By: OrePulse

Harmony Gold has priced a $500 million convertible bond due 2031, carrying a 1.5 per cent annual coupon, as the company lines up financing for a sharp increase in capital spending led by its Australian copper growth projects.

The bond converts into ordinary shares at R418.60 apiece, a 40 per cent premium to Harmony's recent share price. Full conversion would create roughly 19.4 million new shares, equal to about 3 per cent of the company's issued share capital. However, Harmony has left itself room to settle the bond in cash instead of stock to limit dilution to existing shareholders.

Chief Executive Beyers Nel said the offering strengthens the company's financial flexibility. "It enhances funding efficiency, diversifies our capital sources and optimises our funding profile," Nel said. Arnold van Graan, an analyst at Nedbank Securities, offered a similarly positive read on the move: "We see the proactive balance sheet management as positive."

The bond proceeds are tied to a substantial step-up in planned spending. Harmony is targeting capital expenditure of R28 billion in its 2027 financial year, nearly double the R17.1 billion it spent in the year just ended. Roughly half of that increase is earmarked for the company's copper portfolio in Australia, where Harmony is working to ramp up the existing CSA mine and advance Eva, a greenfields copper project in Queensland.

Recapitalising CSA is expected to cost R3.2 billion over two years. Eva is the larger commitment: Harmony expects to spend $650 million to $680 million on the project this year alone, part of a total outlay of $1.55 billion to $1.75 billion before the mine reaches first copper production, which the company is targeting for late 2028. Harmony has said it wants to become a copper producer of 100,000 metric tons a year within three to five years, a goal that rests heavily on Eva and CSA delivering on schedule.

Harmony's South African gold operations are not being starved of capital in the meantime. The company has budgeted R19.5 billion in lifetime capital spending across four of its established mines — Mponeng, Moab Khotsong, Tshepong North and Doornkop — even as the bulk of the incremental FY2027 increase flows toward the Australian copper build-out.

The financing comes from a position of relative strength. As of June 30, Harmony held R17.1 billion, or roughly $1 billion, in available liquidity against net debt of just R852 million, a modest figure for a company of its size. Adjusted free cash flow generation rose 54 per cent over the same period to a record R17 billion, giving Harmony a stronger base from which to raise additional capital on favourable terms.

Pricing a convertible bond rather than issuing new equity outright lets Harmony secure funding at a comparatively low coupon while deferring any share dilution unless and until the stock trades above the R418.60 conversion price — a bet, in effect, that the company's shares will be higher by 2031 than they are today. Citigroup and JP Morgan served as joint global coordinators on the offering, with Absa, FirstRand and Nedbank also participating.

The move comes as Harmony pushes to diversify beyond gold, which remains the core of its business even as bullion prices have eased from recent record highs. Copper's growing importance to the energy transition and electrification has made Australian assets like CSA and Eva an increasingly central part of the company's growth story, and the size and structure of this financing — low coupon, deferred dilution, funding split between an established mine and a greenfields project — suggest Harmony is betting that copper will be a meaningful part of its business well before the bond matures in 2031.