Harmony Gold (JSE: HAR) falls 4.9% as record profit meets lower FY27 output

Harmony Gold Mining Company Limited (JSE: HAR; NYSE: HMY) closed 4.9% lower on August 27 even after record gold prices drove headline earnings 87% higher and enabled the South African miner to declare its largest shareholder payout to date. FY26 revenue increased 34% to R99.24 billion, headline earnings reached R27.24 billion and adjusted free cash flow climbed 54% to R17.15 billion as the average gold price received rose 35% in rand terms and the newly acquired CSA mine began adding copper earnings. However, gold production declined 3% to 1.43 million ounces and management expects only 1.30 million to 1.40 million ounces in FY27 while all-in sustaining cost guidance rises materially. HAR closed at R340.96 after an exceptionally strong preceding month, leaving investors to decide whether rising copper exposure and gold-price strength can compensate for lower gold volumes and higher costs.

Why did Harmony Gold shares fall after an 87% earnings increase?

Harmony’s FY26 financial performance was exceptional by almost any conventional measure.

Group revenue rose from R73.90 billion to R99.24 billion, headline earnings increased from R14.53 billion to R27.24 billion and headline earnings per share climbed 87% to R43.63.

Basic EPS more than doubled to R47.01.

Adjusted free cash flow reached a record R17.15 billion, up 54%, allowing Harmony to continue funding growth investments while declaring a final dividend of R7.50 per share and taking the total annual shareholder payout to a record R8.1 billion.

The market reaction nevertheless reflected expectations rather than the magnitude of the historical growth.

Harmony’s share price had already risen dramatically before the results as gold prices surged. HAR closed at R263.70 on July 27 and reached R340.96 on August 27 even after the results-day decline, representing an increase of roughly 29% in one month.

The stock had traded as high as R383.86 earlier in the week and its 52-week high is R428.88. August 27’s 4.9% decline therefore followed an unusually strong pre-results rerating rather than occurring from a depressed valuation.

More importantly, management’s FY27 production and cost guidance points to weaker operating leverage if gold prices stop rising.

How much does Harmony’s FY27 gold guidance change the earnings setup?

Harmony produced 1.4296 million ounces of gold during FY26, down 3% year on year but still inside guidance for an eleventh consecutive year.

For FY27, management expects only 1.30 million to 1.40 million ounces.

The midpoint of 1.35 million ounces represents a decline of approximately 5.6% from FY26 production.

Costs are simultaneously moving higher. FY26 all-in sustaining costs reached R1.192 million per kilogram, up 13% from the previous year.

FY27 AISC is expected between R1.30 million and R1.395 million per kilogram.

At the R1.3475 million midpoint, that represents another increase of approximately 13% from FY26.

This creates a clear earnings sensitivity. Harmony is guiding to fewer gold ounces at a higher cost per unit, meaning the realised gold price needs to remain strong merely to preserve the exceptional margins generated during FY26.

The FY26 average gold price received was R2.070 million per kilogram. Against AISC of R1.192 million, the simple spread was approximately R878,000 per kilogram before considering other costs, taxes and corporate items.

If the realised rand gold price remained unchanged and AISC moved to the FY27 midpoint, that illustrative spread would narrow to about R722,000 per kilogram, approximately 18% below the FY26 level.

That calculation is not an earnings forecast because the gold price, exchange rate, production mix and other costs will all change. It shows why investors reacted cautiously despite the record historical profit.

Is the gold price still powerful enough to outweigh lower production?

Harmony received an average US$3,811 per ounce for gold during FY26 compared with US$2,620 a year earlier, an increase of 46% in U.S. dollar terms.

In rand terms, the realised price increased 35% because the South African currency strengthened against the dollar.

That gold-price move was powerful enough to overwhelm the 3% decline in production and 13% increase in AISC. Group production profit increased 59% to R48.18 billion.

The investment case remains highly sensitive to whether gold can stay near elevated levels.

