Harmony Gold Mining Company Limited (HMY) Q4 2020 Earnings Call Transcript

Harmony Gold Mining Company Limited (NYSE: HMY) Q4 2020 earnings call dated Sep. 15, 2020

Corporate Participants:

Peter Steenkamp — Chief Executive Officer

Boipelo Lekubo — Financial Director

Marian van der Walt — Senior Group Executive, Enterprise Risk and Investor Relations

Herman Perry — Chief Financial Officer and Treasury 

Analysts:

Patrick Mann — Bank of America Merrill Lynch — Analyst

Shilan Modi — UBS — Analyst

Arnold Van Graan — Nedbank Capital — Analyst

Adrian Hammond — SBG Securities — Analyst

Mark du Toit — OysterCatcher Investments — Analyst

Presentation:

Operator

Good day, ladies and gentlemen, and welcome to Harmony Gold Results for the Year — for the Financial Year Ended June 2020. [Operator Instructions] Please note that this conference is being recorded.

I’d now like to hand the conference over to Mr. Peter Steenkamp. Please go ahead, sir.

Peter Steenkamp — Chief Executive Officer

Thank you, Judith, and good morning, everybody. Thanks for joining us here at the financial and operating results for FY’20 at the year ending on the 30th of June 2020. With me in the team we have got Boipelo, Frank, and Mashego. Executive Directors, Max, Marian, and also Herman. So, feel free to ask any questions later.

Just in terms of our results, our key features of our results is really a 9% increase in production profit to ZAR7.1 billion — close to ZAR7.2 billion. We had a 3% increase in average underground — or decrease in average recovered grade of 4.45 [Phonetic] versus 5.59 we had in the previous year. And a 9% increase in revenue to ZAR25.2 billion [Phonetic]. The Company achieved a better-than-expected production performance in the fourth quarter of the — of FY’20 despite the COVID-19 challenges, and we are at 25% increase in the average gold price received. So that has really been quite a good tailwind that we had.

We make — continues to make a good progress in executing its — our strategy of producing safe, profitable ounces and increasing our margins. Our drive for safe ounces was never more applicable than in the last quarter of the financial year as we faced the challenges of managing and mitigating the risks presented by the COVID-19 pandemic. Despite the impact of the South African lockdown and phased restart of the mining in the country, we are pleased to report higher than anticipated production and substantial delivery against our strategy in the last quarter of the year.

We are well-positioned to benefit from the anticipated continuing strength of the gold price. The newly acquired assets will help grow our production and, as conditions improve, Harmony has other Tier 1 projects such as Wafi-Golpu and a pipeline of organic projects in South Africa to incorporate into its portfolio.

We will take any questions if you have.

Questions and Answers:

Operator

Thank you very much, sir. [Operator Instructions] The first question comes from Arnold Van Graan of Nedbank.

Arnold Van Graan — Nedbank Capital — Analyst

Yes. Good morning, Peter and team. Thank you for taking my question. So, Peter, my first question is around flexibility and the operational impact of the lack of flexibility. So where I’m coming from is, I see you’ve had some high-grading following the lockdown, which is understandable, you’ve also had reduced development. So, my worry is that, this lack of flexibility could have a material impact on your output going forward. So, the questions around that is, at mid-year, you already had some grade issues at Kusasalethu and Moab and you had some infrastructure issues at Target. So the questions are, how far did you manage to resolve those issues before the lockdown? And then given that, plus the sort of reduced development, how do you see that playing out over the next few years — a few months? When will you catch up the development? And have you taken the lack of flexibility into account of your guidance? So I’m just really worried that in a couple of quarters from now, a lot of these issues could materially impact production. So that’s my first question. Maybe let’s leave it there and then I’ve got a financial question after that. Thanks.

Peter Steenkamp — Chief Executive Officer

Well, thanks, Arnold. And you are 100% correct. When we started back at work, and especially when we had 50% of our employees back at work, we obviously had to deploy them into our stopping crews. There were areas where we read flexibility issues prior to the lockdown starting and it’s really at Tshepong. So we did bring in — we did start some development at Tshepong earlier than later. For that reason, Tshepong if you look at their production buildup as far as gold production is concerned, it was a little bit slower than the other mines because we had also crews that we had to deploy into development at the time.

