a plant that's in line, and you have to curtail costs. You know, how do you do that? I mean, you actually can't switch a part of that off. So we do have a little bit more flexibility. If we have three fans running an underground mine, potentially at night we can switch one of them off and it will have an impact on conditions underground, but not as big as when we switch it on again at a period of time. So we can play around with what we've got. So we've managed to get through this set of results. without any impact on the results. I mean, we actually got through it, you know, I think fairly unscathed if you compare to many of our peers in the market. But it's not to say that it is not difficult. It is very difficult and it is very time-consuming and obviously in day-to-day management we have to deal with it. And so we also, like anybody else, are very keen for little curtailment to come to an end to find ways of actually take some pressure off the grids so that we can operate and operate properly. So like anything else, we are in the same boat. But we managed to get through it, and where we are now in the second set, we're still managing it without having too much impact on our operations. But again, I think it's more on the back of that we have the flexibility. We have obviously installed in capacity that is that is built for much bigger mines than we currently operate. So we have enough pumps on the ground, for instance, by just an example, on a mine that we can pump the water out in shorter periods than we're currently creating in the mine. So we do have this little bit of flexibility. But again, it is about, I think, a lot about attitude. You're not allowing to have an excuse or let an external factor impact on your results. I think it's an important attitude to have.

It's Mark from Oyster Catcher Investments. Perhaps, do you have any timelines for the EVA copper project feasibility? And then the second question is just clarity on, I mean, you said that currently you are managing with the current load called curtailment. Is that, you know, in this past month, are you still, is that still the case?

No. I'll get the second one first. I think we're still managing, you know, as much as we, like I said, it is a day-to-day constant, you know, take a massive effort, but we're still managing. So we don't think, you know, for this set of results that are coming that we will have, that road containment will have a massive impact on the outcome of those results. On the EVA, I mean, obviously, we just took over. So it was really on the 17th, I think, Armand, it was the 17th of December. We paid the money and we actually took, you know, offers and started to use. So the first step is really to redo the feasibility study. That by September, around about that time, we should be finished with that. on the feasibility study. You know, we've obviously started with all reserves and those kind of things, and then obviously that goes into the next phases of the feasibility study. We don't think there's any flaw in what we bought. As a matter of fact, I believe there could be some upside in that. So... So at the end of the day, you know, we're probably targeting the end of this calendar year to have in a situation that we can take it to the board for, you know, for decision on, first of all, you know, the skills of that. And then secondly, obviously, also, you know, how we're going to fund it, you know, so if we want to build that. So there's obviously a toolbox of different things. different options to fund it. And it is a short mine that's going to be built in two years. It's in the copper space. There's a lot of, I would say, interest from financiers to be part of it. So we don't foresee a problem to find a way of building the mine now, if we approve it.

All right, I just want to find out, are there any questions from those who may have dialed in?

Yes, we do have questions from the conference call. The first question is from Adrian Hammond of SBG Securities. Please go ahead.

Hi, Peter. Yeah, I just want to ask the thinking around the broader strategy for the group. You've described yourselves as a proper gold producer. What other assets are you looking at? Would you diversify into other metals than copper? And then just for Boy Pelo and the options for ever funding, what are you considering? And can you give us a ballpark capex for that project, please?

Adrian, yes. Yeah, I think, you know, we obviously, like I said, in 2004, we got involved into copper by default buying, doing Wafi Golpo, or, you know, our intention to do Wafi Golpo. So, you know, we will be a copper producer, you know, mostly Wafi Golpo is more a copper producer than a gold producer. Um, so, so that obviously brought us into copper. EVA is an operation that, you know, created an opportunity. We are comfortable with, with copper. Other metals, uh, not at this stage, no. Um, we kind of want to stick to gold copper, but I think like anything else in life, you know, it's like, uh, yeah, you know, as I say, if you're a rugby player, you, you have to take the gap that's in front of you sometimes. And, um, If there is an opportunity, and I don't foresee it in other precious metals, or we don't necessarily believe that we will ever be a coal producer or something like that, that will be totally out of our league. But gold, copper, we're comfortable with. Probably other precious metals will be okay, but we... We are not looking at anything at this point in time, so please don't start a rumor that we are going into platinum. But, you know, if an opportunity do come to our things, we probably will consider that. But I'm comfortable with those two. And they are, you know, in most of the ore bodies that you're going to find going forward, they are actually present in the same ore bodies, like both gold and copper, like we do have with Wafi. And most likely there will be some more that we will have gold and copper in the same ore bodies. So yes, we're comfortable with that.

