Harmony Gold Mining Co. Ltd. · JSE:HAR
Harmony Gold Mining — Investor Day (August 2012)
57 slides from Harmony Gold Mining's investor day presentation, Aug 29, 2012
Slide 1: Investor day
Investor day Session 1 and 3 29 August 2012 1 w w w . h a r mw onwyw. c. hoa. zr m a ony.co.za INVESTOR DAY 29 AUG 2012
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 Strategy 2 Safety and health 3 Assumptions 4 Resources and Reserves 5 Production 6 Wafi-Golpu project 7 Financials 8 Conclusion 3 www.harmony.co.za INVESTOR DAY 29 AUG 2012
Slide 4: Strategy
Strategy 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: Facts about Harmony today
Facts about Harmony today • Operating in South Africa and Papua New Guinea (PNG) • Building world class mines in South Africa and PNG – 10 underground mines, one open pit operation and several surface sources in SA – 50% joint venture in PNG with Newcrest Mining Ltd • Hidden Valley open pit mine • W
Slide 7: Unlocking value
Unlocking value Production gap and build-up Commissioning Steady state production Project construction Masimong, Tshepong, Increasing project value Joel, Target 1,Unisel, Kalgold Kusasalethu, Doornkop, Feasibility Phakisa, Target 3 Pre-feasibility study Hidden Valley Bambanani/Steyn 2 Resource defin
Slide 8: Safety and health
Safety and health www.harmony.co.za
Slide 9: Safety and health behaviours
Safety and health behaviours • Safety and health starts with me • I behave safely and healthy in everything I do – „Zero harm, Zero accidents, Zero fatalities‟ • I am always alert to my colleagues‟ safety and health 9 www.harmony.co.za INVESTOR DAY 29 AUG 2012
Slide 10: Our safety and health journey
Our safety and health journey • Improve Harmony‟s Occupational Health and Safety Management Framework (OHS) • Develop and implement a safety culture strategy • Continuous improvement through auditing, feedback and closing the loop • Harmony participates in industry level health and safety initiative
Slide 11: All safety indicators improved over past 10 years
All safety indicators improved over past 10 years TIAFR¹* RIFR³* 60 10 50 8 40 6 30 4 20 10 2 0 0 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 LTIFR²* FIFRª* 30 0.35 25 0.30 0.25 20 0.20 15 0.15 10 0.10 5 0.05 0 0.00 FY03 FY04 FY05 FY06 FY07 FY0
Slide 12: Assumptions
Assumptions www.harmony.co.za
Slide 13: Commodity price assumptions for Reserves
Commodity price assumptions for Reserves • Gold (Au) – Cut-off gold price US$1 400/oz, US$/R7.55 = R340 000/kg – US$/AUS$1.00 • Silver price US$25.00 • Copper (Cu) US$7 714/tonne or US$3.50/lb • Oil US$120/bbl • Uranium US$50/lb • Molybdenum US$15/lb 13 www.harmony.co.za INVESTOR DAY 29 AUG 2012
Slide 14: Planning parameters
Planning parameters South Africa • Salary increases 9.00% • Electricity increases – April 2012, April 2013 16.00% nominal terms – April 2014 10.00% real terms – April 2015, April 2016, April 2017 5.00% real terms • Water increases – August 2012 13.50% nominal terms – August 2013 - August 2016 7.08%
Slide 15: Reserves and Resources
Reserves and Resources www.harmony.co.za
Slide 16: Reserves reconciliation y-on-y
Reserves reconciliation y-on-y Gold equivalent Mineral Reserves reconciliation - FY11 vs FY12 60 50 Equivalent 13.9 40 1.3 5.6 8.0 Moz 30 1.5 52.9 41.6 20 33.6 10 0 Balance at Evander held Resultant Mined during Geological & PNG Gold & Balance at June 2011 for sale 0.0 FY12 Scope changes Gold June 2
Slide 17: Geographical diversification (Reserves)
Geographical diversification (Reserves)¹ Gold Reserves FY11 Gold equivalent* Reserves FY11 PNG, 6% PNG, 11% South South Africa, 94% Africa, 89% Note: Reserves as at 30 June 2011 includes Evander Note: Reserves as at 30 June 2011 includes Evander Gold Reserves FY12 Gold equivalent* Reserves FY12 PNG,
Slide 18: FY13 exploration planning
FY13 exploration planning AMANAB – (EL1708: 464km²) MT HAGEN – (EL1596/1611, EL1864/5/66/7: 986km2) • Target: +4MOz Au Vein array • Target: +10 Moz Epithermal Au • Field work including mapping, surface sampling (8 300) • Campaign style fieldwork to develop Yup East to drill testing • Drilling (6 700
Slide 19: Production
Production www.harmony.co.za
Slide 20: Recovered grade vs reserve grade
Recovered grade vs reserve grade Adjusted (-5%) Actual grade Mineral reserve to compare with (g/t) Mine grade (g/t) Comments recovery grade achieved in June 2012 (g/t) FY12 Target 1 4.90 4.66 4.61 Target 3 6.40 6.08 3.55 Increase Basal reef ratio Unisel 4.63 4.40 4.04 Masimong 5.06 4.81 3.45 Waste d
Slide 21: Asset portfolio
Asset portfolio Expected potential Cash cost* Cash costs* Life of mine Operation Comments ounces (R/kg) (US$/oz) (years) Kusasalethu 260 000 - 300 000 oz R240 000 - 250 000/kg US$990 -1 030/oz 25 years In build-up Doornkop 185 000 - 200 000 oz R245 000 - 255 000/kg US$1 010 -1 050/oz 16 years In bui
Slide 22: Planned production ounces
Planned production ounces moz 1 800 1.7moz 1.6moz 1 600 1.45moz 1 400 1.3moz 1.17*moz 1 200 1 000 800 600 400 200 - FY 12 FY 13 FY 14 FY 15 FY 16 Phakisa Doornkop Kusasalethu Target 3 Hidden Valley Target 1 Tshepong Masimong Bambanani and Steyn 2 Joel Unisel Kalgold Project Phoenix Other surface sou
Slide 23: What is going to be different?