So, yes, we obviously — when we had the lockdown, we had to make emergency plans and we had to respond to that at the time. And we’ve done it in such a way that we could do. Just prior to the lock down, we actually had very good momentum on all of our operations. Even at Kusasalethu, we had quite a good performance and we had a stunning performance during the lockdown from Kusasalethu. The grades recovered back to 6 grams a ton and we will see going forward that Kusasalethu will actually have a very, very good time going forward. So, we’re through that area that we’ve mined into that terrace reefs that we had to redeploy crews to other areas at the time.

So, as far as flexibility is concerned, we took into consideration for our guidance that we had at the time. Obviously, it is very difficult to guide. And I want to make it very clear, because we don’t know what the impact of COVID is going to be going forward. Will there be a second wave? Will there be further kind of things happening? We don’t know. We take best possible step at it. At the moment, COVID is really an issue that we’ve got under control. We’ve got about 61 people at the moment affected by COVID in the total Company. And — so, we really got it under control now. But looking at it going forward, we obviously had to take — where we are at the moment, re-plan the mines in terms of what — our current situation as far as flexibility is concerned.

And in general, I feel comfortable with every mine as far as flexibility is concerned. The one that I am a little bit worried about is Tshepong. But Tshepong at the moment, like I said, we haven’t returned all the crews to Tshepong yet, stopping crews. We will probably build them up in the next month or two to get them right. But the rest of the operations, I think we are clearly okay. And obviously we know what is our critical things that we need to blast. And we focus on them up to a very high level in our organization to make sure that those things. We’ve got development control rooms that runs the operations. We’ve got things in place that really manage the things well. And we — the figures are very visible, very high up in organization.

Arnold Van Graan — Nedbank Capital — Analyst

Okay. Peter, thank you very much for that. Yeah. Good luck with that. And then just a quick one for Boipelo. So you talk about some cost-cutting initiatives, which again is expected. Boipelo, can you just give us a rough overview of where these costs are coming from? And whether that can have any impact on productivity going forward?

Boipelo Lekubo — Financial Director

I think, obviously, if we contextualize that, looking at our cost, 50% is labor. So, I mean, we continue to pay our employees in the initial period of the lockdown. There were some employees that did forego cuts in the latter part of the lockdown. 16% of our cost is electricity, where we did, obviously, with our energy saving initiatives. But, I mean, these costs were not necessarily that material. Over and above that, there were some force majeure that we installed with some of our supplier contract. But I must — during that period, to ensure enough liquidity, we did drawdown a little bit on our facilities. But that was subsequently repaid post year-end. So I’d elaborate that more — as more of the cost-saving initiatives.

In further to that, we did reduced capital spend. I mean, there was cuts on development. So, a lot of savings advantage [Phonetic] was — were achieved in that. So in a nutshell, that was pretty much it.

Arnold Van Graan — Nedbank Capital — Analyst

Okay. Thank you very much for that. And, yeah, just well done on the very tough circumstances. And particularly well done on your response to COVID and all the initiatives that you launched on the back of that, I think it’s commendable. Thank you. Over to the next one. Cheers.

Operator

Thank you. The next question comes from Adrian Hammond of SBG Securities.

Adrian Hammond — SBG Securities — Analyst

Morning, everyone. Yeah. Likewise, well done on a good set of numbers. I don’t suppose you have a normalized HEPS for us. If you could give us some time, which should be interesting to see. I just want to ask on the deriv loss that you recorded in the income statement, ZAR1,678 million. What of that was cash?

Boipelo Lekubo — Financial Director

So, Adrian, you know that with our gold forward and sale derivatives, we apply cash flow hedge accounting for most of those and realized gains and losses we record in the statement of other comprehensive income. So, what you see in that ZAR1,678 million, about ZAR1.4 billion relates to mainly the forex contracts. And we’ve got about ZAR235 million of the unrealized losses on the reclassified or rather the hedges that we discontinued hedge accounting. That was really due to the restructuring. So we do provide quite a detailed note in Note 11 of the financials, where you’ll be able to see a reconciliation of that as well as of the hedge reserve.

