Harmony Gold Mining Co. Ltd. · JSE:HAR

Harmony Gold Mining — Investor Presentation (September 2017)

43 slides from Harmony Gold Mining's investor presentation, September 2017

  1. Slide 1: Investor Brief September 2017

    © Harmony | Investor brief – September 2017 1 September 2017 INVESTOR BRIEF

  2. Slide 2: Why invest in Harmony

    2 WHY INVEST IN HARMONY Large, profitable producer Balance sheet strength © Harmony | Investor brief – September 2017 Quality growth prospects Share price uplift

  3. Slide 3: Our investment proposition

    3 OUR INVESTMENT PROPOSITION Large, profitable Balance sheet strength Quality growth prospects Share price uplift producer  >1 Moz annual  Low net debt  Hidden Valley  Highly geared to gold production investment plan on price and Rand/US$ © Harmony | Investor brief – September 2017  Successful

  4. Slide 4: Established operations, growth opportunities

    4 ESTABLISHED OPERATIONS, GROWTH OPPORTUNITIES PAPUA NEW GUINEA © Harmony | Investor brief – September 2017 Production split FY17 9% SOUTH AFRICA FY19E 15% Hidden Valley (open pit mine) Golpu copper-gold project (50:50 JV) Production split Multiple exploration areas FY17 91% (50% and 100%) FY19E 85%

  5. Slide 5: Quality reserves – gold and copper

    5 QUALITY RESERVES – GOLD AND COPPER Geographic diversification Mineral diversification1 Copper* (36%) Gold (63%) PNG SA SA 13.2 Moz © Harmony | Investor brief – September 2017 PNG 16.3 Moz Total reserves 44% 56% of 36.7 Moz1 PNG 6.9 Moz Silver (1%) 1 Copper and silver as gold equivalents based on T

  6. Slide 6: Delivered on strategic objectives in FY17

    6 DELIVERED ON STRATEGIC OBJECTIVES IN FY17 Strategy Safe, profitable ounces and increasing margins Strategic Operational Cash Effective capital pillars excellence certainty allocation © Harmony | Investor brief – September 2017  Safety performance  Reduced net debt –  Hidden Valley improved stro

  7. Slide 7: Solid investment case

    7 SOLID INVESTMENT CASE Large, profitable producer Balance sheet strength  safe, predictable production  low net debt allows for growth  maintain increase in grade  hedging strategy protects © Harmony | Investor brief – September 2017 margins Quality growth prospects Share price uplift  Golpu –

  8. Slide 8: Share price geared to Rand gold price

    8 SHARE PRICE GEARED TO RAND GOLD PRICE 70 800,000 60 750,000 50 700,000 40 650,000 Rand/kg © Harmony | Investor brief – September 2017 Rand 30 600,000 20 550,000 10 500,000 - 450,000 Dec-15 Jun-16 Dec-16 Jun-17 Harmony share price (Rand) Gold price Rand/kg Source: Factset,

  9. Slide 9: Operational excellence

    © Harmony | Investor brief – September 2017 9 EXCELLENCE OPERATIONAL

  10. Slide 10: Safety, flexibility and predictability

    10 SAFETY, FLEXIBILITY AND PREDICTABILITY Operational excellence - creating an enabling environment Safety and health Infrastructure Grade Capital allocation; Realistic management management reducing costs production plans © Harmony | Investor brief – September 2017 No mining below Proactive, Focuse

  11. Slide 11: Consistently improving underground grade

    11 CONSISTENTLY IMPROVING UNDERGROUND GRADE Grade performance  Only South African gold 5.3 miner with improved underground grade profile 5.1 5.18  Grade discipline is key 5.07 5.02 4.9 − no mining below cut-off − mining to average 4.7 4.74 4.73 reserve grade © Harmony | Investor brief – September

  12. Slide 12: South African asset portfolio

    12 SOUTH AFRICAN ASSET PORTFOLIO South Africa Nature Operation FY17 Asset priority production split Tshepong operations Growth 36% Growth capital allocated Joel Bambanani Short life - improve productivity High margin 9% (AISC <US$850) to maximise cash flow Underground © Harmony | Investor brief – Se

  13. Slide 13: SA forecast (FY18)

    13 SA FORECAST (FY18) FY17 FY18* 5.07 5.18 Underground recovered grade (g/t) © Harmony | Investor brief – September 2017 31,275 Produced 30,871 (kg) Operational excellence will extend life of mines Opportunities 514,333 520,000 Tshepong/Phakisa integration Joel decline – increase grade AISC (R/kg) C

  14. Slide 14: Papua New Guinea asset portfolio

    14 PAPUA NEW GUINEA ASSET PORTFOLIO PNG Nature Operation Asset priority Operation Open-pit Hidden Valley Stage 5 and 6 investment Definitive Golpu – Stage 1 Optimise study outcomes feasibility Golpu - Stage 2 Study work to optimise Golpu value Prefeasibility/ Hidden Valley – © Harmony | Investor bri

