Safe-haven Demand And Renewables Will Unlock Lasting Potential

Key Takeaways

• Elevated gold demand, disciplined operations, and proactive cost controls position Harmony for sustained margin resilience and strong cash flow generation.
  
• Strategic project ramp-ups, copper acquisitions, and renewable investments diversify earnings and enhance long-term growth prospects.
  
• Rising costs, production declines, project delays, and reliance on aging mines heighten operational risks and threaten Harmony Gold's margin stability and long-term earnings outlook.

Catalysts

Engages in the exploration, extraction, and processing of mineral properties in South Africa, Papua New Guinea, and Australasia.

• Sustained demand for gold as a safe-haven asset amid persistent global inflation, geopolitical instability, and increased central bank allocations is likely to support high gold prices, providing tailwinds for Harmony's revenue and margins over the long term.
  
• Structural portfolio improvement via ongoing ramp-up and optimization at high-quality, long-life projects like Wafi-Golpu and the acquisition of MAC Copper and Eva Copper is expected to boost future production volumes and diversify earnings, positively impacting top-line growth.
  
• Harmony's strong operational discipline-reflected in 10 years of meeting production guidance, consistently high recovered gold grades, and rigorous cost control-suggests future margin resilience and stable free cash flow generation.
  
• Planned investments in renewable energy (such as the 100MW solar plant at Moab Khotsong) and continued cost optimization initiatives can counteract input cost inflation and improve net margins over time.
  
• The tightening global supply of new large-scale gold and copper discoveries, coupled with rising barriers to entry (from ESG and regulatory demands), positions Harmony's existing reserve base and sustainability credentials to capture higher prices and protect long-term earnings growth.

Harmony Gold Mining Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Harmony Gold Mining's revenue will grow by 11.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 19.5% today to 30.6% in 3 years time.
• Analysts expect earnings to reach ZAR 31.7 billion (and earnings per share of ZAR 49.46) by about September 2028, up from ZAR 14.4 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 8.8x on those 2028 earnings, down from 11.7x today. This future PE is lower than the current PE for the US Metals and Mining industry at 14.8x.
• Analysts expect the number of shares outstanding to grow by 0.13% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 17.72%, as per the Simply Wall St company report.

Harmony Gold Mining Future Earnings Per Share Growth

Risks

• The company's higher recent grades, particularly at Mponeng, are described as temporary outperformance rather than a sustainable trend; as the mine moves out of current high-grade zones, grades are expected to revert to reserve levels-potentially falling from current highs toward 9 grams/tonne even within the next two years. Lower average grades will decrease revenue and compress net margins as cost per ounce rises.
  
• Sustained, structurally higher all-in sustaining costs (AISC) are noted across operations, with costs guided to rise further in the coming years (driven by mining inflation, higher sustaining capital, and rand appreciation). This cost escalation threatens overall margin resilience, especially if gold prices weaken or do not keep pace.
  
• Delays in major expansion projects such as Wafi-Golpu have resulted in significant opportunity cost, with no near-term resolution certain; continued access and permitting risks in Papua New Guinea may limit the company's ability to grow production and diversify revenue, reducing medium-term earnings growth.
  
• The company anticipates a decline in production at key assets (like Moab Khotsong dropping from 6 tonnes to 4 tonnes between 2027–2031 and the tapering of older "optimized" assets). Unless new projects (e.g., MAC Copper, Eva Copper) ramp up seamlessly and on time, this could lead to an overall reduction in gold equivalent production and cash flow, negatively impacting long-term earnings visibility.
  
• The increasing reliance on aging South African mine infrastructure exposes Harmony to mounting operational, safety, and cost risks-particularly as labor and electricity (comprising 72% of costs) face inflationary pressure and as safety stoppages (already impacting production volumes in FY25) continue; these structural headwinds could result in higher unit costs, more frequent operational disruptions, and increased earnings volatility.

Valuation

• The analysts have a consensus price target of ZAR275.0 for Harmony Gold Mining based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ZAR320.0, and the most bearish reporting a price target of just ZAR220.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ZAR103.6 billion, earnings will come to ZAR31.7 billion, and it would be trading on a PE ratio of 8.8x, assuming you use a discount rate of 17.7%.
  
• Given the current share price of ZAR270.72, the analyst price target of ZAR275.0 is 1.6% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.