What is going to be different? • Safety improvements • Structure change aimed at improved safety, achievement of plans and standardisation • Commissioning phase almost complete on build-up mines – lower risk of new infrastructure teething problems • Short Interval Control process institutionalised a
Slide 24: Wafi-Golpu project
Wafi-Golpu project www.harmony.co.za
Slide 25: Deposit scale upside
Deposit scale upside Current drilling suggests upside for Lift 1 • High grade mineralised porphyries more extensive than previously thought (implying more contained metal) Lift 1 • Strike opened to north with latest drill intercepts – WR433 – 190m@ 1.15g/t Au, 2.57%Cu Lift 2 – WR434 – 702m@ 0.82g/tA
Slide 26: System scale growth potential
System scale growth potential New gold zone • North of the diatreme 87m @ 3.0 g/t (302m) • Above Reid Fault Miapilli • +300m strike and open ended Zenapu 525m @ 0.34 g/t Au, 0.1g/t surface 157m @ 1 g/t Au 0.08 % Cu Au M Zone 157m @ 1.03 (269m) Golpu 8m @ 4.6 g/t Au 10m @ 9.1 g/t (389m) Nambonga 21,0
Slide 27: District scale growth potential
District scale growth potential • Characteristically, major porphyry Zimake copper-gold deposits occur in groups as clusters or as an alignment of several deposits along structural trend Bavaga • Wafi transfer is a major northeast trending crustal structure • Numerous high tenor, cohesive gold Zenap
Slide 28: Wafi-Golpu resources at 30 June 2012
Wafi-Golpu resources at 30 June 2012 PLAN VIEW Miapilli Porphyry Golpu Target Northern Zone Golpu(1) • 1000Mt @ 0.63g/t Au, 0.90% Cu WR426 157m @ 1.0g/t Au 20.3Moz Au (20.3Moz Au, 9.0Mt Cu) 9.0Mt Cu Wafi WR397 10m @ 9.1g/t Au • 132Mt @1.69g/t Au (6.9Moz Au) WR426 WR433 WR432 721,000mN Nambonga WR392
Slide 29: Golpu: Pre-feasibility study results
Golpu Pre-feasibility study (PFS) results An exciting investment proposition 29 www.harmony.co.za INVESTOR DAY 29 AUG 2012
Slide 30: Golpu reserves (100% basis)
Golpu reserves (100% basis) Grade Contained • Based on the June 2012 Golpu resource Potential metal production model (current drilling excluded) rate (Mtpa) Au Mt Au g/t Cu% Cu Mt Moz • Reserve calculated using US$1 250/oz 2007 Pre-feasibility study gold and US$3.10/lb copper • Extraction via the bl
Slide 31: World class Golpu resource
World class Golpu resource Porphyry Copper - Gold Deposits - SE Asia (bubble size represents total Au-equivalent ounces1) 1.30 1.20 Oyu Tolgoi 248 Moz 1.10 1.00 Golpu Project 69 Moz 0.90 0.80 Tampakan 0.70 94 Moz Cu (wt %) Northparkes Grasberg Ok Tedi 0.60 12 Moz 329 Moz 20 Moz 0.50 Frieda River Did
Slide 32: Mining base case 2 lifts with 3rd lift potential
Mining base case 2 lifts with 3rd lift potential Golpu Cross Section Section 721,000mN Looking North West East Lif t 1 5,000 mRL 4850 mRL Lif t 2 Indicated Probable Conversion Resource Reserve 16.6 Moz Au 12.4 Moz Au 75% 4,500 mRL 7.46 Mt Cu 5.44 Mt Cu 73% Indicated 4100 mRL 4,000 mRL Lif t 3 Inferr
Slide 33: Mining: base case strategy
Mining: base case strategy • Aim to achieve optimal balance between resource recovery, financial returns and overall risk • Orebody‟s scale and geometry lends itself to block caving – Safest, most efficient, and lowest cost extraction of the deposit at the maximum feasible rate of production • Due t
Slide 34: Mine access layout – preferred option
Mine access layout – preferred option • Two block cave lifts: sequential mining of lifts • Rock mass preconditioning by hydraulic fracturing and conditioning techniques • Mine development plan further optimised in feasibility study • Remains open at depth 34 www.harmony.co.za INVESTOR DAY 29 AUG 201
Slide 35: Project infrastructure
Project infrastructure 35 www.harmony.co.za INVESTOR DAY 29 AUG 2012
Slide 36: Next steps: approvals and schedule
Next steps: approvals and schedule • Consult and communicate with key stakeholders • Feasibility study is anticipated to commence in early 2013 – Subject to consultation, gating and Board approval – Approximately 24 month time frame • Environmental Social Impact Assessment conducted in parallel with
