Harmony Gold Mining Co. Ltd. · JSE:HAR
Harmony Gold Mining — Q2 FY2013 Earnings Presentation
57 slides from Harmony Gold Mining's earnings presentation, Feb 4, 2013
Slide 1: Q2 FY13
Q2 FY13 GRAHAM BRIGGS FRANK ABBOTT 4 February 2013 1 w w w . h a r mw onwyw. c. hoa. zr m a ony.co.za FY 2013 Q1 Q2 Q3 Q4
Slide 2: Safe Harbour Statement
Private Securities Litigation Reform Act Safe Harbour Statement This presentation contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and 21E of the Securities Exchange Act of 1934, as amended, that are intended to be covered by the safe
Slide 3: Agenda
Agenda 1 Global gold miner 2 Building low cost, high grade mines 3 World-class exploration projects 4 Supporting corporate social investment Minimising and mitigating the impacts 5 to the environment 6 Unhedged, low debt 7 Dividends 8 Conclusion 3 www.harmony.co.za FY 2013 Q1 Q2 Q3 Q4
Slide 4: Global gold miner
Global gold miner www.harmony.co.za
Slide 5: Strategy
Strategy A global gold mining and exploration company - growing gold production, reserves and profits Delivering on projects Growth Global opportunities Grow the company Generate profits Exploration Growth in reserves Improve cash costs Optimise operational delivery and quality of ounces Experienced
Slide 6: Exciting investment proposition
Exciting investment proposition One of the world’s largest gold miners Building low-cost, high-grade mines: SA and PNG World-class exploration project: Golpu (PNG) Supporting meaningful and responsible corporate social investment Minimising and mitigating the impacts to the environment U
Slide 7: Large gold producer – building low cost, high grade mines
Large gold producer – building low cost, high grade mines www.harmony.co.za
Slide 8: 3rd consecutive quarter of grade improvements
3rd Consecutive quarter of grade improvements g/t Harmony underground recovery grade 5.00 4.80 4.60 4.40 4.20 4.00 3.80 3.60 Mar 12 Jun 12 Sep 12 Dec 12 Recovered grade 8 www.harmony.co.za FY 2013 Q1 Q2 Q3 Q4
Slide 9: Production (kg) (6 monthly)
Production (kg) (6 monthly) kg Total Harmony production (kg) (6 monthly) 25 000 20 000 15 000 10 000 5 000 - Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Continuing operations (kg) 9 www.harmony.co.za FY 2013 Q1 Q2 Q3 Q4
Slide 10: Production (oz'000) (6 monthly)
Production (oz’000) (6 monthly) oz '000 Total Harmony production (oz'000) (6 monthly) 700 600 500 400 300 200 100 0 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Continuing operations (oz'000) 10 www.harmony.co.za FY 2013 Q1 Q2 Q3 Q4
Slide 11: Doornkop
Doornkop Production (quarterly) • Built up production to more than a tonne 1 100 1 000 of gold for the quarter 900 (1 004kg /32 279oz) 800 700 • 4% increase in grade to 3.69g/t 600 500 (reserve grade = 3.78g/t) 400 Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec • 8% improvement in cash operating costs
Slide 12: Phakisa
Phakisa Production (quarterly) • Steady production at 688kg (22 120oz) 800 due to 13% increase in grade to 5.38g/t 700 600 • 8% improvement in cash operating costs 500 at R338 233/kg (US$1214/oz) 400 300 • Tonnes decreased by 10% q-on-q Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec 10 10 10 11 11 11 1
Slide 13: Hidden Valley - steps to improve performance
Hidden Valley - steps to improve performance • Crusher installation and commissioning scheduled for June quarter will reduce haulage cost – truck ore haulage continued during the quarter at significant cost • Overland conveyor (OLC) belt replacement ongoing in March and June 2013 quarters in anticip
Slide 14: Group operating results (q-on-q) (continuing operations)
Group operating results (q-on-q) (continuing operations) % Dec 2012 Sep 2012 change kg 9 074 10 013 (9) Gold produced oz 291 734 321 924 (9) R/kg 479 801 440 868 9 Gold price US$/oz 1 722 1 663 4 R/kg 310 858 294 404 (6) Cash operating costs US$/oz 1 115 1 110 (1) Underground recovery grade g/t 4.77
Slide 15: Group operating results excluding Kusasalethu
Group operating results (q-on-q) (continuing operations) excluding Kusasalethu % Dec 2012 Sep 2012 change kg 8 672 8 412 3 Gold produced oz 278 809 270 451 3 R/kg 479 131 440 574 9 Gold price US$/oz 1 721 1 661 4 R/kg 285 498 296 650 4 Cash operating costs US$/oz 1 024 1 119 9 Underground recovery g
