Harmony Gold, a leading South African mining company, has announced the pricing of its $500m guaranteed senior unsecured convertible bonds due in 2031. The bonds will be issued at 100% of their principal amount, with each bond valued at $200,000. The offering is set to be redeemed at the end of September 2031. This move is part of the company's efforts to optimize its funding profile and diversify its capital sources.
The convertible bonds will pay a coupon of 1.500% per annum, with payments made semi-annually on March 29 and September 29 of each year. The first payment is scheduled for March 2027. The initial conversion price of R418.60 represents a 40% premium above the reference share price, which is the placement price per share. This conversion price is expected to provide investors with an attractive opportunity to convert their bonds into Harmony Gold shares.
According to Harmony Gold CEO Beyers Nel, the offering reflects the company's proactive and disciplined approach to balance sheet management from a position of strength. The bond offering enhances funding efficiency, diversifies capital sources, and optimizes the company's funding profile. Nel expressed confidence in Harmony Gold's ability to continue creating long-term value for shareholders, stating that the capital program remains fully funded.
The payments in respect of the bonds will be guaranteed by several Harmony Gold subsidiaries, including Harmony Gold (Australia), African Rainbow Minerals Gold, and Randfontein Estates. The bonds will be convertible into approximately 19.4 million Harmony Gold ordinary shares, representing about 3% of its issued ordinary share capital. This conversion option provides investors with flexibility and potential for long-term growth.
The bonds are set to be issued on September 29 and will be listed on the Frankfurt Stock Exchange. Citigroup and JPMorgan acted as joint global co-ordinators and bookrunners for the offering, with Absa Bank, Firstrand, and Nedbank acting as co-lead managers. The joint bookrunners also placed approximately 4.1 million existing Harmony Gold shares on behalf of a limited number of bond buyers who wished to hedge market risk.
Harmony Gold reported a significant increase in its full-year earnings in August, with a more than 80% rise in earnings per share (HEPS). The company's HEPS soared 87% to 4,363c for the year to end-June, driven by a strong operational performance and the benefit of a higher gold price. Group revenue increased 34% to R99.24bn, and the company achieved a record adjusted free cash flow of R17.15bn, up 54% year on year.
The strong financial performance enabled Harmony Gold to pay a record annual dividend of 750c, bringing the total dividend to a record R8.15bn, or 1,280c per share. The company achieved gold production guidance for the 11th consecutive financial year and delivered on all key operating guidance metrics. This solid performance underscores Harmony Gold's ability to generate value for its shareholders and maintain a strong financial position.
Key points
- Harmony Gold has priced a $500m convertible bond offering due in 2031, with an initial conversion price of R418.60 representing a 40% premium above the reference share price.
- The bond offering is part of Harmony Gold's efforts to optimize its funding profile and diversify its capital sources.
- The company's strong financial performance has enabled it to pay a record annual dividend and maintain a fully funded capital program.