Yeah, just on the EVA funding, I mean, we were guided in the due diligence with $600 million thereabout. But obviously, as Peter said, the feasibility is being refined. So that number will be refined. And in terms of options, I mean, it could be a combination of things, Adrian. We just have to see how we can make it work, you know, possible bond options. equity, project finance, et cetera. There's a number, but obviously it will need to be optimal for that and for us.

So we look forward to that. And well done on a good operating performance. Thanks. Thanks, Adrian.

Any other questions on the line?

Yes. The next question is from Jared Hoover of R&B Morgan Stanley.

Hi, Peter and Tim. Thanks for the call. Got a few questions, maybe just following up from Adrian's one. Obviously, you have rebranded yourself over the last 12 to 18 months as a copper gold play. Very recently, you've had an organizational restructure internally. And if I'm not mistaken, I think your business development team does now sit in Australia. So should we be thinking of you as having a much more aggressive push into M&A than maybe you have been historically? And potentially with the 20% electricity increase in South Africa, does it also mean that you might have to shorten some of your mine lives and potentially close some of your mines in South Africa in the not too distant future? So that's my first question. Then my second one is for the first half of the year, you've done about 50 to 53% of your full year production guidance. And the second half typically is seasonally softer, but you've had a good startup post-Christmas. completely offsetting the load shedding impact and Penang is going into good grades. Are there any assets in the portfolio that you foresee having a materially weaker second half? And maybe if you can just talk to specifically your expectations around target and hidden value in the second half of the year. And then my last question for Boipelo, I picked up a few headlines that suggested Papua New Guinea is having some FX shortages. Can you just comment on your ability to extract cash from that country? I'll leave it there. Thanks.

Okay. Let me quickly – thanks for the questions. Yes, we did have a restructuring. BIOS is now in charge of all operations. That's also obviously in anticipation of having a – you know, operating significantly in more than one part of the world. And so Pius is now the group chief operating officer. And we obviously will look at, you know, filling up some positions, opening up opportunity in South Africa to have both a South African and also a person in in Southeast Asia to run it over time. Yes, our new business team is in Australia. We found that it is... probably a little bit better there in terms of operational-wise. There's a lot of more action happening in Australia, and from the Brisbane office that we have there, it's for Johannes quite easily to do it. But Johannes is also responsible for the building of the new projects, which will be EVA and Wafi Gopu when that actually goes starting. So it's an operational role and obviously also an M&A role that he will fulfill there. So He's going to have his hands full. He's obviously capacitated with some very good people in terms of project building skills and obviously also on the M&A side through his team that he's got there. And we will strengthen that also from South Africa and be operating there. So, yes, then if one look at... In terms of how we look at our planning cycles and where we actually do, we actually every year look at our life of mine plans. We then obviously populate our expectation of costs and those kind of things into that. We then determine what we say cut-offs. And, you know, if the cost pressures get too high, the cut-offs get higher, then there's reserves that actually then, you know, become unmineable. So we have to constantly find a way of trying to get our costs down. And, you know, like for instance, you know, electricity or energy increase, high energy increases, you know, have impact on terms of determining cut-offs. So we cannot forever just absorb electricity. The higher energy increases will have an impact on Harmony, and it will certainly shorten the life of mines of some of the operations. And so, yes, so we are very diligent in terms of making sure that we have the right cutoffs. We are very conservative in our outlook and price, because I think, you know, in the past, Harmony, those of you who remember many years ago, had some scratches on our backs because we obviously followed good prices and believed that those will be the norms. We were very conservative in our prices and obviously very conservative in our costs that we put in. So that determined where we develop, what we deliver, what we put into reserves and what we actually then put back in resource. So in the end of the day, having a very high inflation rate will have an impact in terms of the life of mine, of the mines. But yes, again, to say we always said that we are active in the Southeast Asia area, which includes Australia and obviously Papua New Guinea and those parts of the world. And South Africa, but also continental Africa, is still an ambition for us to find the right entry point and the right way of doing that. And we will constantly be looking at that. And being honest, his M&A leg that he's got there is actually in the right space as far as that's concerned. Where would you take maybe the whole thing about the target in Valley and then also the outlook for grades of production going forward?