Slide 16: World-class exploration projects
World-class exploration projects www.harmony.co.za
Slide 17: Golpu project – recent drilling
Golpu project – recent drilling Golpu project - recent drilling • Increase in Lift 1 gold and copper grades • Confirms eastern boundary of Lift 2 • Mineralisation continuity below Lift 2 WR429W intersects • 658m @ 0.86g/t Au, 1.09% Cu • Including 246m @ 1.68g/t Au, 1.97% Cu 17 www.harmony.co.za FY 2
Slide 18: Golpu Lift 1
Golpu Lift 1 Golpu project • Volume of higher grade porphyry in Lift 1 increases • Higher grades extended north, outside current Lift 1 design • Lifts the margin per tonne of the mining block relative to the prefeasibility study estimate 18 www.harmony.co.za FY 2013 Q1 Q2 Q3 Q4
Slide 19: Supporting corporate social investment
Supporting corporate social investment www.harmony.co.za
Slide 20: Major social and economic contributions
Major social and economic contributions The gold mining industry employs thousands of people in South Africa provides local economic development and funds numerous corporate social investment projects spends most of its income locally helps earn most of SA’s foreign exchange is a substanti
Slide 21: Safety is our first priority
Safety is our first priority • Regrettably 3 fatals for the quarter (including Evander) • Significant safety achievements during the quarter were – Phakisa achieved 2 000 000 fatality free shifts – Tshepong, Kusasalethu and Doornkop achieved 1 000 000 fatality free shifts – Doornkop achieved 5 500 0
Slide 22: Kusasalethu's cash flow suffers due to unlawful labour disruptions
Kusasalethu’s cash flow suffers due to unlawful labour disruptions Operational cash free flow (R'000) 200 000 150 000 100 000 50 000 - -50 000 • Unprotected strike • Violence -100 000 • Sit-ins -150 000 -200 000 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep
Slide 23: Kusasalethu operating results (q-on-q)
Kusasalethu operating results (q-on-q) % Dec 2012 Sep 2012 change kg 402 1 601 (75) Gold produced oz 12 925 51 473 (75) R/kg 857 928 282 606 (>100) Cash operating costs US$/oz 3 078 1 066 (>100) R/tonne 2 499 1 379 (81) Cash operating costs US$/tonne 262 152 (72) Gold price R/kg 489 920 442 421 11 2
Slide 24: Safety, then production
Safety, then production • Kusasalethu is a mine worth saving • S189 process and bilateral discussions with unions commenced on 7 January 2013 • Two formal consultations have taken place to date on 17 and 29 January 2013 – facilitated by the CCMA indicates that the parties are moving closer to reachi
Slide 25: Minimising and mitigating the impacts of the environment
Minimising and mitigating the impacts of the environment www.harmony.co.za
Slide 26: Environmental management – Rehabilitation
Environmental management Rehabilitation • The Free State rehabilitation project commenced in FY10 • To date, we have – reduced the environmental footprint, land reclamation, waste recycling, metal reclamation and recycling – restored the affected area to support alternative land use – advanced socio
Slide 27: Environmental management – Rehabilitation continued
Environmental management Rehabilitation | continued • Rehabilitation project has resulted in a liability reduction of R24m in FY13 and a total liability reduction of R125m since the inception of the programme • 17 headgear demolitions completed (8 of these already rehabilitated and further 7 will be
Slide 28: Masimong housing project
Masimong housing project • 26 hectares of land transferred to local council • 461 rental units completed • Green theme – borehole and dam for gardens, waste recycling unit envisaged, solar power water heating for all units • Complex includes – Sport area for different sport codes – Crèche for pre sc
Slide 29: Committed to more housing projects
Committed to more housing projects • New housing projects to be an extension of the Tripartite agreement – between Harmony, Province (Department of Human Settlements) and Local Municipality • Envisaged 1000 units to be developed over a period of 4 years • Merriespruit 3, Harmony 3 and Steyn 2 hostel
Slide 30: Unhedged, low debt
Unhedged, low debt www.harmony.co.za
