Harmony Gold Mining Co. Ltd. · JSE:HAR

Harmony Gold Mining — H1 FY2019 Earnings Presentation

56 slides from Harmony Gold Mining's earnings presentation, Feb 12, 2019

  1. Slide 1: Results for the six months ended 31 December 2018

    RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2018 12 February 2019

  2. Slide 2: Safe Harbour Statement – Forward Looking Statements

    2 PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOUR STATEMENT FORWARD LOOKING STATEMENTS This presentation contains forward-looking statements within the meaning of the safe harbor provided by Section 21E of the Exchange Act and Section 27A of the Securities Act of 1933, as amended (the “Securit

  3. Slide 3: Achievements for the half year

    Results for the six months ended 31 December 2018 (H1FY19) 3 ACHIEVEMENTS FOR THE HALF YEAR LTIFR 7% improvement in lost time injury increase in frequency rate underground recovered grade 34% 25% © Harmony increase in production, increase in production profit boosted by Moab Khotsong and to R3.4 bil

  4. Slide 4: Overview of six months ended December 2018

    4 OVERVIEW OF SIX MONTHS ENDED 31 DECEMBER 2018  Risk-based safety approach delivers improvement in safety rates Results for the six months ended 31 December 2018 (H1FY19)  Moab Khotsong and Hidden Valley significantly boost production, 34% increase in production Operational  On track to achieve

  5. Slide 5: Focused on safety

    FOCUSED ON SAFETY PETER STEENKAMP (CEO)

  6. Slide 6: Key aspects of our safety approach

    6 KEY ASPECTS OF OUR SAFETY APPROACH Four layered risk based Key outcome approach Results for the six months ended 31 December 2018 (H1FY19) Baseline risk assessment Identification of key controls to prevent significant unwanted events Issue-based risk assessment Control monitoring and assessments T

  7. Slide 7: SA operations – improved safety trends

    7 SA OPERATIONS – IMPROVED SAFETY TRENDS Lost time injury frequency rate (LTIFR) (per million hours) Results for the six months ended 31 December 2018 (H1FY19) 8.00 7.00 7.13 6.75 6.00 6.45 6.05 6.17 5.00 4.84 4.00 3.00 2.00 © Harmony 1.00 0.00 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19

  8. Slide 8: Journey to increasing margins

    JOURNEY TO INCREASING MARGINS PETER STEENKAMP (CEO)

  9. Slide 9: Growing the quality of our portfolio

    9 GROWING THE QUALITY OF OUR PORTFOLIO Underground recovered grade (g/t) Production (Koz) 6.00 1,500 Results for the six months ended 31 December 2018 (H1FY19) 5.85 AISC 5.60 <US$950/oz 1,000 5.20 4.80 Focused on 5.28 500 operational 5.02 excellence 4.40 © Harmony 4.00 - FY16 FY19FC FY16 FY19FC ■ SA

  10. Slide 10: 34% increase in gold production

    10 34% INCREASE IN GOLD PRODUCTION (H1FY18 VS H1FY19) 750,000 Results for the six months ended 31 December 2018 (H1FY19) 700,000 650,000 600,000 550,000 Ounces 500,000 450,000 400,000 © Harmony 350,000 300,000 250,000 H1FY18 H1FY19 South Africa (excl. Moab) Moab Khotsong operations Hidden Valley

  11. Slide 11: Underground recovered grade

    11 UNDERGROUND RECOVERED GRADE 5.7 Results for the six months ended 31 December 2018 (H1FY19) 5.6 5.65 5.5 5.48 5.4 5.3 g/t 5.26 5.2 5.1 5.07 5.0 © Harmony 4.9 4.8 4.7 FY17 H1FY18 FY18 H1FY19

  12. Slide 12: Production and cash flow boosted

    12 PRODUCTION AND CASH FLOW BOOSTED Underground recovered grade (g/t) Production (kg) 5.65 23,359 Results for the six months ended 31 December 2018 (H1FY19) + 10% 15,599 + 50% 5.12 "Old" Harmony Harmony today "Old" Harmony Harmony today All-in sustaining cost (R/kg) Operational free cash flow (R'mil

