CEO Peter Steenkamp on steering Harmony safely and sustainably during an eventful past year


Better than anticipated is how Peter Steenkamp, CEO of Harmony, describes the company’s 2020 fourth-quarter performance. ‘Harmony was well prepared to deal with the challenges of COVID-19 by the time SA declared a national state of disaster, and in having the necessary precautionary measures in place, we were able to recall our employees smoothly as restrictions lifted,’ he says.

Another aspect in Harmony’s favour is that gold is a commodity that is considered a safe haven in times of uncertainty, and the mine was able to leverage off high gold prices without sacrificing its core drivers of safety, production and costs during the first quarter of FY21. These factors have driven the mining house for the past 70 years, leading the company to coin the phrase ‘sustainable gold’ in commemoration. The year was eventful and produced favourable results. In June 2020, Harmony raised R3 466 million through a share placement to fund its cash portion of the acquisition of Mponeng mine and Mine Waste Solutions, proving not only how viable an investment this was to the company, but also how bullish it is. ‘Production increased by 38% from 7 049 kg to 9 758 kg, with an increase in gold production at our SA underground operations from 4 578 kg in the June 2020 quarter, to 7 528 kg at the end of September 2020. This is mainly derived from our underground operations resuming work at 100% capacity after lockdown restrictions were lifted,’ says Steenkamp.

‘We almost tripled our quarter-on-quarter operating free cash flow to R1.8 billion in the September 2020 quarter compared with the R603 million in the previous quarter, which again was due to higher production and a 5.4% increase in the R/kg price of R922 398/kg quarter-on-quarter.’

Strengthening these results is that in this November past, Harmony was named a runner-up in the Sunday Times Top 100 Companies Awards, which acknowledges JSE-listed companies that have created wealth and value for shareholders.

‘In September Harmony was included in the FTSE/JSE Africa Top 40 Index, which is aligned with SWIX, meaning we are now ranked by market capitalisation in terms of the 40 most investable companies in the country,’ says Steenkamp.

And investment interest is seemingly growing. ‘Bearing in mind that the price of and market for gold is driven by the state of the global geopolitical environment, a combination of factors converged to spur an exceptional price rally during the 2020 financial year,’ he says. ‘The reasons are multifold: the impact on global markets in the wake of the rapid spread of the COVID-19 virus; a significant contraction of the world economy; an overhaul of monetary and fiscal policies; a weaker dollar; and continued global geopolitical risk.’.

Steenkamp relates that the gold price rose from $1 404/oz at the start of FY20 to $1 776/oz at the close of the year (June 2020). Post this timeline, the gold price continued on this trajectory and rallied to an all-time high of $2 038/oz on 3 August 2020. ‘On 9 November volatility in the gold market surged after Pfizer and BioNTech’s announcement of a COVID-19 vaccine which is more than 90% effective. Some analysts remained unfazed by the news, reporting that their price forecast will remain unchanged as investors remain bullish about gold, supported by the potential weakening of the US dollar.

‘I am delighted to hear that a COVID-19 vaccine is under way, which will allow us to continue doing what we do best; ensuring the wellness of our employees and producing safe, profitable ounces,’ says Steenkamp.

Harmony’s emphasis on ‘safe’ is underscored by its comprehensive ESG practices, its ‘safe’ preservation of cash and maintenance of a strong balance sheet. ‘Safe’ is also evident in its organic growth strategies, acquisitions and cost containment. And ‘safe’ has presented opportunities to use technology to improve cost and productivity efficiencies and overall financial management.

‘The adoption of technology has brought about a group-wide safety risk management strategy across all operations,’ says Steenkamp. ‘One example is a “missing person locator”, which allows us to pinpoint exactly where each of our South African miners is at any given time, which is especially crucial should a mining incident occur.’

Steenkamp believes in the power of connectedness, especially in mining, where vulnerabilities are exposed in unknown situations. ‘Being decisive and quick allowed us to introduce measures to manage, contain and prevent the spread of the COVID-19 virus, regardless of the cost, although resources were allocated responsibly. We always aim for a balance between lives and livelihood, and delivered the same value to our host communities,’ he says.

‘From here on, we are focused on reducing our debt, securing the Wafi-Golpu special mining lease in Papua New Guinea – of which we own 50%, considering paying dividends should the gold price remain at current levels, and preserving cash and maintaining our strong balance sheet.’

By Kerry Dimmer