Harmony Gold Mining Co. Ltd. · JSE:HAR
Harmony Gold Mining — Q1 FY2005 Earnings Presentation
26 slides from Harmony Gold Mining's earnings presentation, September 2004
Slide 1: Rightsizing and Restructuring Programme Completed – Profitability Restored
“RIGHTSIZING AND RESTRUCTURING PROGRAMME COMPLETED – PROFITABILITY RESTORED” Quarter ended September 2004
Slide 2: Important Information
HIGHLIGHTS Important Information In connection with the proposed acquisition of Gold Fields, Harmony has filed a registration statement on Form F-4, which includes a preliminary prospectus and related exchange offer materials, to register the Harmony ordinary shares (including Harmony ordinary share
Slide 3: Highlights
HIGHLIGHTS • cash operating profit of R132,8 million (June ’04 - loss of R43,0 million) • working costs of R77 880/kg (June ’04 – R83 173/kg) • 2,5% increase in production on core operations • implementation of CONOPS on track • growth projects on track – Doornkop South Reef Project re-engineered AN
Slide 4: Fatality Injury Rate (per million hours worked)
FATALITY INJURY RATE (PER MILLION HOURS WORKED) 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 5 00 01 02 03 04 0 4/ 20 20 20 20 20 00 2 tr tQ 1s
Slide 5: Significant Improvement in Working Costs
SIGNIFICANT IMPROVEMENT IN WORKING COSTS September June % 2004 2004 Variance Production - kg 25 822 26 373 (2) Production - oz 830 195 847 908 (2) Revenue -R/kg 83 024 81 543 2 Revenue -US$/oz 405 384 1 Cash cost - R/kg 77 880 83 173 6 Cash cost - US$/oz 380 392 3 Exchange rate 6,38 6,60 (3)
Slide 6: Our Delivery – On Working Costs
OUR DELIVERY – ON WORKING COSTS • June 2004 R83 173/kg • Sept 2004 R80 000/kg R77 880/kg • Dec 2004 R77 500/kg (on target) • June 2005 R75 000/kg (on target)
Slide 7: No Increase in Rand/Tonne Unit Costs
NO INCREASE IN RAND/TONNE UNIT COSTS Sept Jun % 2004 2004 Variance U/g working costs - R/tonne 433 433 - Cash operating profit (R’m) 133 (43) 409 Cash operating profit margin 6% - 100 Cash earning/(loss) per share 41 (15) 373 EPS (cents) (106) (191) 45 • wage increases offset by CONOPS benefits
Slide 8: We Mine World Class Ounces
WE MINE WORLD CLASS OUNCES Ounces Working cost R/kg Sept ‘04 Very profitable Below R70 000/kg 57% Profitable Below R83 000/kg 83% Loss making Balance 17% Overall cash operating profit margin 6,2%
Slide 9: Quarter on Quarter Cash Operating Profit Variance Analysis
QUARTER ON QUARTER CASH OPERATING PROFIT VARIANCE ANALYSIS A quarter on quarter cash operating profit variance analysis Cash operating loss – June 2004 (R 43,0) million - volume decrease (tonnes) (R379,6) million - working cost decrease (%) R182,6 million - recovery grade increase (g/t) R334,6 milli
Slide 10: Sustainable Earnings Before Depreciation
SUSTAINABLE EARNINGS BEFORE DEPRECIATION Working profit 133 Overheads (38) Net sundry revenue 37 Interest paid (100) Foreign exchange loss (1) Financial instruments 1 32
Slide 11: Depreciation and Non-Recurring
DEPRECIATION AND NON- RECURRING Sustainable earnings before depreciation 32 Investments 4 Depreciation (239) Restructuring costs (154) Exploration costs (24) Rehabilitation provision (14) Net loss before tax (395)
Slide 12: Reconciliation of Headline Earnings
RECONCILIATION OF HEADLINE EARNINGS EARNINGS PER QUARTER ENDED QUARTER ENDED SHARE (SA Cents) SEPT 2004 JUNE 2004 Cash earnings/(loss) 41 (15) Basic loss (106) (191) Headline loss (110) (131) Fully diluted loss (106) (191) Headline earning in cents per share Quarter ended Sept 2004 Basic loss (106)
Slide 13: Quarter on Quarter Operational Performance
QUARTER ON QUARTER OPERATIONAL PERFORMANCE OPERATIONS SEPT 2004 JUN 2004 VARIANCE (R’million) (R’million) (R’million) Free State growth 144 67 77 Free State marginal (75) (70) (5) Evander 62 1 61 Randfontein 4 4 - Elandsrand (39) (25) (14) Orkney 1 - 1 Kalgold (3) 3 (6) Re-structured operations - (5
Slide 14: Operational Highlights
