Harmony Gold Mining Co. Ltd. · JSE:HAR
Harmony Gold Mining — Q4 FY2003 Earnings Presentation
34 slides from Harmony Gold Mining's earnings presentation, June 2003
Slide 1: Harmony as a Growth Company
HARMONY AS A GROWTH COMPANY Harmony gives you: • leveraged • unhedged • pure exposure to gold mainly in South Africa
Slide 2: The Perfect Storm – Our Challenges
“THE PERFECT STORM” – OUR CHALLENGES External Factors • strong South African Rand • royalty threat Internal Factors • high wage settlement • protracted CONOPS negotiations • less than successful geographical diversification • grade problems at Elandsrand • retaining good people
Slide 3: The Perfect Storm – Our Battle Plan
“THE PERFECT STORM” – OUR BATTLE PLAN Strategic • focus on South African gold acquisitions • really understand our strengths • rationalise asset portfolio • do not overpay for Avgold!! • sustain capex as long as possible Operational • successfully merge with ARMgold • reduce costs • increase product
Slide 4: Highlights
HIGHLIGHTS • final dividend of 150 SA cents per share, • strong rand impacts on results, • good operational performance on all operations except Elandsrand, • two year wage agreement with NUM • merger on track, • continuous operations (CONOPS) agreement at Free Gold • 26% exposure to Avgold, and • e
Slide 5: Cash Operating Profit (R'million)
CASH OPERATING PROFIT (R’MILLION) VARIANCE OPERATIONS JUN 2003 MAR 2003 (R’MILLION) Free State 4 53 (49) Evander 39 45 (6) Randfontein 40 105 (65) Elandskraal (33) 44 (77) Kalgold 11 21 (10) Australian Operations 23 69 (46) SUB-TOTAL 84 337 (253) Free Gold (50%) 99 141 (42) TOTAL 183 478 (295)
Slide 6: Elandsrand - De-clogging Our Main Arteries
ELANDSRAND - “DE-CLOGGING OUR MAIN ARTERIES” DIAGRAMMATIC REPRESENTATION OF MAIN TRANSFER SYSTEM Sub # Sub-Vent # No. 1 Reef now being Level Orepass used for reef 88 blockage and forced ROM No. 2 Reef milling negatively system 92 impacted (for two being used months) for waste 42 000 waste 95 tons dr
Slide 7: Elandsrand - We Left Gold Underground
ELANDSRAND -“WE LEFT GOLD UNDERGROUND” Broken vs Recovered 10.00 9.00 8.00 7.00 6.00 g/t 5.00 4.00 3.00 2.00 ROM Milling 1.00 0.00 Jun-02 Jul-02 Aug-02 Oct-02 Nov-02 Apr-03 Jun-03 Jul-03 Jan-03 Sep-02 Feb-03 Dec-02 Mar-03 May-03 Broken g/t Recovered g/t
Slide 8: Elandsrand - Back to Mining the Original Payshoot
ELANDSRAND - “BACK TO MINING THE ORIGINAL PAYSHOOT” 98 level cmg/t 647 cmg/t cmg/t 2125 1091 102 level cmg/t cmg/t 102-37 1385 3581 Raise - 200 m to holing cmg/t 10 Months 142 102-36 Raise - Holed Raise - 100 m to holing Box 6 - 8 Weeks 5 Months Box 4 - 6 Weeks Box 3 - 4 Weeks 102-35 Raise - 120 m t
Slide 9: Quarter on Quarter Variance Analysis
QUARTER ON QUARTER VARIANCE ANALYSIS Cash operating profit March 2003 R478 million Volume increase (tonnes) +2% R83 million Working costs increase (2%) (R34 million) Recovery grade reduction (3%) (R103 million) Rand gold price reduction (12%) (R241 million) Net variance (R295 million) Cash operating
Slide 10: Cash Operating Profit
CASH OPERATING PROFIT 1200 14 1000 R - millions 12 800 600 10 400 8 200 0 6 Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun '00 '00 '00 '00 '01 '01 '01 '01 '02 '02 '02 '02 '03 '03 Operating profit Rand/Dollar Exchange Rate Movement
Slide 11: Leveraged to Gold Price
LEVERAGED TO GOLD PRICE GOLD CASH OPERATING % GOLD % PRICE PROFIT PRICE VARIANCE (R/kg) (R’million) VARIANCE 80 000 100 (5) (45) Actual results for 84 000 183 June - ’03 quarter - 88 000 276 5 51 94 000 408 12 123 100 000 540 19 195
Slide 12: Returning Value to Our Shareholders
RETURNING VALUE TO OUR SHAREHOLDERS JUNE 2003 FINANCIAL QUARTER YEAR Headline earnings per share 44 661 Other adjustments 21 34 Earning per share before impairment 65 695 Australian impairment charges (324) (336) Net earnings per share (259) 359 Dividend paid 150 SA cents 275 SA cents * * Represents
