Harmony Gold Mining Co. Ltd. · JSE:HAR

Harmony Gold Mining — Corporate Update (February 2005)

64 slides from Harmony Gold Mining's corporate update, Feb 7, 2005

  1. Slide 1: Elandsrand 7 February 2005

    Elandsrand 7 February 2005 1

  2. Slide 2: Geology of Elandsrand

    HARMONY’ GEOLOGY OF ELANDSRAND

  3. Slide 3: The Witwatersrand Basin - Geological Plan

    HARMONY’ 3 PANRGRAND VINE ia Ar) DERMAL MINE LEGEND os ee Eoprend Cartes! Rac Geren ee es eh Common Hl Fi oe eee Wafer teats SRK Consulting THE WITWATERSRAND BASIN - Breen Geological Plan FIGURG 3.1

  4. Slide 4: Elandsrand Mine schematic section through shaft system

    HARMONY’ = ELANDSRAND MINE - | - SRK Conseuiting| schematic section through shaft system | looking east

  5. Slide 5: Elandskraal Gold Mine Facies Plan

    HARMONY’ GIS Compiled by Poy b. FACIES TYPE EEE] VCR not developed HE «(Duplicated Reef Terraces Complex 4 BB Terrace Complex 2 GHB Terrace Complex 4 Terrace Complex 6 Terrace Complex 6 {sand filled channels) M2) Slope Facies 1000 o 1000 Meters ELANDSKRAAL GOLD MINE Facies Plan

  6. Slide 6: Terrace and Slope model for the VCR

    TERRACE TERRACE SLOPE {OR “RISER”) a, CHANNEL eee ; | ~ = Pe eS lified mode $ associated for the VCR on Robb et al, 1998) + 4 4 howi the aeomorp ica showing the geomorphologi errace and Slope | BPN

  7. Slide 7: Geological section

    HARMONY’ OR A East q Horizontal scale 1:12,500 Vertical Scale 1:100 Dip of strate exaggerated

  8. Slide 8: History of Elandsrand Project

    HISTORY OF ELANDSRAND PROJECT 8

  9. Slide 9: Events

    EVENTS • objective 1988 ­ to exploit the western high grade block of Elandsrand • 1989/90 Elandsrand Project ­ original feasibility • May 1991 ­ project commenced • February 2001 ­ Harmony acquisition 9

  10. Slide 10: Elandsrand Delivers

    “Elandsrand” Delivers Organic growth Deepening Operational Project Improvements 10

  11. Slide 11: Elandsrand Delivers: Organic growth, Deepening Project

    “Elandsrand” Delivers Organic growth Deepening Project 11

  12. Slide 12: Elandsrand

    ELANDSRAND • Value creating opportunity • 9,3 million ounces of proven reserves • 17 million ounce resource • long life output 413 000 oz per annum • +18 years Life of Mine • enhances the quality of Harmony’s reserve base • significant turnaround potential from: • the Old Elandsrand Mine to the New

  13. Slide 13: Gold Recovered (kg)

    GOLD RECOVERED (KG) 0 5000 10000 15000 20000 20 01 20 02 20 03 20 04 20 05 Old Mine 20 06 20 07 20 08 20 09 98 & Above 20 10 YEAR 20 11 20 12 102 ­ 113 Lev 20 13 20 14 New Mine 20 15 20 16 20 17 20 13 18 GOLD RECOVERED

  14. Slide 14: Project Area Production Profile

    PROJECT AREA PRODUCTION PROFILE Avge/Annum Avge/Month M² 330,000 27,500 M (Reef) 2317 193 M (Waste) 9950 829 Tons 1,462,000 121,854 g/t 8.8 8.8 Kg's 12,866 1,072 14

