SecProbe.io

CORRESP
1
filename1.htm

Document

HARMONY GOLD MINING COMPANY LIMITED

Randfontein Office Park            P O Box 2, Randfontein, 1760    T +27 11 411 2000                  NYSE trading symbol HMY

Cnr Main Reef Road and Ward            Johannesburg, South Africa        F +27 11 692 3879                  JSE trading symbol HAR

Avenue, Randfontein, 1759                    W www.harmony.co.za

To comply with Item 1302

UNITED STATES SECURITIES

AND EXCHANGE COMMISSION

DIVISION OF CORPORATION FINANCE

100 F STREET, NE

WASHINGTON, D.C.

20549

FOR ATTENTION:     STEVE LO

SHANNON BUSKIRK

JOHN COLEMAN

RE:             Harmony Gold Mining Company Limited

Form 20-F for Fiscal Year Ended June 30, 2023

Filed October 31, 2023

Comment Letter dated March 8, 2024

April 8, 2024

Ladies and Gentlemen,

Reference is made to the Staff’s comment letter dated March 8, 2024 in respect of the Harmony Gold Mining Company Limited (the "Company" or “Harmony”) Form 20-F for the year ended June 30, 2023. Set forth below is the response to the Staff’s comment, which follows the text of the comment in the Staff letter:

Form 20-F For the Fiscal Year Ended June 30, 2023

96.12 Technical Report Summary of the Mineral Resources and Mineral Reserves for Tshepong North, Free State Province, South Africa, page 189

1.We note your response to comment 2. The provisions in S-K 1300 preclude the inclusion of inferred resources in an economic analysis that supports a property's economic viability. For example, pursuant to Item 1302(e)(6) of Regulation S-K, a qualified person must exclude inferred mineral resources from a pre-feasibility study's demonstration of economic viability in support of a disclosure of a mineral reserve. Please obtain and file a revised Tshepong North technical report summary from your qualified person to comply with this requirement. Please review your other technical report summaries and make arrangements with your respective qualified persons to revise as necessary to comply with this requirement.

Response:

To satisfy Item 1302(e)(6) of Regulation S-K 1300, the following principle will apply to the revised technical report summary submitted for Tshepong North and all other future fillings where operations include Inferred Mineral Resources in the life of mine (“LOM”). References to “ZAR” are to South Africa Rand and references to “USD” are to US dollars.

–Cash flows will be prepared for both the LOM business plan and Mineral Reserves as the LOM business plan may include Inferred Mineral Resources which are then excluded in the Mineral Reserves.

–Capital and operating costs are and will continue its alignment with the mine design, extraction schedule and estimated gold production for both the LOM business plan and Mineral Reserves.

Directors:    PT Motsepe* (Chairman), KT Nondumo* (Deputy Chairman), M Msimang*, PW Steenkamp (Chief Executive), BP Lekubo (Financial Director),

    HE Mashego (Executive Director), JL Wetton*, VP Pillay*, GR Sibiya*, PL Turner*, B Nqwababa*, M Prinsloo*

        *Non-Executive

Secretary:             SS Mohatla

Registration Number:     1950/038232/06

–A set of key assumptions are and will continue to be approved by management and used in determining the economic viability of a prefeasibility project. These assumptions include, but are not limited to, the gold commodity price and USD/ZAR exchange rate.

–The cash flow will be tested for its sensitivity to commodity price (ZAR/kg) and operating costs (ZAR), for both the LOM business plan and Mineral  Reserves, for the QP to make a decision if the economic assessment demonstrates sufficient viability in support of a disclosure of a Mineral Reserve.

The qualified person (“QP”) for Tshepong North excluded Inferred Mineral Resources for the demonstration of economic viability of the Mineral Reserves and a revised Tshepong North technical report summary was compiled by the QP to comply with the Item 1302(e)(6) of Regulation S-K1300 requirement. Key changes to the report are explained in this response and has reference to gold content, revenue, cost and profit of the Mineral Reserve vs the LOM plan. Please also see the attached blackline of the Tshepong North technical report summary version with proposed amendments in Appendix 1.

The gold price forecast of ZAR825,000/kg (USD1,582/oz and ZAR:USD exchange rate forecast of R16.22/USD), used in the Tshepong North LOM and Mineral Reserve cash flows, is considered conservative by the QP if compared to a consensus view on gold price outlook of ZAR1,064,868/kg (USD1,837/oz and ZAR:USD exchange rate forecast of R18.03/USD) (See tables 1-8 and 1-10).

