Global Inflation And De-Dollarization Will Boost Gold And Copper Demand

Key Takeaways

• Expanded high-grade production, swift copper ramp-up, and tight cost controls position Harmony for substantial, sustained earnings and free cash flow growth above market expectations.
  
• Structural gold price tailwinds and robust capital discipline create significant upside potential, including transformational acquisitions and sector-leading profitability.
  
• Reliance on aging South African mines and shifting investor demand threaten long-term profitability amid operational, regulatory, and financing challenges across key geographies.

Catalysts

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

• Analysts broadly agree that expanded high-grade production and tight cost controls will sustain margin improvement, but with ramping copper output from Eva and faster reserve conversion at flagship assets like Mponeng and Moab Khotsong, Harmony is positioned for a step-change in both group revenue and operating margins well beyond current consensus forecasts.
  
• Analyst consensus expects copper to simply diversify earnings, but rapid first copper at Eva and progress on permitting Wafi-Golpu could establish Harmony as a premier gold-copper producer just as global copper demand accelerates, driving robust and sustained multi-cycle earnings growth with sector-leading free cash flow generation.
  
• Harmony's ongoing margin expansion is likely being materially understated: with multi-year wage deals, regulated South African power costs and elevated by-product credits, unit cost inflation remains highly predictable even as gold prices rise, creating significant potential for further positive operating leverage and upside in net profit.
  
• Structural global shifts toward increased gold ownership by central banks and investors-amplified by sustained inflation and de-dollarization-set the stage for a prolonged period of record or rising realized gold prices, which would directly and powerfully lift Harmony's top-line revenue and cash flows.
  
• Harmony's disciplined capital allocation, robust balance sheet, and proven M&A execution create the real prospect of accretive transformational acquisitions during industry consolidation, which could swiftly accelerate both reserve growth and earnings, closing any perceived "production dip" and re-rating the stock closer to top-tier peer multiples.

Harmony Gold Mining Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Harmony Gold Mining compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Harmony Gold Mining's revenue will grow by 22.5% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 15.7% today to 44.3% in 3 years time.
• The bullish analysts expect earnings to reach ZAR 54.6 billion (and earnings per share of ZAR 78.59) by about July 2028, up from ZAR 10.5 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 5.5x on those 2028 earnings, down from 15.4x today. This future PE is lower than the current PE for the US Metals and Mining industry at 7.3x.
• Analysts expect the number of shares outstanding to grow by 0.36% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 17.65%, as per the Simply Wall St company report.

Harmony Gold Mining Future Earnings Per Share Growth

Risks

• Harmony's future growth is tightly linked to high gold prices, but global decarbonization and a shift towards renewable energy could dampen long-term investment demand for gold, negatively affecting revenue and profitability over the coming decades.
  
• The company's core South African assets remain exposed to deep-level mining risks, including labor unrest, safety incidents, and cost inflation, which can increase unit costs and erode net margins despite current strong operational delivery.
  
• Harmony's portfolio relies heavily on aging and mature underground South African mines facing declining ore grades, requiring higher sustaining capital and risking a decline in long-term earnings as capital expenditure rises and production becomes costlier.
  
• Potential regulatory, political, and social interventions in South Africa or Papua New Guinea-such as higher taxes, stringent ESG mandates, or permitting delays-may hinder operations, raise compliance costs, or impact asset ownership, ultimately putting downward pressure on net earnings and free cash flow.
  
• The increasing global focus on battery metals may draw investor capital away from gold, pressuring sector valuations, raising Harmony's cost of capital and making it more difficult to compete for financing, which could suppress long-term share price growth and limit funding for expansion projects.

Valuation

• The assumed bullish price target for Harmony Gold Mining is ZAR295.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Harmony Gold Mining's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ZAR295.0, and the most bearish reporting a price target of just ZAR185.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be ZAR123.4 billion, earnings will come to ZAR54.6 billion, and it would be trading on a PE ratio of 5.5x, assuming you use a discount rate of 17.7%.
• Given the current share price of ZAR260.21, the bullish analyst price target of ZAR295.0 is 11.8% higher.
• 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.