OPERATIONAL HIGHLIGHTS • good progress with CONOPS • digested the annual 7% wage increase • Target Shaft R/tonne cost improvements • further production improvements at Tshepong • Bambanani’s overall improvements – tonnes, grade and safety • Evander’s excellent recovery, but grades not sustainable •
Slide 15: Capital Expenditure – Investing in Our Future
CAPITAL EXPENDITURE – “INVESTING IN OUR FUTURE” OPERATIONAL ACTUAL FORECAST CAPEX SEPT 2004 DEC 2004 Free State Growth 27 17 Free State Marginal 8 4 Evander 14 8 Randfontein 7 4 Australian Operations 35 34 Total Operational Capex 91 67 PROJECT CAPEX Doornkop South Reef 32 40 Elandsrand New Mine 27 2
Slide 16: Hidden Valley – Production Growth in Australasia
HIDDEN VALLEY – PRODUCTION GROWTH IN AUSTRALASIA • approval process is progressing towards date of end of November 2004 • construction date – February 2005 • project optimisation (pit design and infrastructure) underway • definition drilling continues – conversion of inferred resources to indicated
Slide 17: Wafi – Progressing Towards Pre-Feasibility Study
WAFI – PROGRESSING TOWARDS PRE-FEASIBILITY STUDY • completed 13 136 metre RD drilling programme, 5 538 metres in July and August 2004, Borehole Drill Hole Values Area • WRC 014 25m @ 3,94 g/t from 161m B-Zone • WRC 017 30m @ 5,03 g/t from 107m B-Zone • WRC 028 33m @ 4,75 g/t from 313m Link-Zone • WR
Slide 18: Doornkop South Reef Project – Re-engineered
DOORNKOP SOUTH REEF PROJECT – RE-ENGINEERED • re-interpretation of geological model completed • southern portion of orebody now contains 75% of gold above 207 Level (previously 212 Level) • capital expenditure saving of R173 million • 60m of shaft sinking • less development • full production targets
Slide 19: Doornkop South Reef Project - Financial Analysis
DOORNKOP SOUTH REEF PROJECT - FINANCIAL ANALYSIS Capital cost update R ‘million Final estimated cost 1 097,6 Sunk capital 142,9 Capital to be spent 954,7 Financial evaluation Gold price (R/kg) R80 000 NPV @ 7,5% R403m IRR 58%
Slide 20: What May the Future Hold?
WHAT MAY THE FUTURE HOLD ? Next quarter (Dec ‘04) • gold price – R83 000 – R86 000/kg • cash operating cost below - R77 000/kg • CONOPS successfully implemented company wide • Elandsrand, recovery in progress “Cash burn” – a thing of the past
Slide 21: The Proposed Merger Between Harmony and Gold Fields
THE PROPOSED MERGER BETWEEN HARMONY AND GOLD FIELDS OUR OFFER • share for share offer for 100% of Gold Fields • 1,275 Harmony share for every Gold Fields share • the offer values Gold Fields at R52,9 billion (US$ 8,1 billion) • represents a 29% premium to the volume weighted average market price of
Slide 22: The Transaction – Early Settlement
THE TRANSACTION EARLY SETTLEMENT • Up to a maximum 34,9% of Gold Fields shares can be settled firm within approximately 30 days – pro-rata for all shareholders – to comply with all regulatory requirements • Allows shareholders to realise in a short time period the premium inherent in the offer • To
Slide 23: The Transaction – Subsequent Offer
THE TRANSACTION SUBSEQUENT OFFER • immediate follow-on offer • on the same terms as the early settlement offer • for the balance of the issued share capital of Gold Fields KEY CONDITIONS • IAMGold transaction not proceeding • Approval from the South African Competition Authorities
Slide 24: The Rationale for the Offer
THE RATIONALE FOR THE OFFER • continuation of our strategy of growth • creation of the world’s largest gold producer • value proposition of combined entity makes for a compelling investment case • Harmony has a track record in unlocking value of turnaround assets and this can be achieved with the Go
Slide 25: Private Securities Litigation Reform Act Safe Harbor Statement
PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT Important Information In connection with the proposed acquisition of Gold Fields, Harmony has filed a registration statement on Form F-4, which includes a preliminary prospectus and related exchange offer materials, to register the Harmo
Slide 26: Questions
Questions Website www.harmony.co.za
Harmony Gold Mining Company — Q1 FY2005 Earnings Presentation on 6ix