  13. Slide 13: Moab Khotsong payback

    13 MOAB KHOTSONG PAYBACK 2,500,000 2,000,000 Results for the six months ended 31 December 2018 (H1FY19) 1,500,000 Excludes Great Noligwa pillar and Zaaiplaats 1,000,000 (both undergoing studies) 500,000 - R'000 (500,000) (1,000,000) (1,500,000) (2,000,000) R1.1 billion generated (2,500,000) © Harmon

  14. Slide 14: Successful re-investment in Hidden Valley

    14 SUCCESSFUL RE-INVESTMENT IN HIDDEN VALLEY  World class safety and health Results for the six months ended 31 December 2018 (H1FY19) Re-investment Post JV (50%) performance phase (100%) re-investment (100%)  Strong management team 200,000  Disciplined cost management Production (oz)  Pre-strip

  15. Slide 15: Hidden Valley payback

    15 HIDDEN VALLEY PAYBACK 4,500,000 Results for the six months ended 31 December 2018 (H1FY19) 3,500,000 2,500,000 1,500,000 R'000 500,000 (500,000) (1,500,000) © Harmony (2,500,000) Re-investment FY19FC FY20FC FY21FC FY22FC FY23FC Yearly free cash flow Cummulative cash Pre-tax, real (constant gold p

  16. Slide 16: Wafi-Golpu update

    16 WAFI-GOLPU UPDATE  Government of PNG and JV partners entered into MOU (11 December 2018): Results for the six months ended 31 December 2018 (H1FY19) − Set out targeted dates for completion: • 28 Feb 19 – endorsed time sheets • 31 Mar 19 – detailed agreements finalised • 30 Jun 19 – grant of spec

  17. Slide 17: Wafi-Golpu is a game changer

    17 WAFI-GOLPU IS A GAME CHANGER Large production − Steady state production: in excess of 1.4 million gold equivalents ounces profile per annum Results for the six months ended 31 December 2018 (H1FY19) High grade = − High average recovery grades: Au = 0.90g/t, Cu = 1.27% low unit cost production − L

  18. Slide 18: Wafi-Golpu has a large production profile

    18 WAFI-GOLPU HAS A LARGE PRODUCTION PROFILE 2,500 300 Results for the six months ended 31 December 2018 (H1FY19) 250 2,000 200 1,500 000’t 150 000’oz 1,000 100 500 50 © Harmony - - 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 Au metal recovered (koz) Au equ

  19. Slide 19: Project pipeline

    19 Results for the six months ended 31 December 2018 (H1FY19) © Harmony PROJECT PIPELINE PHILLIP TOBIAS (COO - BUSINESS DEVELOPMENT, COMPANY STRATEGY AND PROJECTS)

  20. Slide 20: Disciplined project evaluation and management

    20 DISCIPLINED PROJECT EVALUATION AND MANAGEMENT Key areas Rationale Results for the six months ended 31 December 2018 (H1FY19) - Safety a priority Lower risk profile - Surface projects ranked higher - Pillar mining is intensely scrutinized Improving margins - Ounce replacement and growth are aimed

  21. Slide 21: Organic opportunities

    21 ORGANIC OPPORTUNITIES Permitting Concept/ Feasibility Pre-feasibility phase exploration Results for the six months ended 31 December 2018 (H1FY19) Wafi-Golpu Central Plant Kalgold Mispah Tailings Copper-gold project Reclamation Near mine brownfields Reclamation (SA, (PNG, mechanised Expansion pro

  22. Slide 22: Operational overview

    OPERATIONAL OVERVIEW BEYERS NEL (COO – SOUTH AFRICA OPERATIONS)

  23. Slide 23: Operational excellence core to generating cash flows

    23 Results for the six months ended 31 December 2018 (H1FY19) OPERATIONAL EXCELLENCE CORE TO GENERATING CASH FLOWS Grade and Cost Safety and Infrastructure Capital flexibility management health management allocation management Focused cost Focused No mining management Risk-based capital below cut-of

  24. Slide 24: Focused on generating free cash flow (Rand)

    24 FOCUSED ON GENERATING FREE CASH FLOW (RAND) Restructured 1,400 Disciplined for profitability 114 (132) Results for the six months ended 31 December 2018 (H1FY19) and focused on 77 profitability To improve (143) 1,200 87 on flexibility 100 Safety Development 1,000 and good continues 196 operationa