The conservative gold price of ZAR825,000/kg as per the company guidance is used in order to meet the  Company strategy to ensure operational excellence, cash certainty, effective capital allocation and responsible stewardship. The intent is to ensure that Harmony avoids fluctuations in Mineral Reserve cut-off grades resulting in additional volumes at lower grades and higher operating cost that will reduce profit margins and shareholder returns.

The contribution for the Tshepong North Mineral Reserves is ZAR894 million (see table 1-2) cash negative at a gold price of ZAR825,000/kg. Sensitivity analysis was performed on the commodity pricing (ZAR/kg) and operating costs (ZAR). A 10% increase in gold price (ZAR907,500/kg) results in a ZAR566 million (see table 1-4) positive cash flow. The insights provided by the sensitivity analysis show that Tshepong North is almost equally sensitive to changes in the gold price (ZAR/kg), as to changes in total operating costs (ZAR). Based on  the sensitivity of the operation’s cash flow to gold price, the QP is of the opinion that the Tshepong North economic assessment demonstrates sufficient viability in support of a disclosure of a Mineral Reserve.

Table 1-1:Tshepong North Cash Flow (LOM)

Item Units LOM Total FY2024 FY2025 FY2026 FY2027 FY2028 FY2029 FY2030

Mining advance m2

 1,324,881 193,473 193,635 193,557 193,539 194,301 194,277 162,099

Total OCD m 27,733 5,964 5,368 5,915 5,727 3,118 1,312 329

Milled tons t '000 5,134 739 755 759 756 754 753 617

Yield g/t  4,83   4,67   4,73   4,95   4,84   4,93   4,80   4,88

Gold recovered kg 24,789 3,455 3,569 3,757 3,662 3,722 3,610 3,013

Revenue ZAR'000 20,451,163 2,850,775 2,944,673 3,099,147 3,021,299 3,070,752 2,978,389 2,486,130

Total operating costs ZAR'000 18,609,859 2,739,803 2,724,031 2,737,169 2,727,321 2,681,127 2,647,763 2,352,645

Capital (including OCD) ZAR'000 1,646,983 421,553 326,232 332,231 303,825 173,654 78,428 11,060

Royalty ZAR'000 185,886 14,254 14,723 15,496 15,106 41,173 48,522 36,612

Total costs (including capital and royalty) ZAR'000 20,442,728 3,175,609 3,064,987 3,084,896 3,046,252 2,895,953 2,774,713 2,400,317

Profit (after OCD and capital) ZAR'000 8,435 -324,834 -120,314 14,250 -24,954 174,799 203,676 85,813

NPV - (low discount rate - 9%) @9% (123,958)

NPV - (medium discount rate - 12%) @12% (150,469)

NPV - (high discount rate - 15%) @15% (171,116)

The cash flow indicated in Table 1-1 includes gold from Inferred Resources in the LOM planning which is not published in the Mineral Reserve. The Revenue and cost is structured to support the LOM scheduled plan. The cash flow for the LOM plan indicates a profit of ZAR8 million.

Table 1-2:Tshepong North Cash Flow (Mineral Reserve)

Item Units LOM Total FY2024 FY2025 FY2026 FY2027 FY2028 FY2029 FY2030

Mining advance m2

 972,929 193,473 190,313 142,167 123,119 120,005 115,839 88,014

Total OCD m 16,927 4,815 3,909 3,143 2,785 1,284 687 304

Milled tons t '000 3,763 744 740 555 479 463 446 338

Yield g/t  4,73   4,90   4,83   4,90   4,66   4,52   4,24   4,84

Gold recovered kg 17,787 3,646 3,573 2,719 2,231 2,091 1,891 1,635

Revenue ZAR'000 14,674,107 3,008,328 2,947,812 2,243,490 1,840,176 1,725,442 1,560,290 1,348,569

Total operating costs ZAR'000 14,237,186 2,801,253 2,776,262 2,099,253 1,811,129 1,751,984 1,685,807 1,311,498

Capital (including OCD) ZAR'000 1,257,564 374,961 267,145 234,574 206,271 111,129 57,701 5,783

Royalty ZAR'000 97,827 20,056 19,652 14,957 12,268 11,503 10,402 8,990

Total costs (including capital and royalty) ZAR'000 15,592,578 3,196,270 3,063,059 2,348,784 2,029,667 1,874,616 1,753,910 1,326,271

Profit (after OCD and capital) ZAR'000 (894,013) (182,928) (110,334) (101,555) (186,425) (146,298) (191,019) 24,546

NPV - (low discount rate - 9%) @9% (666,732)

NPV - (medium discount rate - 12%) @12% (610,734)

NPV - (high discount rate - 15%) @15% (561,951)

The cash flow indicated in Table 1-2 excludes gold from Inferred Resources in the LOM planning and is based on Mineral Reserves only. The revenue and cost is structured to support the Mineral Reserve scheduled plan.The cash flow for the Mineral Reserve plan indicates a loss of ZAR894 million.

