Executive Summary / Key Takeaways

• Harmony Gold Mining Company Limited ($HMY) is undergoing a significant strategic transformation, evolving from a South African gold specialist into a diversified gold and copper producer, with copper projected to constitute approximately 40% of production by FY 2035.
• The company has demonstrated exceptional operational consistency, marking its 10th consecutive year of meeting production guidance in FY 2025, driven by disciplined cost management, high-grade asset acquisitions, and a robust safety culture.
• Harmony's financial health is robust, evidenced by record cash flows, a 285% surge in net cash to ZAR 11.1 billion in FY 2025, and a strong balance sheet with ZAR 20.9 billion in available liquidity, enabling self-funded growth and consistent shareholder returns.
• Key growth catalysts, including the MAC Copper acquisition (expected to close October 2025) and the Eva Copper project (Final Investment Decision expected late 2025), are set to significantly enhance margins, diversify commodity exposure, and provide a natural hedge against gold price volatility.
• While geopolitical and operational risks inherent in deep-level mining and international projects persist, Harmony's specialized mining expertise, disciplined capital allocation, and strategic focus on high-quality, long-life assets position it for sustained value creation in a market increasingly demanding both gold and future-facing metals like copper.

A Legacy Forged, A Future Diversified: Harmony's Strategic Evolution

Harmony Gold Mining Company Limited, incorporated in 1950, has built a formidable legacy over 75 years, primarily as a gold mining specialist in South Africa. This deep-rooted history in the Witwatersrand Basin has provided the foundational expertise for its complex deep-level underground operations. However, the company is in the midst of a profound strategic transformation, moving beyond its traditional gold focus to embrace a significant international copper footprint. This evolution is not merely an expansion but a deliberate re-engineering of its portfolio to enhance resilience, diversify commodity exposure, and capitalize on global demand for future-facing metals.

The company's strategic shift, particularly since 2016, has been characterized by disciplined capital allocation and a relentless pursuit of operational excellence. This has involved a series of value-accretive acquisitions, notably Mponeng, Moab Khotsong, and Mine Waste Solutions, which have been "transformational" in elevating the quality and grade of its asset base. These acquisitions, coupled with internal life-of-mine extension projects, have been the primary drivers behind Harmony's consistent operational performance and expanding margins.

Harmony's operational model is structured around four distinct quadrants: South African High-Grade Underground Operations, South African Surface and Tailings Retreatment Operations, International Copper-Gold Portfolio, and South African Underground Optimized Assets. Each quadrant plays a specific role in the company's growth strategy, from generating significant free cash flow to funding future expansion. This balanced approach allows Harmony to optimize value extraction across its diverse asset base while managing inherent risks.

Specialized Mining and Operational Excellence: Harmony's Differentiated Approach

Harmony's competitive advantage is rooted in its specialized mining skills and operational methodologies, particularly in deep-level, technically demanding environments. The company's "proven expertise in underground mining and exploration" is a critical differentiator. At operations like Mponeng, Harmony employs a "sequential grid mining method," described as a "very rigid mining front" designed to ensure safety and mitigate geotechnical events and seismicity. This meticulous approach to mining in challenging conditions underscores its commitment to safety and operational stability.

Beyond specific mining techniques, Harmony leverages "digitalization and modernization" through "real-time dashboards to monitor and continue improve these leading indicators" for safety. This proactive safety culture, focused on leading indicators and faster A-Hazard closure times, is integral to its operational excellence. The company's "Iceberg philosophy" for flexibility planning further enhances its ability to manage operations predictably and consistently. These integrated operational and safety systems contribute directly to consistent production, improved grades, and effective cost control, forming a crucial "so what" for investors by reducing operational risks and enhancing profitability in complex mining environments.

Competitive Positioning and Market Dynamics

Harmony operates within a competitive global mining landscape, vying with major players like Barrick Gold Corporation (GOLD), Newmont Corporation (NEM), AngloGold Ashanti Limited (AU), and Gold Fields Limited (GFI). While these competitors often boast larger global scales and broader technological integration, Harmony distinguishes itself through its specialized expertise in South African deep-level gold mining and its strategic pivot to copper.