Slide 13: The Australian Reality
“THE AUSTRALIAN REALITY” 2002/03 2001/02 Resource base M/oz 11,0 10,8 Reserve base M/oz 1,5 2,3 Asset value 30 June 2002 A$ 547 Abelle acquisition A$ 234 CAPEX A$ 47 Amortisation (A$ 50) Asset value 30 June 2003 A$ 623 Impairment A$ 155 Tax write back (A$ 41) Net impairment A$ 114 (R598 million or R
Slide 14: The Australian Operations – Smaller but Profitable
THE AUSTRALIAN OPERATIONS – “SMALLER BUT PROFITABLE” • need to mine to the model we use in South Africa focusing on profitable ounces on total cost basis restructured hedge book for 2003/2004 financial year - no hedging commitments restructuring corporate and operational structures, i.e. “The
Slide 15: Total Reserves
TOTAL RESERVES 70 60 100% Million Ounces 50 increase in two 40 years 30 20 10 0 NOTE: 1997 1998 1999 2000 2001 2002 2003 Ore Reserve calculations include 100% of ARMgold reserves Excludes Target’s ounces
Slide 16: 26% Growth in Reserves
26% GROWTH IN RESERVES ORE RESERVES 30 JUNE 30 JUNE % AS AT:- 2003 2002 VARIANCE Gold price per kg R93 000 R95 000 (2) Total resources including project ounces (Moz) 410,2 295,9 39 Reserve base (Moz) 61,9 49,1 26 NOTE: Ore Reserve calculations include 100% of ARMgold reserves Excludes Target’s ounce
Slide 17: Gold Production
GOLD PRODUCTION Record production 3 Total Ounces (Millions) 2.5 2 1.5 1 0.5 1997 1998 1999 2000 2001 2002 2003
Slide 18: Cash Operating Profit
CASH OPERATING PROFIT 3000 2500 Rand Million 2000 1500 1000 500 0 1999 2000 2001 2002 2003
Slide 19: Earnings per Share
EARNINGS PER SHARE 1150 1000 850 700 Cents 550 * 400 250 40% dividend pay out 100 -50 1999 2000 2001 2002 2003 * Value of Australian impairment
Slide 20: Our Track Record
OUR TRACK RECORD JUN ‘03 JUN ‘02 JUN ‘01 JUN ‘00 JUN ‘99 Gold produced - Kg 93 054 82 971 66 563 50 572 39 997 Gold produced - oz 2 991 734 2 667 572 2 140 043 1 625 925 1 285 931 Cash operating profit SA Rand - R’m 2 374 2 591 673 461 386 US$ - million 260 254 88 73 64 Cash operating cost R/kg 71 1
Slide 21: ARMgold - The Value Creating Proposition
ARMGOLD - THE VALUE CREATING PROPOSITION Defensive Focus • 600 000 quality ounces • 50% of growth projects • synergies in Free State Offensive Focus • becoming a BEE company • well positioned for further South African growth • leverage CONOPS to all operations
Slide 22: The Merged Harmony Cash Operating Profit (Pro-forma)
THE MERGED HARMONY CASH OPERATING PROFIT (PRO-FORMA) 1200 14 1000 R - millions 12 800 600 10 400 8 200 0 6 Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Jun '00 '00 '00 '00 '01 '01 '01 '01 '02 '02 '02 '02 '03 '03 '03 Operating profit Rand/Dollar Exchange Rate Movement
Slide 23: The Merged Harmony - Pro-forma Quarterly Results
THE MERGED HARMONY - PRO-FORMA QUARTERLY RESULTS (JUNE ’03) Tonnes milled 9 013 U/G recovery grade 5,43 g/t Overall recovery grade 3,32 g/t Gold recovered - kg 29 958 - oz 963 168 Revenue - R/kg R85 000 (US$341) Working cost - R/kg R74 000 (US$297) Profit margin 13% (US$ 44)
Slide 24: The Merged Harmony - Pro-forma Production by Region
THE MERGED HARMONY - PRO-FORMA PRODUCTION BY REGION 2% 9% 18% 9% 10% 30% 12% 10% Free State FreeGold JV Evander Randfontein Elandskraal Offshore Kalgold Orkney
Slide 25: Harmonising the Free State Goldfields
HARMONISING THE FREE STATE GOLDFIELDS * * (Harmony 26,1%)
Slide 26: Harmony/ARMgold Merger Timetable
HARMONY/ARMgold MERGER TIMETABLE • 2 May 2003 – merger announcement • 16 July – Competition Tribunal approval • 1 September – Harmony general meeting • 1 September – ARMgold scheme meeting • 9 September – Court sanction of scheme • 22 September – operative date of scheme – special dividend paid • 23
Slide 27: Future Value Creating Opportunities for Harmony?
