Harmony Gold Mining Co. Ltd. · JSE:HAR
Harmony Gold Mining — Q2 2002 Earnings Presentation
30 slides from Harmony Gold Mining's earnings presentation, June 2002
Slide 1: Focusing on Safe Production
FOCUSING ON SAFE PRODUCTION CASH OPERATING PROFIT SURPASSES R1,0 BILLION FINAL DIVIDEND OF 425 CENTS PER SHARE QUARTER ENDED JUNE 2002
Slide 2: Forward-looking statements
This presentation includes certain information that is based on management’s reasonable expectations and assumptions. These “forward-looking statements” include, but are not limited to, statements regarding estimates, intentions and beliefs, as well as anticipated future production, mine life, marke
Slide 3: Focusing on Safe Production
FOCUSING ON SAFE PRODUCTION • Evander seismic event – 5:15 am on 12 July 2002 – 3,9 on Richter Scale – Injuries to 4 employees • Deelkraal seismic event – 13:00 on 12 July 2002 – 1,8 on Richter Scale – 5 employees injured – 2 fatally
Slide 4: No Risks When Investing in Harmony
NO RISKS WHEN INVESTING IN HARMONY new Minerals & Petroleum Resources Development Bill ?? hedging corporate governance
Slide 5: Share Price Performance
SHARE PRICE PERFORMANCE HARMONY RELATIVE TO FTSE/JSE GOLD MINING INDEX (left hand scale) Source: I-Net Bridge; Deutsche Securities
Slide 6: Stock Liquidity Increases
STOCK LIQUIDITY INCREASES 1999/2000 As a % 2000/2001 As a % 2001/2002 As a % JSE 63,1 45 55,6 38 198,0 32 NASDAQ 43,3 31 63,1 44 301,0 48 LSE/Europe 35,3 24 25,9 18 122,2 20 TOTAL 141,7 m 100 144,9 m 100 621,2 100 Ave. issued share capital 83,6 million 102,9 million 169,2 million Liquidity of shares
Slide 7: Creating Value Over the Past 12 Months
CREATING VALUE OVER THE PAST 12 MONTHS % Year Ending 30 June 2002 30 June 2001 Variance Production– kg 82 971 66 563 25 Production– oz 2 667 567 2 140 043 25 Revenue – R/kg 93 978 67 525 39 Revenue – US$/oz 287 276 4 Working cost– R/kg 62 812 57 416 (9) Working cost– US$/oz 192 234 18 Cash operating
Slide 8: Highlights
HIGHLIGHTS • Minerals and Petroleum Resources Development Bill • incorporation of Hill 50 in Australia (22 July 2002) • acquisition of 10% in Elandsrand from Khumo Bathong • US$19m investment in Russian gold mining company • disposal of 9,8% shareholding in AurionGold to Placer Dome • net impairment
Slide 9: Highlights
HIGHLIGHTS • record cash operating profit of R1 067,7 million • quarterly e.p.s of 402 cents • e.p.s for financial year of 1 094 cents, up 882% on 111 cents for previous year • final dividend of 425 cents. Total dividend of 500 cents for the financial year • 9% reduction in working costs from R65 39
Slide 10: Value Creation: Cash Operating Profit
VALUE CREATION CASH OPERATING PROFIT 1100 1000 900 R - millions 800 700 600 500 400 300 200 100 0 Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun '99 '00 '00 '00 '00 '01 '01 '01 '01 '02 '02
Slide 11: Quarterly Performance
QUARTERLY PERFORMANCE % June 2002 March 2002 Variance Production kg 24 390 20 936 17 Production/oz 784 1555 673 106 17 Revenue R/kg 103 349 106 037 (3) Cash cost R/kg 59 574 65 392 9 Revenue US$/oz 308 286 8 Cash cost US$/oz 178 176 (1) Cash cost R/tonne 210 228 8 Exchange rate R/US$ 10,43 11,53 10
Slide 12: Working Profit Analysis
WORKING PROFIT ANALYSIS TOTAL WORKING PROFIT(R’million) OPERATIONS JUNE MARCH VARIANCE 2002 2002 Free State 213,7 145,4 68,3 Evander 140,9 169,3 (28,4) Randfontein 172,5 198,0 (25,5) Elandskraal 173,6 115,2 58,4 Kalgold 11,7 8,3 3,4 Australian Ops. 70,4 13,3 57,1 Sub Total 782,8 649,5 133,3 Free Gol
Slide 13: Profit Margin Analysis – June 2002
PROFIT MARGIN ANALYSIS – JUNE 2002 OPERATIONS US$ CASH COST % MARGIN Free State 197 40 Evander 176 43 Randfontein 179 42 Elandskraal 180 42 Kalgold 234 24 Australian Ops 205 33 Sub Total 189 39 Free Gold (50%) 130 58 TOTAL 178 42
Slide 14: Locality Plan
LOCALITY PLAN Masimong Mine 5# 4# 3# Scale : 5000 m
Slide 15: Masimong Ore Reserves
MASIMONG ORE RESERVES In-situ reserves 3,000,000 2,500,000 2,000,000 5# Oz 1,500,000 4# 3# 1,000,000 500,000 0 1998 1999 2000 2001 2002 Purchased Samrec Reserve = 2,117,310 Oz * *only applies to 4 & 5 Shaft reserves Samrec Resource = 48,146,059 Oz
Slide 16: Masimong m2 Build Up
MASIMONG M2 BUILD UP 45000 340 40000 330 35000 320 30000 310 25000 30,000 R/t m2 22,000 300 20000 290 15000 16,590 10000 280 6,000 6,000 270 5000 4,760 4,000 4,000 0 260 Jul-02 Jun-03 Jun-04 3# 4# 5# R/t