Sure, Peter. Jared, thanks for the questions. I'll start with target one. As guided previously, we're in the process of completing the recapitalization project. And just briefly... What the recapitalization project entails is to move the crusher, the underground crusher, further down the mine, closer to the mining block. The idea with that is that you'd have shorter cycle times for your dump trucks and you would have lower operating costs. At the moment, we've got full dump trucks driving a long road up the decline to get to the old crusher. And obviously, that's hard on your mining vehicles. You know, kit don't last. And obviously, OPEX is expensive. So Target is a disappointment in terms of the performance we see. But we do know and as guided previously that, you know, Target would, you know, would turn around once the infrastructure is in place. And we've got it that the infrastructure would be completed by our Q4 financial year. So basically, you know, at the end of the middle of the calendar year. you know, we would be completed on that. Eden Valley, we expect a much better, you know, quarter four financial. And it is a function of spatially where we are in the pit. We were, you know, as discussed earlier today, you know, a little bit slow on the stripping. So spatially in the pit, we are a little bit higher up in the pit financially. in terms of where we would have wanted to be. But we do know that we've got the two areas, which is Big Red, you know, the one high-grade lobe, as well as the Cavaroy area, which is the good grades. And as we get the mining fronts or the benches into those areas, you know, we know we'll be good on grade. The mole has been performing very well at Eden Valley. In actual fact... You know, there was record tons processed in December months at the mine. So, you know, it's not a function of, you know, the mole or the hauling. It's actually a function of breaking the right grade and mining it in the pit and getting it through the system. So, you know, having said that, you know, we're confident that we get into the better mining grades. Eden Valley would perform better than what we've seen in the last period.

Yeah, but we will stick to our guidance. I think it's, you know, let's just stick to that guidance. We will not change anything as far as that's concerned. I know we did 53% of our production in the first half, but, you know, we always have the impact of the Christmas break is normally found in the second half of the year. So we'll stick to the guidance.

Just on P&G, no, we have not experienced any issues in terms of getting money in or out.

Okay, thanks, Tim. That's all from me.

Okay, I've just got – I think we're going to finish up there with the calls. I've just got two questions that have come in on the webcast. The first one is from Vizio, from Yandre Peterson, asking about our underground grades, which increased a fair amount, but full year guidance implies a possible decrease in the second half. Were you intentionally high grading in response to the high prices? And do you expect the higher grades to remain? protected.

Thank you, Yandre. I'll take it. We stick to our grade guidance. In the reporting period, we had exceptionally high grades at Mpuneng, higher than the planned grades in actual fact. So no, no intention to necessarily high grade or anything like that. Again, it's just where we are in the ore body and we maintain our grade range in terms of the guidance.

Thanks, Per. And then the last question is from Morotori Capital, Teleki Teleki. A question on the S300 strategy and in just terms of the implementation of that strategy and what are the limitations and challenges that we've experienced so far? Second question is in terms of face grade versus recovered grade and is that ratio widening or narrowing?

Good again, Bayer. Thanks for the questions. I'll start with S300. So S300 is the business improvement platform that I've referenced in the questions we had earlier. So what it stands for is S Safe 300. So we want each of our conventional underground crews to produce 300 square meters per crew per month safely. Now, we didn't put the S on the back of the 300. We put the S in front because it's safe production, safe S300. So when we started this off, our crews were doing in the region of about 240 square meters per month as a mean across the SA operations. So it was that shift from 240 to 300. Now, our run rate at the moment is up to 260 to 270. So we've got that last little bit to go. And if you translate it into, you know, miners' language, it's that extra one and a half blasts that we're looking for. And how we structured the S300 process is to look at some technology drivers, some people aspects, you know, some technical aspects that relate to a productive sloping environment and to really... you know, resource energy around improving the environment in order for people to be successful, whether that be, you know, the use of localized hydropower to improve drilling cycles for, you know, conventional rock drill operators, or whether it be, you know, longer or shorter shift cycles or longer shifts or different operating shift environments. You know, there's a whole spread of many little projects that we're trying to drive to facilitate the growth to S300. I mean, because we are, you know, as leveraged to the gold price as we are in South Africa, we do know that any productivity improvement is obviously a cheap ounce to produce extra. So, you know, a whole effort going around productivity improvement, and we've just coined it S300 to make it tangible. Just remind me of the next question, please, Jared.

The face grade versus recover grade.

You know, the face grade versus recovered grade, you know, that gap is actually narrowing. And, you know, it is narrowing because of good quality mining, which we always proud ourselves on. The COVID period had some, you know, drag on that. You know, we didn't have all our people back. But, you know, we've got all our crews in now. Vamping levels are picking up nicely. So we are getting some of our old gold back into the system. So you're certainly comfortable, you know, where the ratio is, you know, face to face to recover. You know, those metrics are looking good.

Good. I think that concludes this part of the presentation. Obviously, there's a lot of executives around. So if there's any questions, please be free to ask them. And thank you very much for joining us. I know it's very difficult through load shedding to get through all the traffic jams to get here. We really appreciate you joining us and have a safe trip back to wherever you come from. Thank you.