Harmony's regional focus in South Africa, particularly its long-standing presence in the Witwatersrand Basin, provides a unique advantage in navigating complex geological conditions and fostering strong local relationships. This localized operational expertise can translate into lower risks and potentially better capital efficiency in familiar territories. For instance, its surface retreatment operations, a "quiet powerhouse of low-risk and high-margin cash," represent a significant ESG story with the potential for "another 100 years of hydro mining across South Africa."

However, Harmony's regional concentration also presents vulnerabilities, as disruptions in South Africa could disproportionately impact financial performance. While competitors like Newmont emphasize advanced mining technologies and broader innovation, Harmony's strength lies in its refined operational methodologies and safety systems tailored for its specific assets. Its cost structure, with over 90% of operating costs rand-denominated and predictable wage and power tariffs, provides a natural hedge against global inflation, a competitive edge against peers with more diversified international cost bases.

Financially, Harmony's high-grade, high-margin assets are globally competitive, with the majority of its portfolio operating at an all-in sustaining cost below $1,500 per ounce and generating meaningful cash flow at strong margins. While its South African optimized portfolio currently sits on the higher end of the cost curve, the strategic shift towards higher-grade gold and copper is designed to naturally enhance overall profitability as higher-cost ounces taper down. The acquisition of MAC Copper and the development of Eva Copper are critical steps in this diversification, providing a natural hedge against gold price volatility and strengthening Harmony's exposure to future-facing metals within Tier 1 mining jurisdictions.

Stellar Financial Performance and Robust Balance Sheet

Harmony has consistently delivered a stellar financial performance, reflecting its strategic execution and operational effectiveness. In FY 2025, the company achieved record high cash flows, with adjusted free cash flow reaching just over ZAR 11 billion at a 16% margin. This represents a remarkable 54% growth in adjusted free cash flow, providing significant strategic optionality and derisking its capital program. Headline earnings per share rose by 26% to ZAR 23.37 per share.

The company's balance sheet has strengthened considerably, with net cash surging by 285% to ZAR 11.1 billion in FY 2025, a clear indicator of robust cash generation and operational excellence. Harmony's headroom expanded to ZAR 20.9 billion (over USD 1.1 billion in available liquidity), positioning it to fund its growth pipeline and pursue value-accretive acquisitions without compromising financial flexibility. The company's leverage ratio is projected to peak at a conservative 0.4x net debt to EBITDA even after the MAC Copper acquisition, well below its 1x internal threshold, making an equity raise "unlikely".

Revenue in FY 2025 grew by 20% to ZAR 74 billion, driven by operational consistency and a higher gold price received. Net profit jumped 67% to ZAR 15.6 billion, and EBITDA increased by 37% to ZAR 26 billion. This strong financial position allows Harmony to maintain a consistent dividend policy, having declared a record final dividend of ZAR 2.4 billion in FY 2025.

Operational Excellence and Growth Catalysts

Harmony's operational performance has been consistently strong. FY 2025 marked its 10th consecutive year of meeting production guidance, hitting the upper end at 46 tonnes of gold (approximately 1.48 million ounces). Underground recovered grades exceeded upward revised guidance, reaching 6.27 grams per tonne. All-in sustaining costs remained in line with guidance at ZAR 1.05 million a kilogram (about USD 1,800 per ounce), despite inflationary pressures and lower planned production.

The company's high-grade South African underground operations, Mponeng and Moab Khotsong, are central to its value proposition. In FY 2025, production from these mines increased by 8% to 16.5 tonnes, with grades improving by 10% to 9.89 grams per tonne. Mponeng, in particular, delivered a "phenomenal performance" with an underground recovered grade of 11.27 grams per tonne. The Board has approved the Mponeng life of mine extension project, which will convert over three million ounces into mineral reserves, extending the mine's life from 7 to 20 years and delivering an average steady-state production of 260,000 ounces per annum. This project, with an attractive real all-in sustaining cost of ZAR 768,000 a kilogram (or $1,290 per ounce), is expected to contribute approximately ZAR 2.5 billion per annum in cash flow.