Slide 17: Masimong Expansion Project
MASIMONG EXPANSION PROJECT • production growth opportunity – from 13 000 m² to 40 000 m² per month by June 2004 • significant footwall development on both Basal and B-reef ore bodies required • 135 000 tonnes per month @ 5,5 g/t by June 2004 • 275 000 ozs per annum for a period in excess of 15 years
Slide 18: Masimong Expansion Project
MASIMONG EXPANSION PROJECT • working costs of R290,00 /tonne • gold price of R95 000/kg • capital expenditure for 2003, R38,3 m per annum 2004 and 2005 (R115,9 million) • NPV (pre-tax) @ 10% R505,7 million • IRR of 118% • payback of 18 months
Slide 19: Recoupment of Evander Investment
RECOUPMENT OF EVANDER INVESTMENT Cumulative CAPEX of R274million Operating profit - R millions 1200 1000 Payback after ten quarters 800 600 400 R415 million nett investment 200 0 Sep '98 Dec '98 Jun '99 Sep '99 Dec '99 Jun '00 Sep '00 Dec '00 Jun '01 Sep '01 Dec '01 Jun '02 Mar '99 Mar '00 Mar '01 M
Slide 20: Recoupment of Randfontein Investment
RECOUPMENT OF RANDFONTEIN INVESTMENT Operating profit - R millions 1200 Payback after eight quarters 1000 800 R750 million nett investment 600 400 200 0 Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun '00 '00 '00 '00 '01 '01 '01 '01 '02 '02 Cash operating profit Cumulative profit
Slide 21: Recoupment of Elandskraal Investment
RECOUPMENT OF ELANDSKRAAL INVESTMENT R 988 million total investment Operating profit - R millions 1000 800 600 400 200 0 Jun Sep Dec Mar Jun Sep Dec '01 '01 '01 '02 '02 '02 '02 Cash operating profit Cumulative profit
Slide 22: Elandsrand Sub Shaft Deepening Project
ELANDSRAND SUB SHAFT DEEPENING PROJECT • “new mine” project being developed through infrastructure of previous Elandsrand operations • 10 million ounce ore reserve for total area, an increase of 1,6 million ounces over June 2001 financial year • 7 million ounces at a recovery grade of 7,2 g/t to be
Slide 23: Elandsrand Sub Shaft Deepening Project
ELANDSRAND SUB SHAFT DEEPENING PROJECT • gold price R95 000/kg • approved capex R609,8 million • estimated cost to completion R600,4 million • capital spent to date R143,0 million • capital expenditure for period July 2002 – June 2003 R137,4 million • NPV R546,5 million • IRR 33,4%
Slide 24: Deelkraal Level Project
DEELKRAAL 35 LEVEL PROJECT • reserve of 560 000 tonnes @ 8,68 g/t recovered • 4,861 (156 000 ozs) kgs gold recovered over 5 year period • start-up, re-equip & development on 35 level, extending life of mine by 4 years • total capital expenditure of R13,9 million • NPV (pre-tax) @ 10% R162,6 million
Slide 25: Free Gold Operations
FREE GOLD OPERATIONS % R’million Jun ‘02 Mar ‘02 Variance Cash operating profit 569,9 402,8 42 Interest charges (45,4) (40,3) (13) Other income– net 34,8 4,9 610 Amortisation charges (33,6) (26,8) (25) Profit before tax 503, 6 340,6 48 Due to Harmony 251, 8 170, 3 48
Slide 26: Free Gold Profit Margins
FREE GOLD PROFIT MARGINS % Total Mine Results Jun ‘02 Mar ‘02 Variance Gold price US$/oz 311 290 7 Cash cost US$/oz 130 154 16 Profit margin US$/oz 181 136 33 Exchange rate: Rand per US$ 10,43 11,53 10
Slide 27: Recoupment of (50%) of Free Gold Investment
RECOUPMENT OF (50%) OF FREE GOLD INVESTMENT R 1 350 million total investment Operating profit - R millions 1500 1250 1000 750 500 250 0 Mar '02 Jun '02 Sep '02 Dec '02 Mar '03 Jun '03 Cash operating profit Cumulative profit
Slide 28: Kalplats PGM Project
KALPLATS PGM PROJECT • R3,6 million expenditure for June 2002 quarter • pre-feasibility study completed during the quarter • mineral resource stands at 3,8 million oz at 1,5 g/t TPM to 150 m depth (includes 1,5 million oz of higher grade reef at 3,7 g/t TPM) • metallurgical extractions estimated at
Slide 29: Capital Expenditure
CAPITAL EXPENDITURE JUNE SEPT OPERATIONS QUARTER QUARTER ACTUALS FORECAST Free State 37 31 Evander 28 34 Randfontein 5 6 Elandskraal 43 42 Free Gold (50%) 7 10 Australian Ops 62 70 Kalgold 1 4 TOTAL 183 197
Slide 30: September 2002 Quarter Outlook
SEPTEMBER 2002 QUARTER OUTLOOK • working cost focus continues • combination of weaker Rand and lower US Dollar price = revenue of R100 000 kg • Evander No. 8 Shaft back in full production • September 2002 quarter will see lower gold price and higher cost impacting • optimise positioning of Kalplats