  15. Slide 15: Hidden Valley forecast (FY18 and FY19)

    15 HIDDEN VALLEY FORECAST (FY18 AND FY19) FY17 FY18* FY19* Recovered 1.59 grade (g/t) 1.16 1.07 5,910 © Harmony | Investor brief – September 2017 Produced (kg) 2,965 2,940 543,186 535,000  Exploration – satellite deposits AISC 480,009 (R/kg) Opportunities  Stage 7 cutback to extend life-of-mine Ke

  16. Slide 16: Cash certainty

    © Harmony | Investor brief – September 2017 16 CASH CERTAINTY

  17. Slide 17: Successful hedging programmes realise US$126 million

    17 SUCCESSFUL HEDGING PROGRAMMES REALISE US$126 MILLION 700,000 GOLD 650,000 FY17 cash flow: Unrealised mark-to-market 600,000 US$51m R/kg value at 30 June 2017: 550,000 US$102 million 500,000 450,000 400,000 © Harmony | Investor brief – September 2017 Profit Spot gold price Forward price 19 CURRENC

  18. Slide 18: Hedging strengthens margins

    18 HEDGING STRENGTHENS MARGINS (US$) US$/oz All-in sustaining costs US$/oz - FY17 1,600 Target 1 1,500 Hedging price received* 1,400 Unisel 1,300 Spot gold price received Kalgold Doornkop 1,200 Hidden © Harmony | Investor brief – September 2017 Kusasalethu Valley AISC Harmony Tshepong Phakisa FY17:

  19. Slide 19: Hedging programme summary at June 2017

    19 HEDGING PROGRAMME SUMMARY AT 30 JUNE 2017 FY18 FY19 TOTAL Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 US$m 111 132 120 59 422 Approx. 35% of Currency US$/ Floor 15.00 14.40 14.00 14.00 annual revenue, at ZAR weighted average collars Cap 16.30 15.50 15.00 15.00 floor:R14.39/US$, cap:R15.50/US$ ZAR/ ‘000 oz 54 54 54 5

  20. Slide 20: Low net debt leads to flexibility

    20 LOW NET DEBT LEADS TO FLEXIBILITY 300 250 1.8x 200 US#039;million 150 © Harmony | Investor brief – September 2017 262 249 100 192 0.3x 0.3x 50 109 74 68 0 FY15 FY16 FY17 EBITDA Net debt Net debt/EBITDA ratio EBITDA: operating profit, excluding amortization and depreciation, impairment and loss on sc

  21. Slide 21: Net debt compared to major peers

    21 NET DEBT COMPARED TO MAJOR PEERS Net debt/EBITDA* 3.0 2.5 2.0 © Harmony | Investor brief – September 2017 1.5 1.0 0.5 0.0 South Canadian Canadian South SouthPeers Canadian Australian Canadian American Canadian Harmony African African African ■ South African ■ Canadian ■ Australian ■ American * Ne

  22. Slide 22: Effective capital allocation

    © Harmony | Investor brief – September 2017 22 ALLOCATION EFFECTIVE CAPITAL

  23. Slide 23: Progress made towards aspiration of 1.5Moz by FY19

    23 PROGRESS MADE TOWARDS ASPIRATION OF 1.5MOZ BY FY19 Balance: Organic growth, exploration, identifying and evaluating acquisitions FY17 Hidden Valley acquisition © Harmony | Investor brief – September 2017 180 000oz FY17 Central plant tailings project 15 000oz FY17 SA production 1Moz

  24. Slide 24: Growing our ounces through acquisition

    24 GROWING OUR OUNCES THROUGH ACQUISITION Acquisition criteria  Gold mines  1 - 2 Moz reserves  More than 100 000 oz per annum  Life of mine of 10 years or more © Harmony | Investor brief – September 2017  Producing or late stage development near producing  Low cost, cash generative asset (all

  25. Slide 25: Hidden Valley investment

    25 HIDDEN VALLEY INVESTMENT – 180 000OZ BY FY19 Strong fundamentals  Project economics – support FCF - IRR well exceeding 20% - LOM 6 years, AISC average US$850/oz to US$950/oz - Steady state production: © Harmony | Investor brief – September 2017 Au:180 000oz; Ag: 3Moz  Targeted commercial levels

  26. Slide 26: Investment plan on budget and schedule

    26 INVESTMENT PLAN ON BUDGET AND SCHEDULE  Ahead of schedule and operational performance in line with budget Milestones FY17 achievements Safety  No safety related work stoppages  Industry benchmark LTIFR achieved Production  Operational ounces exceeded plan © Harmony | Investor brief – Septembe

  27. Slide 27: Wafi-Golpu is a world class orebody

    27 WAFI-GOLPU IS A WORLD CLASS OREBODY 18.6Moz gold Large resource 8.6Mt copper1 Projected long mine Over 35 years life © Harmony | Investor brief – September 2017 Projected low operation Block-caving - low cost operating cost Close to the city of Close to infrastructure Lae - industrial hub, large