  25. Slide 25: Key steps taken at Tshepong

    25 KEY STEPS TAKEN AT TSHEPONG  Strong and stable management team re-enforced Results for the six months ended 31 December 2018 (H1FY19)  Focused on improving flexibility and speeding up development (Iceberg management)  Disciplined mining and grade management  Measures implemented to halt illeg

  26. Slide 26: Joel in line with plan

    26 JOEL IN LINE WITH PLAN Description of Joel Access the orebody from twin decline project 137 level, two declines were developed at 12° Results for the six months ended 31 December 2018 (H1FY19) from 129 level – a chairlift decline and a conveyor belt decline Current status Decline project is neari

  27. Slide 27: Cash certainty and effective capital allocation

    © Harmony Results for the six months ended 31 December 2018 (H1FY19) 27 FRANK ABBOTT (FD) CASH CERTAINTY AND EFFECTIVE CAPITAL ALLOCATION

  28. Slide 28: Extract from the income statement (Rand)

    28 EXTRACT FROM THE INCOME STATEMENT (RAND) H1FY19 H1FY18 Change Change Rm Rm Rm % Results for the six months ended 31 December 2018 (H1FY19) Production profit* 3 385 2 712 673 25 Hidden Valley 933 23 910 Moab Khotsong operations 915 - 915 SA operations 1 537 2 689 (1 152) Amortisation and depreciat

  29. Slide 29: Extract from the income statement (US$)

    29 EXTRACT FROM THE INCOME STATEMENT (US$) H1FY19 H1FY18 Change Change US$m US$m US$m % Results for the six months ended 31 December 2018 (H1FY19) Production profit* 239 203 36 18 Hidden Valley 66 2 64 Moab Khotsong operations 65 - 65 SA operations 108 201 (93) Amortisation and depreciation (150) (9

  30. Slide 30: Hidden Valley depreciation (Rand)

    30 HIDDEN VALLEY DEPRECIATION (RAND) 1,800 Results for the six months ended 31 December 2018 (H1FY19) 1,600 1,400 1,200 R’million 1,000 800 600 400 © Harmony 200 - FY19FC FY20FC FY21FC FY22FC FY23FC Plant and equipment Stage 5 Stage 6 Capital expenditure Exchange rate: 1PGK = R4.2326 or 1US$ = R13.4

  31. Slide 31: All-in sustaining cost (R/kg)

    31 ALL-IN SUSTAINING COST (R/KG) 580,000 0.7% 0.7% Results for the six months ended 31 December 2018 (H1FY19) 1.5% 560,000 5.5% 7.1% 540,000 0.9% 520,000 6.6% 500,000 © Harmony 480,000 499,900 528,265 460,000 H1FY18 Cash cost Lower SA Inventory Corporate SA Moab Hidden H1FY19 (SA) production movemen

  32. Slide 32: Increased EBITDA (Rand)

    32 INCREASED EBITDA (RAND) 2,500 Results for the six months ended 31 December 2018 (H1FY19) 2,000 1,500 R'million 1,000 500 © Harmony - Dec-14 Dec-15 Dec-16* Dec-17 Dec-18 EBITDA (excl. hedging and translation) Hedging Earnings before interest, tax, depreciation and amortisation (EBITDA) for the six

  33. Slide 33: Significant increase in free cash flow (Rand)

    33 SIGNIFICANT INCREASE IN FREE CASH FLOW (RAND) H1FY19 H1FY18 Extracts from the cash flow statement Rm Rm % change Results for the six months ended 31 December 2018 (H1FY19) Cash generated from operating activities 2 650 1 832 45 Cash utilised by investing activities (2 341) (2 584) 9 Hidden Valley

  34. Slide 34: Net debt level

    34 NET DEBT LEVEL Six monthly net debt level (US$million) 400 Results for the six months ended 31 December 2018 (H1FY19) 350 300 250 US$ million 200 150 100 © Harmony 50 0 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Historic net debt Hidden Valley Moab Khotsong (net of equity)

  35. Slide 35: Capital allocation priorities

    35 Results for the six months ended 31 December 2018 (H1FY19) CAPITAL ALLOCATION PRIORITIES Debt Opportunity Wafi-Golpu repayment evaluation Targeting net debt/ebitda ratio below Organic growth 1. Permitting 0.8x Value accretive © Harmony 2. Funding Improve M&A balance sheet flexibility