The cash flows were tested for its sensitivity to commodity price (ZAR/kg) and operating costs (ZAR) for both the LOM business plan and Mineral  Reserves for the QP to make a decision if the economic assessment demonstrates sufficient viability in support of a disclosure of a Mineral Reserve.

Table 1-3: Gold Price Sensitivity Analysis (LOM)

Sensitivity (%) Production (kg) Gold Price
(ZAR/kg) Revenue (ZAR’000) Operating Cost (ZAR'000) Profit / Loss (ZAR'000) NPV 9% (ZAR'000)

10% 24,789 907,500 22,496,279 20,442,728 2,053,551 1,351,944

5% 24,789 866,250 21,473,721 20,442,728 1,030,993 613,993

LOM plan 24,789 825,000 20,451,163 20,442,728 8,435 (123,958)

-5% 24,789 783,750 19,428,605 20,442,728 (1,014,123) (861,910)

-10% 24,789 742,500 18,406,047 20,442,728 (2,036,681) (1,599,861)

Table 1-4: Gold Price Sensitivity Analysis (Mineral Reserves)

Sensitivity (%) Production (kg) Gold Price
 (ZAR/kg) Revenue (ZAR’000) Operating Cost (ZAR'000) Profit / Loss (ZAR'000) NPV 9%
(ZAR'000)

10% 17,787 907,500 16,141,518 15,568,121 566,060 434,389

5% 17,787 866,250 15,407,813 15,568,121 (163,977) (116,171)

Reserves 17,787 825,000 14,674,107 15,568,121 (894,013) (666,732)

-5% 17,787 783,750 13,940,402 15,568,121 (1,624,050) (1,217,292)

-10% 17,787 742,500 13,206,697 15,568,121 (2,354,087) (1,767,853)

Table 1-5: Total Operating Cost Sensitivity Analysis (LOM)

Sensitivity (%) Production (kg) Gold Price
 (ZAR/kg) Revenue (ZAR’000) Operating Cost (ZAR'000) Profit / Loss (ZAR'000) NPV 9% (ZAR'000)

10% 24,789 825,000 20,451,163 23,542,028 (3,090,865) (2,274,939)

5% 24,789 825,000 20,451,163 21,992,378 (1,541,215) (1,199,449)

LOM plan 24,789 825,000 20,451,163 20,442,728 8,435 (123,958)

-5% 24,789 825,000 20,451,163 18,618,507 1,832,656 1,173,068

-10% 24,789 825,000 20,451,163 17,343,428 3,107,735 2,027,023

Table 1-6: Total Operating Cost Sensitivity Analysis (Mineral Reserves)

Sensitivity (%) Production (kg) Gold Price
 (ZAR/kg) Revenue (ZAR’000) Operating Cost (ZAR'000) Profit / Loss (ZAR'000) NPV 9% (ZAR'000)

10% 17,787 825,000 14,674,107 17,124,933 (2,450,825) (1,840,059)

5% 17,787 825,000 14,674,107 16,346,527 (1,672,419) (1,253,396)

Reserves 17,787 825,000 14,674,107 15,568,121 (894,013) (666,732)

-5% 17,787 825,000 14,674,107 14,789,715 (115,607) (80,068)

-10% 17,787 825,000 14,674,107 14,011,309 662,799 506,596

Table 1-7: Conversions Used in Gold Price Calculations

Economic Factors Gold Price
(USD/oz) Conversion Factor (oz/kg) Exchange Rate (ZAR:USD) Gold Price
(ZAR/kg)

2023 Mineral Resource 1,764 32.15 16.22 920,000

2023 Mineral Reserve 1,582 32.15 16.22 825,000

The same set of approved conversion rates and assumptions were used for the LOM plan and the Mineral Reserve plan (Table 1-7). A full disclosure of the approved  assumptions are covered in the Tshepong North technical report summary.