  28. Slide 28: Golpu – a quality high grade reserve

    28 GOLPU – A QUALITY HIGH GRADE RESERVE (SE ASIA) 1.8% 1.6% Golpu Golpu 1.4% 1.2% Grasberg Cu wt (%) 1.0% In production 0.8% © Harmony | Investor brief – September 2017 Northparkes Ok Tedi 0.6% Namosi Batu Hijau Oyu Tolgoi 0.4% Didipio Project Kingking 0.2% Cadia Valley 0.0% 0.00 0.10 0.20 0.30 0.40

  29. Slide 29: Wafi-Golpu study ongoing

    29 WAFI-GOLPU STUDY ONGOING Progressing work plan Work Geotechnical  Deep sea tailings placement (DSTP) study interpretation program  Hydrogeological drilling to inform updated model  Current study work focused on: − DSTP options Current − © Harmony | Investor brief – September 2017 self-generati

  30. Slide 30: Making a lasting impact

    © Harmony | Investor brief – September 2017 30 IMPACT MAKING A LASTING

  31. Slide 31: Holistic approach to health

    31 HOLISTIC APPROACH TO HEALTH  Prevent illness Proactive  Early identification, early detection and treatment  Focus on preventive care Harmony health initiatives © Harmony | Investor brief – September 2017  Health hub at each operation Proximity improve productivity  Doctors on-site and part

  32. Slide 32: Uplifting our communities

    © Harmony | Investor brief – September 2017 32 UPLIFTING OUR COMMUNITIES

  33. Slide 33: Leader in environmental responsibility

    33 LEADER IN ENVIRONMENTAL RESPONSIBILITY Rehabilitation Going beyond restoration programme - leaving a positive legacy  38 shafts closed to date  commercial agricultural projects implemented  created >200 jobs and local procurement through  commercial vegetable mine rehabilitation production 

  34. Slide 34: Our values

    34 OUR VALUES No matter the circumstances, safety is our main priority We are all accountable for delivering on our commitments © Harmony | Investor brief – September 2017 Achievement is core to our success We are all connected as one team We uphold honesty in all our business dealings and communica

  35. Slide 35: FY17 performance and FY18 guidance

    © Harmony | Investor brief – September 2017 35 AND FY18 GUIDANCE FY17 PERFORMANCE

  36. Slide 36: Year on year results

    36 YEAR ON YEAR RESULTS Year ended Year ended % June 2017 June 2016 change kg 33 836 33 655 1 Gold produced oz 1 087 852 1 082 035 1 R/kg 570 164 544 984 5 Gold price US$/oz 1 304 1 169 12 R/kg 436 917 392 026 (11) © Harmony | Investor brief – September 2017 Cash operating costs US$/oz 1 000 841 (19

  37. Slide 37: Extract from income statement Y-on-Y (US$)

    37 EXTRACT FROM INCOME STATEMENT Y-ON-Y (US$) Extracts from income statement and operating results June 2017 June 2016 % (US$m) (US$m) change Revenue 1 417 1 264 12 Production costs (1 090) (914) (19) Cash operating costs (1 076) (910) (18) Inventory movements (14) (4) (>100) Production profit as pe

  38. Slide 38: FY18 production guidance

    38 FY18 PRODUCTION GUIDANCE Plan to produce ~1.1 Moz in FY18, at – an average underground recovered grade of ~5.18g/t, and – an all-in sustaining cost of ~$1 180/oz (~R520 000/kg at an exchange rate of R13.74/US$) FY18 GRADE GUIDANCE © Harmony | Investor brief – September 2017 Reserve grade Adjusted

  39. Slide 39: FY18 production guidance (per operation)

    39 FY18 PRODUCTION GUIDANCE (per operation) FY17 production FY18 guidance Life of mine Operation (oz ) (oz) (years) Tshepong operations 283 827 303 000 17 Bambanani 88 415 83 000 5 Target 1 85 809 92 000 7 Doornkop 85 939 94 500 18 Joel 72 211 66 500 9 © Harmony | Investor brief – September 2017 Kus

  40. Slide 40: Investing in our growth (capex)

    40 INVESTING IN OUR GROWTH (CAPEX)* 5,000 165 4,000 Rm 411 1,511 3,000 924 482 390 2,000 2,351 2,713 2,662 2,363 1,000 - FY17 ¹ FY18 ¹ FY19 FY20 © Harmony | Investor brief – September 2017 SA operations (Rm) Hidden Valley net-investment capital (Rm) Hidden Valley capital (Rm) 350 12 300 US#039;m 250 30

  41. Slide 41: Classification of cash operating costs excluding capital

    41 CLASSIFICATION OF CASH OPERATING COSTS EXCLUDING CAPITAL SA FY17 Hidden Valley FY17 Water, 1% Royalties, 1% Royalties, 2% Electricity and water, 4% Electricity, 15% Labour, 20% © Harmony | Investor brief – September 2017 Labour, 49% Consumables, 22% Consumables, Contractors, 51% 24% Contractors,

  42. Slide 42: Private Securities Litigation Reform Act safe harbour statement

    42 PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOUR STATEMENT This presentation contains forward-looking statements within the meaning of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, with r

  43. Slide 43: Contact us

    43 © Harmony | Investor brief – September 2017 CONTACT US www.harmony.co.za HarmonyIR@harmony.co.za +27 11 411 2314

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