Adrian Hammond — SBG Securities — Analyst

Yeah. So just — so, in summary then, there is — that ZAR1,678 million, isn’t that cash there or unrealized?

Boipelo Lekubo — Financial Director

No, no. That is realized.

Adrian Hammond — SBG Securities — Analyst

It is realized?

Boipelo Lekubo — Financial Director

Yes. What — so, the unrealized losses, which is approximately ZAR5.2 billion, that sits in other reserve. We apply cash flow hedge accounting on that.

Adrian Hammond — SBG Securities — Analyst

All right. But there is also some realized losses coming through revenue, correct?

Boipelo Lekubo — Financial Director

That’s correct. That’s on the Rand gold hedging, so that’s ZAR1.4 billion, that’s included in revenue, which is a loss.

Adrian Hammond — SBG Securities — Analyst

Okay. Thanks. And then just your position for — on capex for next year. I don’t think you’ve given us guidance on that. And with that, what do you expect to spend at Golpu and your position on that asset? And I just would like to understand a bit more — I see you’ve given a — in terms of your capital allocation framework, you’ve illustrated a IRR of 15%. What’s your price assumption for that, please?

Boipelo Lekubo — Financial Director

I mean, at the moment, our planning assumption is ZAR750,000 a kilogram. Just looking at the capex, we did not guide capex, I think [Speech Overlap] so that will be done in October as part of our annual results.

Insofar as Golpu is concerned, you’ll note that because of the delays in the granting of the SML, a lot of the expenditure is actually being expensed and not capitalized, so that you’ll see under exploration expenditure.

Adrian Hammond — SBG Securities — Analyst

Okay, great. Thanks very much.

Operator

Thank you. [Operator Instructions] The next question comes from Patrick Mann of Bank of America.

Patrick Mann — Bank of America Merrill Lynch — Analyst

Hi. Good morning, Peter and Boipelo and team. Well done on the fourth quarter. Just like to echo, Adrian and everybody’s point. I just wanted to ask on the unit costs. So, they were up 18% Rand per kilogram and, obviously, your volumes were down and that — we understand that that plays an impact. Just — I’m not 100% sure why the cost guidance for ’21 is then up another 6% to 9% off that base. Because it feels like a high base, right? Because it’s up 18% because your volumes are down because of COVID. And then the guidance for ’21 is ZAR690,000 to ZAR710,000 on all-in sustaining costs. So, maybe just help me understand that, is that dropping your planned grades? Is it headcount and wages? I’m just — I would have expected that maybe to be flat year-on-year. If you have 9% nominal inflation, but your volumes should go back to 1.3 million. I would have thought it would come down a little bit. Thanks.

Boipelo Lekubo — Financial Director

I think, Patrick, our overall increase in production costs was about 8%, if you look FY’20 versus ’19, which was largely expected. I mean, it was mainly really the inflationary increases in electricity and labor. So, yes, obviously, with the drop in production then that affected the unit cost, that’s that 18%. So, I mean, if you look at our cost guidance, it — again, the increases on labor and electricity as well. So, it’s more or less in line.

Peter Steenkamp — Chief Executive Officer

Patrick, just — maybe just to come in there. One of the things we tried to do this year because if you look at last year’s performance, the net effect prior to COVID. Now, obviously, COVID had its own little plan. But if you look at the planned performance at the time, we were — on volumes and everything else, we were there. We were just not there on the grade. So, we, in actual fact, had a very, very hard look in terms of our assumptions that we make in terms of things like, for instance, dilutions and things like that. So we — Jaco and Beyers and even our team here in HR level, actually went quite in a lot of detail in terms of understanding our grades and make sure we don’t over-optimistic and grade again. And I think we’ve got a very good plan at the place. I think this is a very realistic plan. Obviously, it is upside in that — can be upside in that. And, obviously, as we incorporate Mponeng in latter part of the year, we would guide again in the middle of the year what our things will be.