Safe-haven demand, central-bank purchases and geopolitical risk have supported the metal, but high gold prices themselves can eventually encourage supply growth and reduce jewellery demand. Changes in real interest rates and the U.S. dollar can also move gold sharply even when Harmony’s own operations perform exactly as planned.

Harmony’s balance sheet now provides considerably more resilience against those swings than during earlier gold cycles.

The group ended FY26 with only R852 million of net debt after completing the MAC Copper acquisition, compared with R11.15 billion of net cash a year earlier. Liquidity remained R17.10 billion through cash and undrawn facilities.

That means the company has used balance-sheet capacity to diversify while avoiding the kind of leverage that historically made gold miners especially vulnerable when commodity prices reversed.

How important has the CSA copper mine already become?

Harmony’s acquisition of MAC Copper changed the group from a predominantly gold producer into a company with a meaningful operating copper business.

The CSA mine in Australia contributed 18,207 tonnes of copper during the period following the acquisition. Recovered grade reached 3.75%, while C1 cash cost of US$2.47 per pound came in better than guidance.

Copper production generated R1.88 billion of group production profit during FY26.

The FY27 contribution should be substantially larger because Harmony expects 28,000 to 30,000 tonnes of copper output.

At the 29,000-tonne midpoint, production would increase roughly 59% compared with the FY26 contribution.

C1 cost guidance rises slightly to US$2.55 to US$2.65 per pound, while expected recovered grade moderates to approximately 3.5%.

CSA therefore gives Harmony a growth business that can partially offset declining gold output.

Copper also changes the long-term commodity exposure. Demand is being supported by grid expansion, electrification, renewable-energy infrastructure, electric vehicles and data centres, while the development pipeline for major new copper mines remains constrained.

The diversification benefit is not automatic because copper prices are themselves cyclical. The strategic value comes from exposing Harmony to two commodities with different demand drivers rather than relying almost entirely on the gold price.

Could Eva Copper and Wafi-Golpu transform Harmony again?

The next stage of diversification extends beyond CSA.

Harmony made the final investment decision on the Eva Copper project in Australia in November 2025 and says construction has advanced through key infrastructure and process-plant milestones.

Eva can eventually add another long-life copper operation to the portfolio, reducing the proportion of group earnings generated by ageing South African gold assets.

Wafi-Golpu in Papua New Guinea represents an even larger potential project.

Harmony jointly owns Wafi-Golpu with Newmont and is progressing negotiations around the mining-development contract and special mining lease needed to move the project forward.

The asset is one of the larger undeveloped copper-gold opportunities in the region, but it has also experienced a long permitting and negotiation process. Investors should therefore value Wafi-Golpu based on measurable regulatory milestones rather than assuming a development timetable before agreements are completed.

Harmony is simultaneously extending the life of existing gold operations. Tshepong North’s life of mine has been increased to 15 years from six years, demonstrating that reserve conversion can preserve selected high-quality assets even as group gold production gradually declines.

The longer-term portfolio is consequently becoming more balanced: fewer assumptions about continuously expanding gold volumes, more investment in high-grade copper and selective life extension of profitable gold assets.

Is Harmony Gold cheap after the 2026 rally?

Harmony had 636.8 million ordinary shares in issue including treasury shares. At R340.96, the headline equity value is approximately R217 billion before adjusting for treasury holdings.

FY26 HEPS of R43.63 produces a trailing headline P/E of roughly 7.8 times.

Basic EPS of R47.01 would imply a multiple closer to 7.3 times.

Those figures appear low relative to the 87% earnings growth reported for FY26, but commodity-company multiples are often lowest when current commodity prices and earnings are exceptionally strong.

Investors should therefore avoid assuming that a 7 to 8 times trailing multiple automatically makes Harmony inexpensive.

The valuation becomes more attractive if gold prices remain high, CSA copper production reaches the 28,000 to 30,000-tonne range and Harmony delivers its growth projects without materially increasing leverage.