  36. Slide 36: Looking forward

    LOOKING FORWARD PETER STEENKAMP (CEO)

  37. Slide 37: Value creating scorecard

    37 VALUE CREATING SCORECARD Foster inclusive growth Advancing local businesses in our host communities Beneficiation Harmony’s Virginia Jewellery School operating since Results for the six months ended 31 December 2018 (H1FY19) December 2000 Education, skills training Harmony bridging school and dev

  38. Slide 38: Positive gold market sentiment

    38 POSITIVE GOLD MARKET SENTIMENT Key gold commodity drivers Results for the six months ended 31 December 2018 (H1FY19) Global inflation pressures / real interest rates Trade protectionism / trade war China demand strong though price sensitive © Harmony Few new low-cost discoveries / projects coming

  39. Slide 39: Outlook

    39 Results for the six months ended 31 December 2018 (H1FY19) OUTLOOK Safe mines On track are profitable to deliver a sustainable mines production performance Delivering Cash flow © Harmony on our investment to be effectively strategy allocated to growth opportunities

  40. Slide 40: Appendices

    APPENDICES

  41. Slide 41: Operational results – H1FY19 vs H1FY18

    41 OPERATIONAL RESULTS – H1FY19 VS H1FY18 % H1FY19 H1FY18 change Results for the six months ended 31 December 2018 (H1FY19) kg 23 359 17 418 34 Gold produced oz 751 008 560 003 34 R/kg 572 898 580 672 (1) Gold price received US$/oz 1 258 1 348 (7) R/kg 429 860 419 440 (2) Cash operating costs US$/oz

  42. Slide 42: All-in sustaining costs H1FY18 vs H1FY19 (Rand)

    42 ALL-IN SUSTAINING COSTS (H1FY18 VS H1FY19) (RAND) R/kg 800,000 Results for the six months ended 31 December 2018 (H1FY19) 750,000 Joel 700,000 650,000 5.48 Tshepong operations Kalgold 600,000 Gold price received (including gold hedge) Kusasalethu Masimong Target 1 550,000 Doornkop 500,000 Unisel

  43. Slide 43: All-in sustaining costs H1FY18 vs H1FY19 (US$)

    43 ALL-IN SUSTAINING COSTS (H1FY18 VS H1FY19) (US$) US$/oz 1,900 Results for the six months ended 31 December 2018 (H1FY19) 1,700 Joel 1,500 5.48 Masimong Kalgold 1,300 Gold price received (including gold hedge) Tshepong Target 1 operations Kusasalethu Doornkop 1,100 Unisel Total Harmony Total Dec-1

  44. Slide 44: Moab Khotsong payback (US$)

    44 MOAB KHOTSONG PAYBACK 200,000 150,000 Results for the six months ended 31 December 2018 (H1FY19) Excludes Great Noligwa 100,000 pillar and Zaaiplaats (both undergoing studies) 50,000 - US$'million (50,000) (100,000) (150,000) (200,000) (250,000) © Harmony (300,000) Investment FY18 FY19FC FY20FC F

  45. Slide 45: Hidden Valley payback (US$)

    45 HIDDEN VALLEY PAYBACK 400,000 Results for the six months ended 31 December 2018 (H1FY19) 300,000 200,000 US$'million 100,000 - (100,000) (200,000) © Harmony (300,000) Re-investment FY19FC FY20FC FY21FC FY22FC FY23FC Yearly free cash flow Cummulative cash Pre-tax, real (constant gold price and cos

  46. Slide 46: Focused on generating free cash flow (US$)

    46 FOCUSED ON GENERATING FREE CASH FLOW (US$) Restructured 100 for Disciplined profitability 9 (9) 90 and Results for the six months ended 31 December 2018 (H1FY19) 5 To improve focused on (10) profitability 6 on flexibility 80 Safety Development 7 and good continues 70 operational 14 momentum 60 US