  15. Slide 15: Project Update

    HARMONY’ PROJECT UPDATE 15

  16. Slide 16: Ore Reserves June 2004 (Project Only)

    ORE RESERVES JUNE 2004 (PROJECT ONLY) HA RM O N Y (S AM R EC com p lia nt) ­ 31/06/2004 Tons G rade K g's O unces M eas ured res ourc es 1,293,979 10.74 13,900 446,885 Indic ated res ourc es 16,955,190 9.91 168,045 5,402,647 Inferred res ourc es 12,302,366 8.86 108,957 3,502,968 Tota l re sou rce s

  17. Slide 17: Western Ultra Deep Levels

    DIAGRAMMATIC SECTION E LANDS RAND S HA FT M M RV SHAF T SHAF T WESTERN ULTRA D EEP LEVELS NORT HERN B OU NDA RY LEASE AR EA VENT SHAF T SUB V C SHAF T R 100 3080 m 102 3240 m 105 3250 m (1 7 6 7 m ) 109 3630 m 113 (2 3 8 7 m ) 115 EL ANDS 3 7 L INE 117 17

  18. Slide 18: Shaft system diagram

    Reef 76 78 Sub Vent Shaft 2nd Reef Pass 80 7m Diameter 82 Sub Shaft 85 10m Diameter 88 4 x 3 Deck Cages 92 42 Persons/deck 95 4 x 12,5 Ton Skips 98 Depth of winder ­2133m 100 102 2 At present 105 109 113 115 Waste Shaft Bottom 3570 m.b.d. LEGEND Waste 2nd Reef Pass Reef Pass Main and Sub­shaft 18

  19. Slide 19: Level plan with reef values

    cm.g/t 1800 cm.g/t 1600 95 Level cm.g/t cm.g/t cm.g/t 2000 2000 1800 cm.g/t cm.g/t 98 Level 39 ­ cm.g/t 98 1724 cm.g/t 1675 2000 2150 cm.g/t 1091 cm.g/t 1433 cm.g/t cm.g/t 1000 cm.g/t 1280 98­ 34 1800 Le ve l 102 cm.g/t 900 cm.g/t 98 ­ 102­37 cm.g/t cm.g/t cm.g/t 39 cm.g/t 1000 2000 1570 1300 cm.g/t

  20. Slide 20: Project Key Dates

    PROJECT KEY DATES EVENT DATE COMMENTS 102 Level on reef May 2002 102 ­ 34 x/cut 102 Level first raise completed July 2003 102 Level ledging commences Oct 2003 105 Level on reef May 2004 1 05 ­ 33 x/cut 105 Level first raise completed March 2005 105 Level ledging commences May 2005 109 Level on reef

  21. Slide 21: Level Results Calendar Year 2004

    102 LEVEL RESULTS Calendar Year 2004 Development Qtr 1 Qtr 2 Qtr 3 Qtr 4 Reef 135 87 91 201 Waste 447 494 335 201 Stoping Qtr 1 Qtr 2 Qtr 3 Qtr 4 m² 1,052 1,854 3,086 4,435 cm g/t 2,028 1,831 2,238 1,470 Tons 3,134 6,017 12,065 14,806 Rec grade 14.61 12.98 12.80 9.63 Rec Kg's 46 78 154 143 21

  22. Slide 22: Infrastructure - Dec 2004

    INFRASTRUCTURE ­ DEC 2004 • the following project components have been completed: § the Backfill shaft raise­boring between 98L and 105L § 113 L sorting belt installation § the reef silos between 113 and 115 levels § settler dam no 1 lining and sealing § backfill winder upgrade § 113 level tip area

  23. Slide 23: Infrastructure - Dec 2004 Continued

    INFRASTRUCTURE ­ DEC 2004 CONTINUED • the following project components have been completed: § 92 L turbine chamber excavation § 98 L BAC fan airway development § 115 L reef system was commissioned during the quarter and reef and waste is hoisted separately from below 100 L § 113 L main Sub­station s

  24. Slide 24: Infrastructure - Dec 2004 Continued

    INFRASTRUCTURE ­ DEC 2004 CONTINUED • the following project components have been completed: § 100 L sub­station chamber and fridge plant chambers still in development, will be completed at the end of February § started civil construction in 115 L pump chamber, will be completed at the end of June 20