The final dividend of R7.50 per share alone represents a yield of approximately 2.2% at the August 27 closing price. The total FY26 distribution was larger because Harmony had already made earlier payments during the year, bringing the aggregate annual shareholder payout to R8.1 billion.

The balance sheet gives the board capacity to continue meaningful returns, but dividends remain linked to cash generation rather than constituting a fixed income stream.

What are the main risks after Harmony’s record FY26 earnings?

The first risk is straightforward commodity exposure. Harmony’s enormous FY26 earnings increase depended heavily on a 35% increase in the rand gold price received, and lower gold prices could reverse some of that leverage quickly.

The second risk is rising cost intensity. AISC already increased 13% in FY26 and is guided higher again for FY27, while underground grades are expected above 5.60 grams per tonne compared with 5.83 grams in FY26.

The third risk is execution across the copper portfolio. CSA is now integrated, but production needs to rise toward 28,000 to 30,000 tonnes while costs remain controlled, and Eva Copper still requires substantial construction spending before it becomes a cash-generating asset.

Safety remains a fundamental operational risk across deep-level South African mining. Harmony reported continued improvement in its lost-time injury frequency rate during FY26 but also suffered fatalities, reinforcing that strong financial performance does not remove the human and operational complexity of underground mining.

The investment case consequently depends on more than gold prices. Harmony needs disciplined execution across safety, costs, project development and copper integration if its record cash flow is to translate into a more durable valuation.

Harmony Gold stock key takeaways after FY26 results

• Harmony Gold closed 4.9% lower at R340.96 on August 27 despite FY26 headline earnings increasing 87% to R27.24 billion.
• Revenue increased 34% to R99.24 billion and adjusted free cash flow rose 54% to a record R17.15 billion as the average gold price received increased sharply.
• Gold production declined 3% to 1.43 million ounces, while FY27 guidance falls to 1.30 million to 1.40 million ounces.
• FY27 gold AISC is expected at R1.30 million to R1.395 million per kilogram compared with R1.192 million during FY26, creating a significant cost test if gold prices stop rising.
• CSA produced 18,207 tonnes of copper after the MAC Copper acquisition and is expected to deliver 28,000 to 30,000 tonnes during FY27.
• Harmony ended FY26 with only R852 million of net debt and R17.1 billion of liquidity despite funding the copper acquisition and declaring record shareholder distributions.
• At R340.96, HAR trades at roughly 7.8 times FY26 HEPS, but the low trailing multiple needs to be weighed against lower guided gold volumes and higher costs.

What would strengthen or weaken the Harmony Gold investment case from here?

The investment case would strengthen if Harmony keeps FY27 gold production toward the upper end of the 1.30 million to 1.40 million-ounce range while holding AISC near the bottom of guidance. Gold prices remaining elevated would preserve cash generation, but evidence that earnings remain strong without another major increase in the commodity price would provide a more convincing test of operating quality.

CSA reaching approximately 29,000 tonnes of copper at the midpoint of guidance would provide another important source of growth. Continued progress at Eva Copper and a material permitting milestone at Wafi-Golpu would reinforce the argument that Harmony is becoming a diversified gold-and-copper producer rather than a mature gold company temporarily benefiting from record metal prices.

The thesis would weaken if gold production falls below guidance, cost inflation pushes AISC beyond R1.395 million per kilogram or the gold price retreats quickly enough to compress margins. Cost overruns at Eva or weaker-than-planned CSA production would also challenge the capital-allocation case behind Harmony’s diversification strategy.

The August 27 sell-off does not indicate that FY26 was weak; the opposite is true. Harmony delivered record cash generation, exceptional earnings growth and its largest shareholder payout while completing a transformational copper acquisition.

The harder question is what investors should pay for those earnings when gold production is declining and unit costs are rising. If copper begins contributing more quickly than gold output falls, Harmony’s current 7 to 8 times trailing earnings multiple could prove conservative. If the gold price carried most of the FY26 improvement and begins normalising, the apparently low valuation may already be anticipating a considerably less profitable next phase.