But I think one of the things that we want — don’t want to get into the same problem again is to have the incorrect grades in place. And there are some place — not surprises, but there are some areas where we had grades — for Joel, for instance, the first part of that bottom area is a much lower stopping width than we normally have. So we don’t have the volumes that we normally have per square meter that we get and the grade not necessarily improving in that thing. So, what I’m trying to say, I think we went through a very, very thorough planning process this year and get — got to that — those guidance. If one look actually at the cost itself, I think it’s a 4% increase, total cost, without the units that is in [Speech Overlap].

So, yes, we — it was a very tough thing to guide. I’m telling you. It’s not that easy to guide the impact of COVID or the second wave or things like that. We already done it. We had some COVID-related that we know of that will have an impact because we only have our final foreign nationals back in — at work in the 1st of September. So, it took us forever to get them into South Africa. We got them in dribs and drabs and things like that, etc., which we — there was actually quite a — I would say, if one thing in the COVID that didn’t work well is actually bringing the foreign nationals back. And it’s because we had Home Affairs in there, we had the police in there, we had Department of Labour, Department of Health, and everybody had to put some time and sprag in the wheel to get people back. And eventually, we got them over the line and got them back. And it took much longer than we expected into tank. But, yes, I think the guidance at the moment, I would say, is probably a fairly conservative guidance, but we’ll keep people updated as things change.

Patrick Mann — Bank of America Merrill Lynch — Analyst

Okay. Thanks very much. Maybe one more, if I may. Just around your sensitivity of those two [Technical Issues] crisis. I mean, [Technical Issues] or…

Marian van der Walt — Senior Group Executive, Enterprise Risk and Investor Relations

Excuse me. Just an interruption. If you wouldn’t mind just repeating?

Patrick Mann — Bank of America Merrill Lynch — Analyst

Hi. Can you hear me now?

Marian van der Walt — Senior Group Executive, Enterprise Risk and Investor Relations

Yes. Thank you.

Peter Steenkamp — Chief Executive Officer

We hear you well now. Thanks for repeating.

Patrick Mann — Bank of America Merrill Lynch — Analyst

Sorry. [Technical Issues] Okay. I think you’re still using around ZAR734,000 reserve price, somewhere around there. I’m just wondering if there is any upside to reserves or life of mine [Technical Issues].

Operator

Okay. Patrick, your line seems to have distorted. Are you able to come closer to your microphone again and repeat the question?

Peter Steenkamp — Chief Executive Officer

We’ve lost Patrick now.

Operator

Patrick, your line is still open. You might have unintentionally muted yourself. I think you’ve got technical problems on that side. [Operator Instructions] I’m Patrick Mann will come back in the queue. Our next question comes from Shilan Modi of UBS.

Shilan Modi — UBS — Analyst

Good morning, everyone. Thanks for taking our questions and congrats on a strong finish to a tough FY’20. Couple of questions from my side. Just in terms of hedging, I mean, you’ve had a consistent hedging policy for the last few years. What’s your thoughts on hedging going forward? I see you have extended your hedges into F’22 now. Just maybe your thoughts on hedging, given the loss that you accrued from hedging in the last year. And then are you also going to increase your hedges given Mponeng and Mine Waste Solutions will get integrated in the next couple of weeks? I’ll follow up with a few more.

Boipelo Lekubo — Financial Director

Okay. So, our hedging — approved hedging policy is 20% on production, and 25% on forex. And we intend to maintain those limits. We have been adding a couple of hedges, which you’ll note we’ve presented our hedging position as of the end of June and August. So, I think earlier on I did say or mentioned all that, given the assets that we do have, we believe that hedging responsibly is a good strategy to lock in healthy margins. So, definitely, yes, with the inclusion of Mponeng, it does present an opportunity at these levels.

Peter Steenkamp — Chief Executive Officer

But again, only at the 20%, not more than 20% of the production.

Shilan Modi — UBS — Analyst

Okay. So, I can assume that you’ll have a similar — like 20% of Mponeng and Mine Waste Solutions will get hedged.