Table 1-8: Consensus ZAR : USD Exchange Rate Forecast

Institutions 2022 2023 2024

Nedbank 16.38   18.29   17.27

Investec —   18.20   17.65

FNB 16.40   18.80   18.00

PWC 16.37   18.20   18.70

IDC 16.36   18.50   18.51

Average 16.38   18.40   18.03

Table 1-9: Consensus View of Forecast Gold Price USD/Ounce

Institutions 2022 2023 2024

World Bank: Development 1,801   1,900   1,750

BMO Capital Markets 1,802   1,925   1,750

Scotiabank 1,803   1,904   1,900

Nedbank 1,817   1,897   1,970

Fitch Solutions 1,800   1,800   1,600

S&P Global 1,804   1,889   1,889

Australian Government 1,801   1,906   1,839

TD Economics 1,802   1,985   2,000

Average 1,804   1,901   1,837

Table 1-10: Average Gold Price in ZAR/kg based on the Consensus Averages Above

Items 2022 2023 2024

Average Consensus Exchange Rate (ZAR:USD)  16.38 18.4 18.03

Average Consensus Gold Price USD/Ounce  1 804 1 901 1 837

Average Consensus Gold Price ZAR/Ounce 29 550 34 978 33 121

Average Gold Price ZAR/Kg 950 038 1 124 581 1 064 868

Table 1-11: Summary of Capital Cost Estimate for Tshepong North (ZAR’000)

Capital Cost Element (ZAR'000) Total LOM (FY2024 - FY2030) Mineral Reserves (FY2024 - FY2030)

AE 155,828 155,828

Shaft Projects 65,404 65,404

Major Projects 55,635 55,635

Total 276,867 276,867

OCD 1,268,339 899,781

Total (including OCD) 1,545,206 1,176,648

Capital cost (Table 1-11) reduces from the LOM plan to the Mineral Reserve plan as the LOM plan includes cost to access Inferred Mineral Resource. The scheduled Inferred Mineral Resource is anticipated to be upgraded to Mineral Reserves with the increase in orebody confidence. An exploration strategy is in place to upgrade Inferred Mineral Resource to Indicated or Measured Mineral Resource and until such time the scheduled Inferred Mineral Resource will remain excluded from the Mineral Reserve economic assessment and cash flow.

Table 1-12: Summary of Operating Cost Estimate for Tshepong North (ZAR’000)

Operating Cost Element (ZAR'000) Total LOM (FY2024 - FY2030) Mineral Reserves (FY2024 - FY2030)

Wages - Payroll 1 3,508,543 2,680,951

Wages - Payroll 2 5,380,550 4,224,181

Stores and Materials 2,893,397 2,234,845

Electric Power and Water 3,197,141 2,386,813

Outside Contractors 1,209,572 992,963

Other 650,452 385,689

Direct Costs 16,839,655 12,905,442

Refining charge allocation 52,971 37,728

Assay cost allocation 89,200 64,508

Hostel cost allocation (141,131) (80,031)

Treatment cost allocation 887,713 643,299

Rail transport allocation 47,939 34,668

Sampling Cost Allocation 783 566

Re-allocated costs 937,475 700,737

Mine Overheads Re-allocated 832,729 631,007

Total 18,609,859 14,237,186

The Company will file a revised Tshepong North technical report summary as requested by the Staff once the approach as proposed above by the Company has been considered by the Staff and the comment process concluded.

Item 19. Exhibits

96.12 Technical Report Summary of the Mineral Resources and Mineral Reserves for Tshepong North, Free State Province, South Africa, page 189

2.Please revise your future filings to provide a critical accounting policy for depreciation that addresses your method of depreciating mining-related assets. Please address the following items:

•Define each of proven and probable reserves, measured and indicated resources and inferred resources;

• Describe the circumstances under which each type of “resource” is included in the calculation of depreciation, describe management’s assumptions concerning these resources (i.e., circumstances under which the resources may be economically mined, additional timing and work to convert the resources to reserves, gold pricing concerns, etc.), and describe management’s track record regarding the conversion of resources to reserves;

• Disclose the nature and amount of resources that are included in the depreciation calculation for each year for which an income statement is presented;

• Disclose the amounts and percentages of variances between the amount of depreciation calculated including these resources and the amount of depreciation calculated without these resources;

• Describe how you risk weighted the resources included in the depreciation calculation; or if you do not risk weight t