Slide 31: Headline earnings – upward trend
Headline earnings – upward trend Headline earnings(Rm) 1 200 1 000 800 600 400 200 0 -200 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Headline earnings (US$m) 140 120 100 80 60 40 20 0 -20 -40 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun
Slide 32: Improved EBITDA trend
Improved EBITDA* trend EBITDA (Rm) EBITDA (US$m) 1 600 180 1 400 160 140 1 200 120 1 000 100 800 80 600 60 400 40 200 20 - - Mar 12 Jun 12 Sep 12 Dec 12 Mar 12 Jun 12 Sep 12 Dec 12 *EBITDA: Earnings before interest, tax, depreciation and amortisation 32 www.harmony.co.za FY 2013 Q1 Q2 Q3 Q4
Slide 33: Cash flow summary (q-on-q) – Rand
Cash flow summary (q-on-q) – Rand Dec 2012 Sep 2012 Extracts from the cash flow statement (Rm) (Rm) Cash flow from operations before exploration 1 552 1 473 Exploration expenditure (160) (136) Income and mining taxes (paid)/ refunded (221) 108 Proceeds from sale of investments and assets 69 55 Capit
Slide 34: Cash flow summary (q-on-q) – US$
Cash flow summary (q-on-q) – US$ Dec 2012 Sep 2012 Extracts from the cash flow statement (US$m) (US$m) Cash flow from operations before exploration 179 178 Exploration expenditure (18) (16) Income and mining taxes (paid)/ refunded (25) 13 Proceeds from sale of investments and assets 8 7 Capital expe
Slide 35: Income statement (q-on-q) – Rand
Income statement (q-on-q) – Rand Dec 2012 Sep 2012 % Extracts from income statement and operating results (Rm) (Rm) change Revenue 4 613 4 278 8 Production costs (2 980) (2 870) (4) Cash operating costs (2 821) (2 948) 4 Inventory movements (159) 78 >(100) Operating profit as per operating results 1
Slide 36: Income statement (q-on-q) – US$
Income statement (q-on-q) – US$ Dec 2012 Sep 2012 % Extracts from income statement and operating results (US$m) (US$m) change Revenue 532 519 3 Production costs (344) (348) 1 Cash operating costs (325) (357) 9 Inventory movements (18) 9 >(100) Operating profit as per operating results 188 171 10 Amo
Slide 37: Dividends
Dividends www.harmony.co.za
Slide 38: Free cash flow (R/kg)
Free cash flow (R/kg) R/kg Total Harmony (continuing operations) 500 000 450 000 R 72 714/kg¹ 400 000 R168 943/kgª 350 000 300 000 250 000 200 000 150 000 100 000 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Cash Operating Cost R/kg Maintenance capital R/kg Growth capital R/
Slide 39: Free cash flow (US$/oz)
Free cash flow (US$/oz) US$/oz Total Harmony (continuing operations) 2 000 1 800 1 600 US$261/oz¹ 1 400 US$607/ozª 1 200 1 000 800 600 400 200 - Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Cash Operating Cost US$/oz Maintenance capital US$/oz Growth capital US$/oz Revenue U
Slide 40: Sharing the upside
Sharing the upside • Interim dividend of 50 cents declared Interim and final dividends declared (SA cents) Earnings and dividend per share (SA cents) 100 700 614 90 600 80 500 70 50 400 60 290 50 300 40 200 144 30 60 90 50 50 50 100 50 60 50 20 40 - 10 (46) 0 (100) FY08 FY09 FY10 FY11 FY12 H1 FY13 F
Slide 41: In conclusion
In conclusion www.harmony.co.za
Slide 42: Delivering value
Delivering value Quarter on quarter* • 28% increase in headline earnings per share* to 158 SA cents (18 US cents) • Doornkop’s build-up takes its production to over a tonne of gold for the quarter • 6% increase in underground grade – 3rd consecutive quarter of grade improvements • Gold production de
Slide 43: Harmony remains undervalued
Harmony remains undervalued One of the world’s largest gold miners Building low-cost, high-grade mines: SA and PNG World-class exploration project: Golpu (PNG) Supporting meaningful and responsible corporate social investment Minimising and mitigating the impacts to the environment Unhed
Slide 44: An exciting investment proposition
Henrika Basterfield Investor Relations Manager Tel: +27 (0)11 411 2314 Mobile: +27 (0)82 759 1775 Email: henrika@harmony.co.za Marian van der Walt Executive: Corporate and Investor Relations Tel: +27 (0)11 411 2037 Mobile: +27 (0)82 888 1242 Email: marian@harmony.co.za JSE (HAR) An exciting NYSE (HM
Slide 45: Appendix
Appendix www.harmony.co.za
Slide 46: Grade improvement