Peter Steenkamp — Chief Executive Officer

That’s great.

Boipelo Lekubo — Financial Director

Yes. Yeah.

Shilan Modi — UBS — Analyst

Okay. And then just in terms of integrating Mponeng and Mine Waste Solutions, I know it’s still early days. But like when I do the math, there was some cost reduction that I can calculate when probably about $100 an ounce, when you integrated Moab into your operations. Can we expect something similar when we look at Mponeng and Mine Waste Solutions?

And then the last question I have is just your priorities for cash in the next two years?

Peter Steenkamp — Chief Executive Officer

Thanks. I’ll take the first one. I think, yes, obviously there is opportunities. The one thing that we had — other than we had with Moab is that, we had a conditional — competition condition — Competition Commission approval. This time around, we had an unconditional Competition Commission approval. So there is nothing that stops us from restructuring from day one. Obviously, we’ll do it in a very responsible way. We will, obviously, first, want to understand precisely what we get. I mean, in the due diligence phase, we’ve got quite a lot of insights, but we have to be on-site and actually — especially the off mine cost and see how we’re going to deal with that, incorporating that into the current Harmony cost. So that’s an, obviously, exercise that we will do and we will guide our way forward a number of half year results, and in terms of where we are and what we see we can do going forward. I think importantly, there is a quite lot of opportunities from the synergies that we have from combining surface sources, converting plants into the tailings retreatment and those kind of things because I think that is a wonderful opportunity that we have in that area.

But then, yes, we’ve seen — we’re confident that we’ll be able to drop the cost. We look at the ratio as management to employees in Harmony, and there is, obviously, much more higher level of employees per — more cowboys than Indians, in that ratio, in Mponeng that we normally used to in Harmony, so we will do all of that work. But, yes, we’re very excited to go there. We haven’t been able to go on-site because, obviously, the COVID thing’s also have an impact; but then secondly, also, I think this time around we’ve — normally, when Venkat were there, it was quite happy for us to start talking to the Moab people, etc. So far we haven’t been able to — I haven’t been on-site yet. So, hopefully, we can do it next week and start talking to the people and getting them over the line. We’re really excited about this. It’s a very fantastic opportunity for us. And I think the people knowing that we know now what we’ve done with Moab, and we can do a similar thing, we will get those people really, truly Harmony supporters going forward to convert from their previous — like changing a rugby team or something like that.

Shilan Modi — UBS — Analyst

Mponeng is also right next to Kusasalethu. Are there any synergies between the two mines?

Peter Steenkamp — Chief Executive Officer

I think that is the one thing and what we want to do is to really see what — how can we actually integrate the two mines into one and get them into a, what we call, can be the possible synergies. One of the things is, obviously, we only need one surface plant. So that in itself makes a thing. But also from a management perspective, should we not make them a one-mine operation and a mega kind of mine with one management team, etc., etc? So there’s a lot of things that we can play with. But none of them is concrete at this point in time.

Shilan Modi — UBS — Analyst

Okay. And then just your priorities for cash for the next two years?

Boipelo Lekubo — Financial Director

I think, technically, given the current gold price environment, it will remain important for us to repay our debt. I mean, also invest in products — projects with strong returns. But ultimately, also to start paying dividends again. Having recreated adequate headroom, we were sitting at ZAR7 billion, which is ZAR4 billion once the acquisition is repaid. So, we’re enjoying quite good balance sheet flexibility right now to support growth.

Shilan Modi — UBS — Analyst

Okay, great. Thanks very much, guys.

Operator

Thank you. [Operator Instructions] We’ve been rejoined by Patrick Mann of Bank of America.

Patrick Mann — Bank of America Merrill Lynch — Analyst

Hi, everybody. Sorry about that. I’m not sure where I got cut off. My question was just around reserve price and your sensitivity of your reserves to your gold price assumption. So, is there any upside to your mineral reserves or your life of mine if you increase your gold price planning assumption? And I think the one that springs to mind is Kusasalethu, which used to have a, geez, I think 20-year-plus life and then that was bought right back down at a higher gold price. Does it make sense to run that mine for longer at lower grades? Or is there any NPV accretive decisions you can make around that?

