Harmony’s FY26 Earnings Are Price-Led as Output Falls and AISC Rises

Harmony Gold’s FY26 trading statement shows how strongly the bullion cycle is lifting earnings even as the operating base becomes more expensive. The company expects basic earnings per share of 4,400 to 4,800 cents, up 90% to 108% from FY25, after the average gold price received rose to US$3,811 an ounce. Yet group gold production fell to 1.43 million ounces from 1.48 million ounces a year earlier, while all-in sustaining costs rose to US$2,195 an ounce from US$1,806.17

That split is the most useful way to read the August 21 update. Harmony met its gold production, grade and cost guidance for an eleventh consecutive year, but the earnings acceleration was not driven by more ounces or lower unit costs. It was driven primarily by a much higher realised gold price, with additional support from R2.8 billion of impairment reversals at Tshepong North, Tshepong South, Kusasalethu and Doornkop.1

The distinction matters because Harmony is entering a heavy investment phase. Its previous Samarium coverage focused on the July refinancing that replaced the MAC Copper bridge with US-dollar, Australian-dollar and rand facilities and improved the funding profile for the CSA and Eva copper assets. The new FY26 disclosure shifts the question from financing capacity to earnings quality: how much of today’s cash generation can survive if gold prices normalise while copper spending rises?4

Gold production of 1.43 million ounces was about 3% lower than FY25, while underground recovered grade slipped to 5.83 g/t from 6.27 g/t. AISC increased by about 22% in US-dollar terms to US$2,195 an ounce. Harmony attributed higher production costs to consumables, electricity, contractors and labour under its five-year wage agreement.17

The gold price more than offset that pressure. The average price received rose to US$3,811 an ounce from US$2,620, a gain of roughly 45% in dollar terms. In rand terms the increase was 35.3% to R2.07 million a kilogram. The resulting margin expansion is why earnings can nearly double even with fewer ounces and a materially higher cost base.1

But basic EPS overstates the change in underlying operating performance because FY26 also includes the R2.8 billion impairment reversals. Headline EPS, which strips out certain capital items, is expected at 4,050 to 4,450 cents, up 73% to 90%. That is still a very strong result, but the gap between EPS and HEPS shows that some of the reported earnings uplift comes from asset revaluations rather than recurring mine cash flow.1

The revaluations themselves are revealing. Higher long-term gold-price assumptions have restored accounting value to older South African assets that previously carried weaker economics. That improves the balance-sheet optics, but it does not change the physical realities of deeper underground mining, ageing infrastructure, power costs and labour intensity. Higher gold prices can extend economic mine lives and support reserve conversion, but they also raise royalties and taxes: Harmony said royalty expense increased by about R1.5 billion and tax expense by about R2.3 billion in FY26.1

Copper is beginning to diversify that dependence. CSA contributed 18,207 tonnes of copper production at a recovered grade of 3.75%, near the upper end of Harmony’s 17,500-to-18,500-tonne guidance for the post-acquisition period. Copper sales totalled 16,719 tonnes at an average realised price of US$5.62 a pound.13

That is encouraging because Harmony’s March interim results had flagged shaft rehabilitation and safety stoppages at CSA, with temporary production constraints after the acquisition. The full-year number suggests the mine recovered enough ground to finish near the top of guidance.39 Still, CSA’s longer-term investment case is based on production above 40,000 tonnes a year over a reserve life of more than 12 years, meaning FY26 represents only a partial-period contribution rather than evidence that the asset has reached its steady-state potential under Harmony ownership.8

The acquisition also brought costs that complicate the headline earnings growth. Harmony recorded R1.4 billion of acquisition expenses, plus higher finance costs and fair-value movements on copper and silver streaming arrangements inherited with MAC Copper. Those are partly transitional, but they show that diversification is not free.1

Eva Copper is the next capital test. Harmony’s July refinancing explicitly linked its new funding structure to the Australian growth pipeline, including Eva, where development capital is expected at roughly US$1.55 billion to US$1.75 billion. The stronger gold-price environment makes that build more affordable, but it also raises the opportunity cost of capital: shareholders are now receiving larger dividends under a policy that can distribute up to half of net free cash.43

At the March half-year point, Harmony had net debt to EBITDA of only 0.18 times, R14.8 billion of liquidity and had declared a record R3.38 billion interim dividend. Adjusted free cash flow for the first half was R5.97 billion despite lower gold production.3 The August trading statement says full-year adjusted free cash flow was robust, but it does not yet disclose the final number. That makes the August 27 results the more important capital-allocation event.12

Investors should watch four figures when the audited FY26 results arrive: full-year adjusted free cash flow, net debt after refinancing the MAC bridge, the final dividend, and the FY27 AISC and production outlook. Together they will show whether the earnings surge is translating into durable balance-sheet capacity or simply reflecting an unusually favourable gold price.

Harmony has delivered the operational consistency it promised and CSA has started to contribute meaningful copper. The risk has changed. With bullion carrying more of the earnings load and unit costs rising, the next phase depends on converting today’s price windfall into lower-risk copper growth and longer-life gold assets before the commodity cycle turns.