  25. Slide 25: Access Development

    ACCESS DEVELOPMENT 102 Level 102 level access development continuing as per schedule Reef development taking place on 37 and 38 raise lines 37 Raise development to be completed this quarter 105 Level All capital development on this level completed Reef development continuing on 33 raise planned comp

  26. Slide 26: Access Development

    ACCESS DEVELOPMENT 109 & 113 Levels Both of these levels continue to mine through the Cobra Dyke with its associated high – pressure gas pockets The 109 RAW Cobra Dyke successfully negotiated with no incidents/ accidents Without any unexpected problems, both levels will be through the Cobra Dyke thi

  27. Slide 27: Capital Expenditure

    CAPITAL EXPENDITURE R MILLION Remaining cost at acquisition R 751 m Final estimated cost after re­engineering R 610 m Capital expenditure as at end Dec 2004 R 412 m Jan 2005 to project completion R 198 m 27

  28. Slide 28: Annual Capital Expenditure Profile

    ANNUAL CAPITAL EXPENDITURE PROFILE R million 2001 2002 2003 2004 2005 2006 2007 2008 Actual Sunk 36 107 106 105 58 Forecast 40 89 65 4 Total 36 107 106 105 98 89 65 4 Elandsrand Project ­ Capital Expenditure 120 100 80 Rmill 60 40 20 ­ 2001 2002 2003 2004 2005 2006 2007 2008 Actual Sunk Forecast 28

  29. Slide 29: Quarterly Capital Expenditure

    QUARTERLY CAPITAL EXPENDITURE 2004/5 Q1 Q2 Q3 Q4 Budget 27.4 31.0 13.9 26.3 98.5 2003/4 Q1 Q2 Q3 Q4 Actual Sunk 29.8 24.8 24.4 26.5 105.5 2002/3 Q1 Q2 Q3 Q4 Actual Sunk 28.6 33.1 22.0 22.6 106.3 29

  30. Slide 30: Sensitivity NPV @ 7.5% (R85000/kg)

    SENSITIVITY NPV @ 7.5% (R 85000/Kg) R 85 000 / kg IRR 30% NPV7.5 R 854m 30

  31. Slide 31: Sensitivity NPV @ 7.5% (R80000/kg)

    SENSITIVITY NPV @ 7.5% (R 80000/Kg) R 80 000 / kg IRR 26% NPV7.5 R 670 m 31

  32. Slide 32: Sensitivity NPV @ 7.5% graph

    SENSITIVITY NPV @ 7.5% (R 85 000/Kg) E l a n d s r a n d P r o j e c t ­ S e n s i t i v i t y G r a p h N P V 7 .5 1 ,2 0 0 1 ,0 0 0 Rmillion 800 600 400 ­10% ­5% Base 5% 10% % G o ld P r ic e o r G r a d e W o r k in g C o s t Capex ­10% ­5% Base 5% 10% Gold Price or Grade 549 698 854 1,004 1,154

  33. Slide 33: Elandsrand Delivers: Operational Improvements

    “Elandsrand” Delivers Organic growth Operational Improvements 33

  34. Slide 34: Positive Events

    POSITIVE EVENTS • successful implementation of the Centre for Operational Effectiveness • implementation of CONOPS and will be completed by the end of March • improve quality of mining • shaft achieved Average Mining Grade for the quarter of 1364cm g/t • grade increased from Sept quarter 5.83g/t to

  35. Slide 35: Successful implementation of the Centre for Operational Effectiveness

    Successful implementation of the Centre for Operational Effectiveness 35

  36. Slide 36: Mining The Harmony Way

    Mining The Harmony Way ­ empowerment of teams ­ flat structures ­ role clarity ­ Multi­Disciplinary Teams : Creates… § peer pressure § cross pollination § synergy 36

  37. Slide 37: HGM Co. Structures

    HGM CO. STRUCTURES Gen. Manager Mine Manager Prod. Manager Sec. Manager Prod. Coach Mine Overseer S/Boss Miner Miner T/Leader Team Team 37