Peter Steenkamp — Chief Executive Officer

Yeah. Patrick, I mean, we’ve used the ZAR750,000 a kilogram price. We did our — actually, we did our — I think our cutoffs at about ZAR680,000 — ZAR650,000, yeah, ZAR650,000. So we haven’t followed the run in the gold price as far as the planning parameter is concerned. So for that reason you haven’t seen it our resources and reserves actually grew that much. We’ve kind of stayed stable. We just — given the fact that we had challenges in developing in the last part of — latter part of the year, it’s actually a good performance in terms of being able to keep our reserves on the same level. So, yes, obviously — but — at the moment, we’re actually mining right in the sweet spot of the Kusasalethu for instance. And we’re not intend to mine outside of that higher grade patch. At this point in time, nothing — no development is going out of that. That kind of payshoot is actually a little bit bigger than we thought originally. So we still have about a four-year life left in Kusasalethu.

But you know, if the gold price is at this very high levels, four years from now, we may be under pressure to operate the thing. So what we need to do is to find ways of other pairing panels or other kind of things that we want to do, finding different ways of operating to get our cost down to actually still have very big margins at any kind of the gold price that we have. And we are, at the moment, actually, we have started with that work at Kusasalethu, having quite a number of our panels are unpaired panels. And that’s why we see Kusasalethu performing very, very well compared to what we had previously.

So there’s other kind of strings that we can pull to improve our efficiencies and actually then trying to work with that. But we are not dropping our planning gold price and things like that. And a short-term decision may help for a year or two, I mean, we’ve seen it in Masimong now that we can actually mine another year, very quite decent profits, which we have closed. But we’re not going to have the mine now extending the life for another 10 years and we’ve met major amount of capital into the development of that mine that has got a orebody that is of lower grade. Masimong really has got very, very low grade left in itself. So it’s not necessarily going to help. So, no, we not follow that. And we have — we’re very stick to that discipline. Patrick, you’d — many years ago, we followed the gold price quite well and then we had a lot of scars on my back is because of that in my life. So I’m not trying to — I’m not going to repeat the history.

Patrick Mann — Bank of America Merrill Lynch — Analyst

Yeah. Makes sense. Thank you. Thanks.

Operator

The next question comes from Adrian Hammond of SBG Securities.

Adrian Hammond — SBG Securities — Analyst

Just a follow-up, if I may, on the environmental side of things, especially now that you’re taking on two assets from AngloGold, which comes with — obviously, it is around surface infrastructure tailings and water management. Could you just give us any highlights on what your key risks are regarding this? And if there has been any changes with regards to provisions for rehabilitation, notably on the AMD side for — given that you now probably become the largest producer in the West Wits and Vaal River region?

Peter Steenkamp — Chief Executive Officer

Adrian, thanks for that. I think it’s a good question. Obviously, we’re bringing what is in the trust funds, we bring along with us in terms of that. There is a bit of a shortfall, but we — but in a Harmony stable, we’ve got quite a surplus in terms of our environmental trust funds that we currently have. If you look at the liability, and we look at the funds that we have, I think we’ve got a fairly big surplus. So the net of that would be that it won’t necessarily affect us in terms of our financial provisions going forward. But, yes, obviously, the management of all of that is the important part of that, and I’m very proud to say that the team that we currently have that actually manage our environmental liability under the leadership of Melanie Naidoo-Vermaak done a tremendous job in the last few years. And as a matter of fact, if you look at our presentation, you’ll see how well we’ve been viewed by the FTSE4Good indexes and things like that, in terms of managing these things down. And she’s got very creative ways of expecting and cost down and also find ways in terms of creating an opportunities to, not only opportunities for entrepreneurship in the area and things like that, but also the rehabilitation of certain area.

So, yes, we’re not — from a financial perspective, we’re not really worried about it. Obviously, from a management perspective, we’ve really looking forward to the challenges to start working on these kind of things and working with that. I think, I would say that really stands out as a major risk, obviously, the water pumping in the gold to Vaal area that we’ve resolved in terms of what those things would be, but other then that we are okay.