FUTURE VALUE CREATING OPPORTUNITIES FOR HARMONY ? Do we buy or do we build ? • it has never been an either/or strategy!! • buying turnaround opportunities in South Africa will deliver future value upliftment (currently own 30% of South African production) • but we are prudently re-investing cash in
Slide 28: Upgrading Our Production Base
UPGRADING OUR PRODUCTION BASE LONG LIFE PROJECT MARGINAL QUALITY QUALITY GROWTH POTENTIAL OUNCES OUNCES OUNCES OUNCES PROJECTS Harmony Evander Masimong Tshepong North Morobe/WAFI Joel Kalgold Elandskraal Phakisa Poplar Rest of Free Gold Randfontein Tshepong Doornkop Rolspruit St Helena Highland Gold
Slide 29: Harmony Project Production Profile
HARMONY PROJECT PRODUCTION PROFILE Ounces (000's) 1,800 1,600 1,400 1,200 1,000 800 600 400 200 - 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Masimong Expansion Phakisa Shaft Doornkop South Reef Elandsrand Tshepong Decline (-66 level) Nyala * R
Slide 30: Abelle Limited
ABELLE LIMITED • we currently own 87% of the company • Morobe is now wholly owned – feasibility study underway • WAFI - drilling returning exciting results with inferred resources increasing to 4,2 million ounces - WR 177 159m @ 6,53 g/t (from 275m) - WR 178 71m @ 8,42 g/t (from 316m) 17m @ 5,25 g/t
Slide 31: Kalplats Platinum Project
KALPLATS PLATINUM PROJECT • drilling to update resource calculations on Crater and Orion orebodies continue • Financial estimates • US$450/oz basket and R8,00 to US Dollar • tonnes milled - 150 000/month • capex - R260 million • Plant costs - R45/tonne • Metallurgical recovery - 75% • recovered valu
Slide 32: Capital Expenditure
CAPITAL EXPENDITURE Qtr - June '03 Total Projects Operational Free State 29 - 29 Randfontein 15 13 2 Elandskraal 34 22 12 Evander 21 - 21 Kalgold 8 - 8 Free Gold (50%) 26 15 11 Australia 64 - 64 197 50 147 Qtr - Sept '03 Total Project Operational Free State 18 - 18 Randfontein 52 34 18 Elandskraal 3
Slide 33: The New Harmony – Unique Investment Opportunity
THE NEW HARMONY – UNIQUE INVESTMENT OPPORTUNITY • the ultimate leveraged, unhedged, pure gold company • truly South African gold company producing approximately 4,0 million ounces per annum • affordable growth projects to ensure long-term sustainability • own 34,5% stake in Avmin and effective 26,1%
Slide 34: Questions
HARMONY AS A GROWTH COMPANY Harmony gives you: Questions • leveraged • unhedged Website • purewww.harmony.co.za exposure to gold mainly in South Africa
Harmony Gold Mining — Q4 FY2003 Earnings Presentation on 6ix