  38. Slide 38: Centre for Business Optimization

    Centre for Business Optimization Centre for Operational Effectiveness T1 Production T2 Coach Stores Eng Services T3 Tn Survey & Logistics & Sampling Tramming BOBEBE (People Service Center) Financial T&A, Payroll, Bonuses, HR & IR, Housing Ore­body Optimization Optimization 38

  39. Slide 39: How Do We Make It Effective?

    HOW DO WE MAKE IT EFFECTIVE? • break down silo’s • service delivery to the people • focus on the needs of the crews / miners • an area where problems are solved • service crews for 24 hrs 7 days a week 39

  40. Slide 40: Create an environment where better business decisions can be taken

    ‘CREATE AN ENVIRONMENT WHERE BETTER BUSINESS DECISIONS CAN BE TAKEN’ 40

  41. Slide 41: Pillars to be Effective

    PILLARS TO BE EFFECTIVE Business Role Rhythm Clarity Quality Info 41

  42. Slide 42: Pillars to be Effective

    PILLARS TO BE EFFECTIVE Business Rhythm Quality Information • set up weekly routine – no • accurate weekly production & • exceptions, no excuses cost information • reduce risk ­ specific, • transparency / accountability consistent pressure • numbers simple/visible/ • sic ­ close loop understood • ac

  43. Slide 43: Revenue: More Money In

    REVENUE : MORE MONEY IN Weekly Underground Planning • crew with Miner • miners with Production Coach Weekly SIC Process • prod. Coach with Mining Manager & Service Providers • Future : Service Definition & Measurement : Engineering Services Tramming Ore Reserve. 43

  44. Slide 44: Mining The Harmony Way How We Do It

    MINING THE HARMONY WAY HOW WE DO IT !!! 3. Weekly Planning : Miner & Crew Establish a 1. SIC : P.Coach / M.Manager Review Last Week's Production Basic Business Rhythm Review : Results Last Week / Plan Next Week Tseki Face Length :________ Miner: _________ 42m SECTION 31 WEEKLY SIC SHEET Weekly SAFET

  45. Slide 45: Weekly SIC

    WEEKLY SIC Focus on More Money IN • proactive : 20% last 7 days / 80% next 7 days • hold prod. coaches accountable for achieving • weekly plan – written action plans • focus : solutions, do things differently • close loop – specific consistent pressure • teamwork – x/pollination / synergies / peer p

  46. Slide 46: Cost: Less Money Out

    COST : LESS MONEY OUT Weekly Stoping Cost Meeting • miner & production coach – last & next 7 days • production coach & mining manager – next 4 weeks Weekly Services Cost Meeting • production engineering • shaft engineering Future : • development ­ contractors / equipping / • construction / stores •

  47. Slide 47: Outcome Required

    OUTCOME REQUIRED • reduce unit cost • increase volume • improve quality & safety • reduce operational variability • optimisation opportunities • real empowerment on lower levels 47

  48. Slide 48: Improve Quality of Mining

    POSITIVE EVENTS IMPROVE QUALITY OF MINING 48

  49. Slide 49: Recovered Grade Quarter on Quarter

    RECOVERED GRADE QUARTER ON QUARTER g/t 10 9 g/ton 8 7 Increase by 10.5% 6 5 4 3 'Sep'04 'Dec '04 New M ine 49

  50. Slide 50: Recovery Grade

    Recovery grade 8.00 7.50 7.00 6.50 6.00 g/ton 5.50 5.00 4.50 4.00 3.50 3.00 Jul­04 Aug­04 Sep­04 Oct­04 Nov­04 Dec ­04 Rec overy grade 50

  51. Slide 51: Cmg/t

    Cmg/t 1800 Cmg/t 1600 1400 1200 1000 800 600 400 200 0 4 4 4 4 4 4 e '0 '0 '0 '0 in l'0 '0 ct ov ec pt ug M Ju O Se D N ew A N 51