Adrian Hammond — SBG Securities — Analyst

And just your neighbors there being Sibanye, the operations should they shut or reduce pumping, does that have an impact on you and how do you work that relationship?

Peter Steenkamp — Chief Executive Officer

It will be a very small impact. And first of all, obviously, the flooding of that will take a few time — few years. But then secondary to that, that the water — the physical transfer of water cannot be that big. So we’ve — so that’s not a major issue for us. So we, obviously, in the due diligence, spend an enormous amount of time on this, and we understand that very well.

Adrian Hammond — SBG Securities — Analyst

Yeah. And is there any chance of taking to surface tailings material and that sounds a bit extreme but pumping it to the Vaal region to your MWS plant?

Peter Steenkamp — Chief Executive Officer

No, I think there’s a better potential in actually by converting some of our current plants. I mean, we — currently, we take over — when we take over Mponeng mine, we will have Savuka plant. We will have the Mponeng plant and the Kusasalethu plant available to us, and most probably only need one plant for full surface of underground sources. So Doornkop will be converted into tailings retreatment facilities. And that is, obviously, the best place to put money in terms of today’s business cases. You turn out an existing plant, convert it into a tailings retreatment plant and then work from there. And we — so, one of the first things we will do when we take over that is to actually do that study, already we started what we could do, we already started with that. But the moment we can actually go on-site and drill and all other kind of things, that’s one of the first places we will go and look for opportunities.

Adrian Hammond — SBG Securities — Analyst

And thanks. And lastly, uranium, does that interest you since you’d be inheriting a uranium plant?

Peter Steenkamp — Chief Executive Officer

We are currently — I think the only — that’s a small business, but it’s a — that is the only uranium producer in South Africa, so, Sunafco [Phonetic], and obviously, our Moab Khotsong mine. So, yes, the prices has done well, so we — at least we’re not — we’re making good money other than the extra gold that we get out of that, we actually all breakeven now with — on uranium production itself without the benefit of the extra gold that we recovered out of the uranium plant.

So, yeah, like I said, Herman can maybe put some more light on it because he’s a uranium expert in our number expert.

Herman Perry — Chief Financial Officer and Treasury

Yes.

Adrian Hammond — SBG Securities — Analyst

Thanks, Peter.

Herman Perry — Chief Financial Officer and Treasury

Adrian, we obviously look at the new assets in terms of uranium opportunities, but it’s also then on the uranium prices improved, but might not be at the levels to make all economical impairment. But we’re well positioned if there isn’t any opportunities. And as Peter said, as we get our hands on the assets, we will take a fresh look at everything that is there.

Adrian Hammond — SBG Securities — Analyst

Thank you.

Operator

[Operator Instructions] We have a question from Mark du Toit of OysterCatcher Investments.

Mark du Toit — OysterCatcher Investments — Analyst

Hi. Good morning, everyone. If you could just — you put some last slides on the Wafi-Golpu project at the end of the presentation. Just to confirm that capex expenditures, is that your portion of the capex, is that for the total project, the $2.8 billion? And maybe just an update of — if there has been any further progress on it at this stage?

Peter Steenkamp — Chief Executive Officer

Now, the $2.8 billion was the original feasibility study number for the total project.

Boipelo Lekubo — Financial Director

100%.

Peter Steenkamp — Chief Executive Officer

100% of the project. So, yeah, just in terms of where we are now? Obviously, I think the last reporting period we did report that back in February we had this — that so-called stay of negotiation court order was lifted. So, we can now negotiate again. Unfortunately, most of us were outside of the country because of COVID. And so, we haven’t progressed much. But in the meantime, a lot of work has been done by the government, the provincial government and the landowners to consolidate their views. So, we are expecting a — soon-to-have a kind of a position paper from their sides in terms of where they are with negotiations and what they would like to see going out of the project.

