Harmony Gold Mining Co. Ltd. · JSE:HAR
Harmony Gold Mining — Gold Fields — Merger or Acquisition (October 2004)
38 slides from Harmony Gold Mining's merger presentation, Oct 20, 2004
Slide 1: Creating a New International Major Gold Producer
CREATING A NEW INTERNATIONAL MAJOR GOLD PRODUCER October 2004
Slide 2: 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 Gold Fie
Slide 3: 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 the ex
Slide 4: The Transaction: Subsequent Offer and Key Conditions
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 5: 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 Gold Field
Slide 6: Our Strategy of Growth Continues
OUR STRATEGY OF GROWTH CONTINUES acquiring Gold Fields is consistent with our strategy of growth Harmony has delivered growth through 26 acquisitions, 17 of which have either been operating mines or listed companies OUR SUCCESS is driven by our ability to extract cost savings where other operators h
Slide 7: The Attributes of This New Major Gold Producer
THE ATTRIBUTES OF THIS NEW MAJOR GOLD PRODUCER
Slide 8: The Largest By Production and Market Capitalisation
THE LARGEST BY ...... New Harmony Newmont AngloGold Ashanti Barrick Placer Dome Kinross Buenaventura DRD Newcrest Goldcorp 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 Attributable production (Ounces ‘000) Newmont New Harmony Barrick AngloGold Ashanti Placer Dome Newcrest Buenaventura Goldcorp
Slide 9: Other Measures: Reserves and Resources
OTHER MEASURES … New Harmony Barrick Newmont AngloGold Ashanti Placer Dome Western Areas Newcrest Kinross Buenaventura DRD 0 20 40 60 80 100 120 140 160 Attributable reserves (Ounces millions) New Harmony AngloGold Ashanti Barrick Placer Dome Newmont Newcrest DRD Western Areas Buenaventura Kinross (
Slide 10: With a Compelling Equity Story
… WITH A COMPELLING EQUITY STORY FTSE/JSE Africa Top 40 Index NYSE Composite Index HSBC Global Gold Index Harmony: #17 Gold Fields: # 10 # 6 Harmony: #616 Gold Fields: # 506 # 348 Harmony: #6 Gold Fields: # 5 #2 access to a greater investor universe increased index weighting increased liquidity glob
Slide 11: Robust and Balanced Asset Portfolio
WE WILL HAVE A ROBUST AND BALANCED ASSET PORTFOLIO VALUE CREATION through margin increases Win-win deal making Deal making phase High impact initial transformation phase Restructure for optimal return phase Full value phase – continued improvements TIME IN QUARTERS “Harmony Way” to generate growth w
Slide 12: Harmony Offers an Enhanced Platform for Growth
HARMONY OFFERS AN ENHANCED PLATFORM FOR GROWTH
Slide 13: Significant Value to Be Unlocked
SIGNIFICANT VALUE TO BE UNLOCKED significant reductions in Gold Fields’ cost base to be realised payback of premium requires unit cost reductions of 15% per annum in Gold Fields’ SA cost structure this is over and above Gold Fields’ current efficiency initiatives equates to approximately R1 billion
Slide 14: Delivered by a Team with a Proven Track Record
DELIVERED BY A TEAM WITH A PROVEN TRACK RECORD
Slide 15: Our Proven Track Record
OUR PROVEN TRACK RECORD re-capitalise mature assets for growth previously abandoned reserves turned into growth 20,000 16,000 12,000 8,000 4,000 0 Mineable reserve (‘000/oz) Production (oz/annum) 1,600,000 1,200,000 800,000 400,000 0 Masimong Phakisa Masimong Phakisa Elandsrand Doornkop South Reef E
Slide 16: The Merged Entity Offers...
THE MERGED ENTITY OFFERS.... the world’s largest gold producer with firepower to grow both the domestic and international businesses apply “Harmony Way” to: cut general company overhead costs reduce fixed overhead cost burden on operations reduce cut-offs creating larger economic ore reserve create
Slide 17: Cost Reduction at Evander and St Helena
COST REDUCTION AT EVANDER AND ST HELENA The introduction of the “Harmony Way” delivers value 500 450 400 350 300 (R/tonne) 200 Pre-acquisition Post-acquisition Evander 31% 450 400 300 250 (R/tonne) 200 Pre-acquisition Post-acquisition St Helena 27%
Slide 18: Cost Reduction at Randfontein and Free Gold
COST REDUCTION AT RANDFONTEIN AND FREE GOLD Similar success at larger operations 500 450 400 350 300 250 (R/tonne) 200 16% Pre-acquisition Post-acquisition Randfontein 500 450 400 350 300 250 (R/tonne) 200 27% Pre-acquisition Post-acquisition Freegold
Slide 19: More Benefits Available
MORE BENEFITS AVAILABLE… implement operational synergies at SA assets Gold Fields’ international assets offer value: examine the real potential of Cerro Corona and APP review existing operating assets to create a long-term growth portfolio continue to develop potential at Hidden Valley and Wafi/Golp
Slide 20: The IAMGOLD Transaction – Value Destruction for Gold Fields Shareholders
THE IAMGOLD TRANSACTION –VALUE DESTRUCTION FOR GOLD FIELDS SHAREHOLDERS
Slide 21: Gold Fields Have Undervalued Their International Assets
GOLD FIELDS HAVE… undervalued their international assets proposed to sell them on the cheap: – selling assets at a substantial discount to Gold Fields’ own rating – most commentators assume that the international assets should contribute a higher rating to Gold Fields’ average Relevant benchmarks, G
Slide 22: IAMGOLD Got It All
IAMGOLD GOT IT ALL … companies’ relative share price performance shows the picture Rebased to 10 August 2004, US$-denominated IAMGOLD share price outperformance 160 150 140 130 120 110 100 90 10-Aug-04 13-Aug-04 18-Aug-04 23-Aug-04 26-Aug-04 31-Aug-04 3-Sep-04 8-Sep-04 13-Sep-04 16-Sep-04 Harmony US