Grade improvement Adjusted (-5%) Mineral reserve Actual grade (g/t) Actual grade (g/t) to compare with Actual grade (g/t) Mine grade (g/t) achieved in achieved in recovery grade achieved in FY12 June 2012 Q1 FY13 Q2 FY13 (g/t) Kusasalethu 6.30 5.99 4.71 4.88 2.91 Doornkop 3.78 3.59 3.31 3.56 3.69 Ph
Slide 47: Working towards our FY16 targets
Working towards our FY16 targets Expected potential Average potential Actual Q1 FY13 Actual Q2 FY13 Operation ounces in FY16 ounces in FY16 (per production production (annual) quarter) Kusasalethu 260 000 - 300 000 oz 65 000 -75 000oz 51 473oz 12 925oz Doornkop 185 000 - 200 000 oz 46 250 - 50 000oz
Slide 48: Exploration in MMJV
Exploration in MMJV Wafi Transfer • Golpu drilling upgrades the gold and copper grades in Lift 1 • Discovery drilling along the Wafi Transfer Zone continues Hidden Valley-Wau District • Drilling at Kerimenge confirms the historical data and extends mineralisation at depth Regional Exploration • Disc
Slide 49: Group operating results (incl discontinued operations)
Group operating results (q-on-q) (incl discontinued operations) % Dec 2012 Sep 2012 change kg 9 737 10 830 (10) Gold produced oz 313 050 348 191 (10) R/kg 479 876 440 927 9 Gold price US$/oz 1 722 1 663 4 R/kg 309 969 291 780 (6) Cash operating costs US$/oz 1 112 1 110 (1) Underground recovery grade
Slide 50: SA underground operating results (incl. discontinued operations)
SA underground operating results (q-on-q) (incl. discontinued operations) % Dec 2012 Sep 2012 change ’000 (metric) 1 685 1 997 (16) Tonnes milled ’000 (imperial) 1 856 2 202 (16) Recovery grade g/t 4.89 4.64 5 kg 8 233 9 261 (11) Gold produced oz 264 696 297 747 (11) R/kg 300 116 285 182 (5) Cash op
Slide 51: SA underground operating results – continuing operations
SA underground operating results (q-on-q) Continuing operations % Dec 2012 Sep 2012 change ’000 (metric) 1 594 1 880 (15) Tonnes milled ’000 (imperial) 1 756 2 073 (15) Recovery grade g/t 4.77 4.52 6 kg 7 608 8 503 (11) Gold produced oz 244 602 273 377 (11) R/kg 300 225 286 654 (5) Cash operating co
Slide 52: SA surface operating results (incl. discontinued operations)
SA surface operating results (q-on-q) (incl. discontinued operations) % Dec 2012 Sep 2012 change ’000 (metric) 2 460 2 432 1 Tonnes milled ’000 (imperial) 2 713 2 682 1 Recovery grade g/t 0.35 0.36 (3) kg 862 880 (2) Gold produced oz 27 713 28 292 (2) R/kg 298 730 292 689 (2) Cash operating costs US
Slide 53: SA surface operating results – continuing operations
SA surface operating results (q-on-q) Continuing operations % Dec 2012 Sep 2012 change ’000 (metric) 2 410 2 390 1 Tonnes milled ’000 (imperial) 2 658 2 636 1 Recovery grade g/t 0.34 0.34 - kg 824 821 - Gold produced oz 26 491 26 395 - R/kg 299 511 303 430 1 Cash operating costs US$/oz 1 075 1 144 6
Slide 54: Hidden Valley operating results (q-on-q)
Hidden Valley operating results* (q-on-q) % Dec 2012 Sep 2012 change ’000 (metric) 456 491 (7) Tonnes milled ’000 (imperial) 503 541 (7) Recovery grade g/t 1.41 1.40 1 kg 642 689 (7) Gold produced oz 20 641 22 152 (7) R/kg 451 424 379 303 (19) Cash operating costs US$/oz 1 620 1 430 (13) R/ton 636 5
Slide 55: Evander including surface results (q-on-q)
Evander including surface results (q-on-q) % Dec 2012 Sep 2012 change ’000 (metric) 141 159 (11) Tonnes milled ’000 (imperial) 155 175 (11) Recovery grade g/t 4.70 5.14 (9) kg 663 817 (19) Gold produced oz 21 316 26 267 (19) R/kg 297 813 259 613 (15) Cash operating costs US$/oz 1 069 979 (9) R/ton 1
Slide 56: Adjusted guidance for the group
Adjusted guidance for the group (as advised on 7 January 2013) Company production guidance FY13¹ FY14¹ FY15¹ FY16¹ Previously guided 1.3 1.45 1.6 1.7 New guidance 1.2 1.45 1.6 1.7 ¹ This guidance assumes that Kusasalethu will be back to planned production on 1 July 2013 56 www.harmony.co.za FY 2013
Slide 57: An exciting investment proposition
Henrika Basterfield Investor Relations Manager Tel: +27 (0)11 411 2314 Mobile: +27 (0)82 759 1775 Email: henrika@harmony.co.za Marian van der Walt Executive: Corporate and Investor Relations Tel: +27 (0)11 411 2037 Mobile: +27 (0)82 888 1242 Email: marian@harmony.co.za JSE (HAR) An exciting NYSE (HM
Harmony Gold Mining Company — Q2 FY2013 Earnings Presentation on 6ix