What is nice — what is a positive thing that the Minister kept on saying — the Prime Minister keep on saying that this will be done under the old act, which is quite good for us. I mean, we’re quite happy for that. And so — and that he actually are very keen to actually put that position paper on the table now, and he made a lot of public announcements as far as that’s concerned, and he talked about September, he would be able to have the bulk of the things — their mandate resolved. So, we are keen to restart with the state negotiation team. He’s keen to get the thing going, Johannes, and they are more ready. We have people on — in-country that can continue with the negotiation. So, whenever the government is ready, we are ready.

Mark du Toit — OysterCatcher Investments — Analyst

Who is going to lead the negotiations? Is it Newcrest, or Unisel?

Peter Steenkamp — Chief Executive Officer

Jointly. Johannes and Craig, I think they’ve got a — covenant [Phonetic] of Johannes with Craig Jones. The two of them are already the guys doing the negotiations. And they also have, obviously, put teams that support them as far as that’s concerned.

Mark du Toit — OysterCatcher Investments — Analyst

Okay, thanks. And then just on your production guidance, I mean, it seems quite conservative, if I compare it to this year’s kind of COVID-impacted production. I mean, am I correct in that view?

Peter Steenkamp — Chief Executive Officer

Yeah. I think — again, I think we’ve — like we spent before, I mean, we had the issue with the — I think what probably is a good — very good grip of this — our grade, the volumes I think is very much in line with what we had and the costs are more or less the same that we said before. So, we’re really sitting in a situation where we had to look at managing our grade. So, we’ve had a very hard look in terms of our grades and we think we are realistic as far as that’s concerned. Like I said, it’s quite difficult to really predict a — or guide the impact of COVID. We looked at in terms of what happened in the first quarter. We adjusted for that. We’re not sure what’s going to happen going forward. At the moment, like I said, we’ve got everything under control. We’ve got 61 people currently affected by that, so we don’t necessarily have an impact on any of our production. And — but we still have close to 1,700 people, vulnerable employees that we haven’t returned. Those are pregnant ladies. Those are people that cannot — that’s got comorbidities, high levels of comorbidities and so forth and older people, and except for the CEO…

Marian van der Walt — Senior Group Executive, Enterprise Risk and Investor Relations

I think a bit more.

Peter Steenkamp — Chief Executive Officer

So we — so the older people have not returned, either. So, I mean, we do have these kind of things that we have to manage. But…

Boipelo Lekubo — Financial Director

And also, Unisel, we split up.

Peter Steenkamp — Chief Executive Officer

And then, obviously, out of that also comes Unisel out — the mine Unisel, we stopped. Well, we stopped — don’t plan to mine it this year, but we’re still finalizing the last part of it. So, yes, so that way we — that, obviously, had an impact on the results. And again, I say we will reguide if we put Mponeng into that, in the middle of the year, we will obviously will increase our guidance quite substantially from where we are now.

Mark du Toit — OysterCatcher Investments — Analyst

Thank you so much.

Operator

Thank you. And gentlemen, that was the final question. Do you have any closing comments.

Peter Steenkamp — Chief Executive Officer

Thank you very much. I could just — I just want to maybe conclude in saying that despite the impact of the pandemic, the need for collective action has revealed our interdependencies and strengthened our relationship with Harmony’s various stakeholders, and I really would like to say that, I mean, this has been probably one of the most rewarding times of my life in mining. We were such — on such a good momentum at prior to the COVID and then COVID struck us, and we had to close the mines. We really thought how we are going to get out of this and really collectively through all the stakeholders, we talked about government, and specifically the government that really, really came to the party, with the likes of [Indecipherable] touch that supported us.

And then, of course, the union’s, especially on branch levels, we had some fantastic support on branch levels. And everybody was — it was a new norm for them on unprecedented areas, that they have to — that we’re not sure what to do, but collectively, I think everybody came through this all the best. And it’s certainly been one of the most rewarding times of my career that — in terms of how we got together, sorted this out, managed the crisis well, and I want to thank my team and everybody else for doing that. So this has been a very, very good experience. And we’re really off a very good base now to start the future with a good price and a good momentum still on our operations now going forward. So we’re looking forward for the new financial year. Thank you very much.

Operator

[Operator Closing Remarks]