The strategic diversification into copper is rapidly taking shape. The acquisition of MAC Copper Limited, owner of the high-grade CSA Copper mine in Australia, received shareholder support on September 1, 2025, and regulatory approvals from the South African Reserve Bank (August 5, 2025) and the Australian Foreign Investment Review Board (August 19, 2025). Harmony anticipates taking control of the asset towards the end of October 2025. This acquisition is immediately cash flow positive, adds approximately 40,000 tonnes per annum of high-quality copper, and offers over 12 years of reserve life, contributing around 2.8 million ounces of gold equivalents in Reserves.

Further strengthening its copper portfolio, a final investment decision on the Eva Copper project in Australia is expected later in the 2025 calendar year. Eva is projected to produce 55,000 to 60,000 tonnes of copper and around 14,000 ounces of gold as a byproduct annually over a 15-year life of mine. In FY 2025, Eva Copper Resources grew by 31%, and gold resources by 12%, bringing its total to approximately 8.6 million ounces of gold and gold equivalents. The Wafi-Golpu project in Papua New Guinea, a "Tier 1 copper-gold bulk block cave mine," remains a significant long-term prize, despite ongoing permitting delays. By FY 2035, copper from Eva, MAC Copper, and Wafi-Golpu is estimated to constitute approximately 40% of Harmony's total production.

Outlook, Guidance, and Risk Assessment

Harmony's FY 2026 guidance reflects consistency and confidence in its planning, targeting safe, sustainable operations. Production is guided to remain steady at 1.4 million to 1.5 million ounces, with underground recovered grades above 5.8 grams per tonne. All-in sustaining costs are planned to rise to between ZAR 1.15 million and ZAR 1.22 million per kilogram, primarily due to mining inflation and higher sustaining capital. Total capital expenditure is projected to increase to ZAR 12.95 billion, driven by fleet replacement at Hidden Valley and the advancement of projects at Moab Khotsong, Mponeng, and Mine Waste Solutions.

The company's track record of meeting or exceeding guidance, coupled with management's conservative planning approach, suggests potential for continued outperformance. Management views grade improvement as a "hedge against cost inflation" and emphasizes that it does not engage in "high grading" to achieve short-term gains, ensuring long-term sustainability.

Despite the positive outlook, Harmony faces inherent risks. Safety remains a paramount concern, with the company continuously implementing systemic changes and fostering a proactive safety culture to address risks like fall of ground in deep-level mining. Project execution also presents challenges, as seen with contractor issues at Moab Khotsong and Mponeng, though these have been addressed through internal mobilization and renegotiations. Geopolitical risks, particularly the protracted negotiations for the Special Mining Lease at Wafi-Golpu, could continue to delay the realization of value from this significant asset. However, management believes the asset is "worth the wait" given its Tier 1 status. Cost inflation, while partially mitigated by Harmony's rand-denominated cost base and predictable wage agreements, remains a persistent factor.

Conclusion

Harmony Gold Mining Company Limited is undergoing a compelling transformation, strategically pivoting to become a leading global gold and copper producer. Its deep-seated expertise in South African gold mining, combined with a disciplined approach to capital allocation and operational excellence, has yielded consistent financial outperformance and a robust balance sheet. The strategic acquisitions of high-grade gold assets and the aggressive expansion into copper through MAC Copper and Eva Copper are set to significantly enhance margins, diversify its commodity portfolio, and provide a crucial hedge against market volatility.

The company's commitment to safety, operational consistency, and long-term value creation, underpinned by its specialized mining methodologies, positions it favorably in a global market increasingly demanding both precious and future-facing metals. While risks associated with deep-level mining and international project development persist, Harmony's proactive risk management and strong financial footing provide a solid foundation. The successful integration of its copper assets and the continued optimization of its gold operations are critical indicators for investors, as Harmony aims to solidify its position as a gold-copper powerhouse, delivering sustainable returns well into the future.