  52. Slide 52: Kilograms Quarter on Quarter

    KILOGRAMS QUARTER ON QUARTER Kg’s 3500 3000 2500 Increase by 8.1% 2000 1500 1000 500 0 'Sep'04 'Dec '04 New M ine 52

  53. Slide 53: Cost Reduction Initiatives

    POSITIVE EVENTS COST REDUCTION INITIATIVES. 53

  54. Slide 54: Decrease in total cost quarter on quarter

    POSITIVE EVENTS DECREASE IN TOTAL COST QUARTER ON QUARTER BY R17.3 MILL AND UNIT COST R/TON DECREASE BY R 56/TON 54

  55. Slide 55: Rand per Ton Quarter on Quarter

    RAND PER TON QUARTER ON QUARTER R/ton 700 Decrease by 8.8% 600 500 400 300 200 100 0 'Sep'04 'Dec '04 New M ine 55

  56. Slide 56: Total Cost Quarter on Quarter

    TOTAL COST QUARTER ON QUARTER R’mill 165 160 Decrease by 10.6% 155 150 145 140 135 'Sep'04 'Dec '04 Total Cost 56

  57. Slide 57: Total Direct Cost Jul vs. Dec

    TOTAL DIRECT COST JUL VS. DEC MONTH R’mill 55 Decrease by 22% 50 Salaries R 3.7m 45 Stores R 4.7m Utilities R 3.0m 40 Contractors R 0.5m Total R11.9m 35 30 Jul'04 'Dec '04 Direct Cost 57

  58. Slide 58: Started to train the miner and his crew to control costs

    POSITIVE EVENTS STARTED TO TRAIN THE MINER AND HIS CREW TO TAKE CONTROL OF THEIR COSTS. 58

  59. Slide 59: Results: East Mine Stoping Stores Cost

    RESULTS East Mine ­ Total Stoping Stores R/m2 Cost Rand's R/m2 000's Rand Costs R 5,500 R 320 Stoping Stores : R/m2 Costs R 5,000 R 4,500 R 270 R 4,000 R 3,500 R 220 R 3,000 R 2,500 R 170 R 2,000 R 1,500 R 120 R 1,000 Jul­02 Sep­02 Nov­02 Jan­03 Mar­03 May­03 Jul­03 Sep­03 Nov­03 Jan­04 Mar­04 May­0

  60. Slide 60: Started to train artisans and foremen to control costs

    POSITIVE EVENTS STARTED TO TRAIN ARTISANS AND PRODUCTION AND SHAFT FOREMEN TO TAKE CONTROL OF THEIR COSTS. 60

  61. Slide 61: Results: Shaft Engineering Rands & R/t

    RESULTS Elandsrand Mine ­ Shaft Engineering Rands & R/t R ands R /t R 35 R 2,300,000 M onthly Rand Costs M onthly R/t Cost R 30 R 2,050,000 Vis ion : R 25 R 1,800,000 R 1,550,000 R 20 R 1,300,000 R 15 R 1,050,000 R 10 R 800,000 R 5 R 550,000 R 0 M ­04 5 Se 0 3 M ­04 Ju 4 M ­05 Se 04 A 04 A 4 A 05 O

  62. Slide 62: Results: Production Engineering Rands & R/t

    RESULTS Elandsrand Mine ­ P roduction Engineering Rands & R/t R ands R /t R 3,650,000 R 45 M onthly R and Costs R 3,400,000 R 40 M onthly R /t Cost R 3,150,000 R 35 Vis ion R 2,900,000 R 30 R 2,650,000 R 25 R 2,400,000 R 20 R 2,150,000 R 15 R 1,900,000 R 10 R 1,650,000 R5 R 1,400,000 R0 M ­04 5 Se 0

  63. Slide 63: Implemented Salvage Operations

    POSITIVE EVENTS IMPLEMENTED SALVAGE OPERATIONS. 63

  64. Slide 64: Questions

    Questions Website www.harmony.co.za 64

Harmony Gold Mining — Corporate Update (February 2005) on 6ix