Slide 23: IAMGOLD Is the Only Winner
IAMGOLD IS THE ONLY WINNER Gold Fields contribution IAMGOLD contribution Net asset value Operating cash flow Resources Reserves Production 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 73% 72% 74% 76% 76% 30% 27% 28% 26% 24% 24% Gold Fields IAMGOLD even prior to the C$0,50 per IAMGOLD share dividend
Slide 24: More Upside to IAMGOLD Shareholders
MORE UPSIDE TO IAMGOLD SHAREHOLDERS Gold Fields contribution IAMGOLD contribution 30% 21% Revenues Operating profit pre D&A Operating profit post D&A Net earnings Reserves Resources - M&I 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Gold Fields IAMGOLD 75% 75% 79% 87% 79% 82% 25% 25% 21% 13% 21% 18%
Slide 25: IAMGOLD Transaction Is a Punt
IAMGOLD TRANSACTION IS A PUNT … on a re-rating of Gold Fields International ? for Gold Fields shareholders to break even the IAMGOLD share price has to rise to C$14,54 at C$14.54 IAMGOLD shareholders will have made US$900m, or a premium of 108% IAMGOLD break even share price analysis (C$) 15 10 5 0
Slide 26: Gold Fields International's Re-rating Dilemma
GOLD FIELDS INTERNATIONAL’S RE-RATING DILEMMA no operating fundamentals to support a re-rating: – IAMGOLD’s assets add little to the critical mass of Gold Fields International – no apparent upside in the IAMGOLD portfolio – no synergistic benefits – increased overheads through duplicated corporate s
Slide 27: Gold Fields Is Giving Away Cash and Control
GOLD FIELDS IS GIVING AWAY … nearly all of its cash the bulk of its current operating cash flow management and board control of the international assets Gold Fields Operating Cash Flow Enlarged IAMGOLD—Board Composition 75% 25% 8 2 South Africa International Gold Fields Directors Independent Directo
Slide 28: Gold Fields Is Giving Away Its Growth Potential
GOLD FIELDS IS GIVING AWAY ITS GROWTH POTENTIAL… 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Gold Fields’ international asset production (‘000 oz) 2001 2002 2003 2004 Indicative Cerro Corona APP CAGR 54 % Gold Fields’ South African production (‘000oz) 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2001 200
Slide 29: Gold Fields Has Condemned SA Assets to a Lingering Death
GOLD FIELDS HAS CONDEMNED SA ASSETS TO A LINGERING DEATH Gold Fields effectively receives: control of orphaned, mature, capex-intensive SA assets 70% interest in their own international assets and development portfolio potential dilution as IAMGOLD uses paper to fund acquisitions loss of management
Slide 30: Will Gold Fields Shareholders Still Receive Dividends?
WILL GOLD FIELDS SHAREHOLDERS STILL RECEIVE DIVIDENDS ??? we question the ability of IAMGOLD to pay dividends to Gold Fields Gold Fields has a history of healthy dividend payouts before Gold Fields can pay a dividend, it must satisfy its own cash requirements capital expenditure requirements of its
Slide 31: The Harmony Offer – A Full and Fair Upfront Premium
THE HARMONY OFFER – A FULL AND FAIR UPFRONT PREMIUM
Slide 32: A Deal Making Premium
A DEAL MAKING PREMIUM an upfront premium of 29% Premium 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Harmony offer South Africa (2001 - 2003) Nedbank - Standard Bank 29% 22% 20% Premium compares favourably to premia paid in the South African market... Premium 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0
Slide 33: A Good Offer in Any Measure
A GOOD OFFER IN ANY MEASURE the implied Gold Fields P/NPV of 2.4x compares favourably to: P / NPV (x) 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2.4x 2.4x 1.9x 1.9x Harmony’s offer international gold majors South Africa gold majors International mid-caps gold companies The trading multiples of comparable companies
Slide 34: No Value Leakage to Third Parties
NO VALUE LEAKAGE TO THIRD PARTIES shareholders will retain: cash and cash flow to: fund capex investment pay dividends financial flexibility to allow for optimum cash allocation unrestricted access to growth: locally and internationally prospective exploration potential full management control of al
Slide 35: Harmony – A Better Deal for Gold Fields Shareholders
HARMONY - A BETTER DEAL FOR GOLD FIELDS SHAREHOLDERS Harmony IAMGOLD Gold Fields shareholders receive an immediate premium Assets sold to IAMGOLD at a substantial discount World’s largest gold producer Creation of two mid cap businesses, lacking in scale Clear strategy for future value creation Futu
Slide 36: A Compelling Investment Case
A COMPELLING INVESTMENT CASE THE MERGED ENTITY IS A COMPELLING INVESTMENT PROPOSITION WHEN COMPARED TO THE IAMGOLD TRANSACTION CURRENTLY RECOMMENDED BY THE GOLD FIELDS BOARD
Slide 37: Notice to US Holders
NOTICE TO US HOLDERS In connection with the proposed acquisition of Gold Fields, Harmony will file with the United States Securities and Exchange Commission (SEC), a registration statement on Form F-4, which will include a preliminary prospectus and related exchange offer materials, to register the
Slide 38: Disclaimers
DISCLAIMERS Statements in this announcement, including without limitation, those concerning the economic outlook for the gold mining industry, expectations regarding gold prices and production, financial projections, estimates and their underlying assumptions, Harmony and the enlarged Harmony group