  47. Slide 47: Hidden Valley depreciation (US$)

    47 HIDDEN VALLEY DEPRECIATION (US$) 140 Results for the six months ended 31 December 2018 (H1FY19) 120 100 US$ million 80 60 40 © Harmony 20 - FY19FC FY20FC FY21FC FY22FC FY23FC Plant and equipment Stage 5 Stage 6 Capital expenditure Exchange rate: 1PGK = R4.2326 or 1US$ = R13.42

  48. Slide 48: All-in sustaining cost (US$/oz)

    48 ALL-IN SUSTAINING COST (US$/OZ) 1,350 0.7% 0.7% Results for the six months ended 31 December 2018 (H1FY19) 1.5% 1,300 7.1% 5.5% 1,250 0.9% 1,200 6.6% 5.8% 1,150 © Harmony 1,100 1,161 1,160 528,265 1,050 H1FY18 Cash cost Lower SA Inventory Corporate SA Moab Hidden Exchange H1FY19 (SA) production m

  49. Slide 49: EBITDA (US$)

    49 EBITDA (US$) 200 180 Results for the six months ended 31 December 2018 (H1FY19) 160 140 120 US$ million 100 80 60 40 © Harmony 20 - Dec-14 Dec-15 Dec-16* Dec-17 Dec-18 EBITDA (excl. hedging and translation) Hedging Earnings before interest, tax, depreciation and amortisation (EBITDA) for the six

  50. Slide 50: Significant increase in free cash flow (US$)

    50 SIGNIFICANT INCREASE IN FREE CASH FLOW (US$) H1FY19 H1FY18 Extracts from the cash flow statement US$m US$m % change Results for the six months ended 31 December 2018 (H1FY19) Cash generated from operating activities 187 137 36 Cash utilised by investing activities (166) (193) 14 Hidden Valley (47

  51. Slide 51: Hedging programme at December 2018

    51 HEDGING PROGRAMME AT 31 DECEMBER 2018 FY 2019 FY 2020 FY2021 TOTAL Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Rand Gold Results for the six months ended 31 December 2018 (H1FY19) Forward Contracts koz 66 66 66 66 65 64 64 28 485 R'000/kg 626 610 621 638 642 657 668 667 639 Dollar Gold Forward Contracts koz 20 18 6

  52. Slide 52: Capital expenditure overview (Rand)

    52 CAPITAL EXPENDITURE OVERVIEW (RAND) 2,600 187 2,400 Results for the six months ended 31 December 2018 (H1FY19) 162 2,200 268 2,000 1,800 1,100 477 1,600 1,400 238 R'million 1,200 153 1,000 800 600 1,125 1,255 400 200 - © Harmony H1FY18 H1FY19 Sustaining capital (excl. Moab) Sustaining capital (Mo

  53. Slide 53: Capital expenditure overview (US$)

    53 CAPITAL EXPENDITURE OVERVIEW (US$) 200 180 13 12 Results for the six months ended 31 December 2018 (H1FY19) 160 20 140 78 36 120 US$ million 100 18 11 80 60 94 40 79 © Harmony 20 - H1FY18 H1FY19 Sustaining capital (excl. Moab) Sustaining capital (Moab) Deferred stripping at Hidden Valley Growth c

  54. Slide 54: Capital guidance (Rand)

    54 CAPITAL GUIDANCE (RAND) 5,000 Results for the six months ended 31 December 2018 (H1FY19) 4,500 167 819 4,000 835 3,500 1,494 672 491 3,000 898 R million 562 700 2,500 307 207 304 2,000 1,500 2,312 2,502 2,347 1,000 2,060 © Harmony 500 - FY18 FY19 FC* FY20 FC* FY21 FC* Sustaining capital (SA) Grow

  55. Slide 55: Capital guidance (US$)

    55 CAPITAL GUIDANCE (US$) 400 350 Results for the six months ended 31 December 2018 (H1FY19) 13 62 300 63 116 51 250 37 US$ million 67 42 53 200 24 16 23 150 100 188 180 176 155 50 © Harmony - FY18 FY19 FC* FY20 FC* FY21 FC* Sustaining capital (SA) Growth capital (SA) Hidden Valley capital Deferred

  56. Slide 56: Contact us

    CONTACT US HarmonyIR@harmony.co.za +27 (11) 411 2314/+27 (82) 759 1775

Harmony Gold Mining Company — H1 FY2019 Earnings Presentation on 6ix