Slide 37: Golpu: Financial analysis
Golpu Financial analysis An exciting investment proposition 37 www.harmony.co.za INVESTOR DAY 29 AUG 2012
Slide 38: Capital cost estimate
Capital cost estimate Initial capital cost estimate summary (US$m)* Advanced exploration works Project construction Total and studies Direct costs Mine 436 532 968 Process plant 0 652 652 Infrastructure 18 540 558 Power supply 0 472 472 Total direct costs 453 2 196 2 649 Indirect costs Project manag
Slide 39: Operating cost estimate and assumptions
Operating cost estimate and assumptions Operating cost estimate summary (US$/tonne milled) Life Of Mine Mining 8.64 Processing 7.39 Infrastructure 1.62 General and administration 5.01 Total operating cost 22.65 500 2019 Copper Mine C1 400 Cash Costs 300 Golpu Expected 200 Cash cost: US$0.54¹/lb 100
Slide 40: Indicative pre-feasibility parameters
Indicative pre-feasibility parameters Pre-feasibility 22Mtpa capacity Units Result Production life Years 26 Peak Au production koz pa 560 Peak Cu production kt pa 335 Annual Au production1 koz pa 490 Annual Cu production1 kt pa 290 Gold cash cost2 US$/oz Negative 2,600³ Copper cash cost2 US$/lb 0.54
Slide 41: Production profile: PFS base case, 22 Mtpa
Production profile: PFS base case, 22 Mtpa Potential Lift 3 41 www.harmony.co.za INVESTOR DAY 29 AUG 2012
Slide 42: Golpu: Significant upside potential
Golpu Significant upside potential An exciting investment proposition 42 www.harmony.co.za INVESTOR DAY 29 AUG 2012
Slide 43: Upside potential
Upside potential • Higher grade and recovery in Lift 1- recently 3 holes in upper section of Golpu deposit returned high grade intercepts • Optimise metallurgical recovery for gold - during the feasibility study the metallurgical studies will test an increase in gold recovery • Ramp up and productio
Slide 44: Production profile – enhanced production case
Production profile – enhanced production case Golpu Production Profile (100%) 30,000 900 25,000 750 Tonnes Mined & Processed (kt) Units Produced (kozs / kt) 20,000 600 15,000 450 10,000 300 5,000 150 0 0 2013 2017 2021 2025 2029 2033 2037 2041 2045 2049 Lift 1 Tonnes Lift 2 Tonnes Lift 3 Tonnes Copp
Slide 45: Project summary
Project summary • World-class project, long life, generating strong cash flows • Lowest industry quartile operating cost (gold and copper) • Technically and financially viable development model identified • Strong support from local community, Provincial and State Governments • Significant upside –
Slide 46: Financials
Financials www.harmony.co.za
Slide 47: Reconciliation of FY12 cost increases (Rand)
Reconciliation of FY12 cost increases (Rand) Total Cash Operating Cost Y-on-Y % Variance on total % Total FY12 vs FY11 -20% Build-up operations -91% -12% Bambanani restructure 41% 4% Hidden Valley -23% -2% Steady operations -14% -10% Estimated average cost increase of 12% for FY13 47 www.harmony.co.
Slide 48: Capital expenditure (US$)
Capital expenditure (US$) US$m 900 800 700 600 500 400 300 200 100 - FY11 Actual FY12 Actual FY13 FY14 FY15 FY16 FY17 Forecast* Forecast* Forecast* Forecast* Forecast* Growth capital - SA Maintenance capital -SA Hidden Valley Golpu *Future costs are estimated in real terms and using an exchange rate
Slide 49: Well controlled capital expenditure (US$m)
Well controlled capital expenditure (US$m)* 600 US$545m 500 US$489m 112 64 US$415m 400 48 40 54 38 85 79 300 78 200 291 298 259 100 - Planned FY12 Actual FY12 FY13 Forecast Maintenance capital (SA) Growth capital (SA) Hidden Valley Golpu *Future costs are estimated in real terms and using an exchang
Slide 50: Low debt and available facilities
Low debt and available facilities Rm Year on year* results 2 500 2 245 2 000 • Operating profit increased by 80% at 1 500 R5.9bn (US$759m) 866 1 000 • Headline earnings per share more than 400 500 doubled at 551 SA cents (US$71 cents) 43 - Jun 11 Jun 12 • Total dividends declared for FY12 Net debt U
Slide 51: Robust margin (US$/oz)
Robust margin (US$/oz)* US$/oz Total Harmony* 1 800 1 600 1 400 1 200 1 000 800 600 FY11 FY12 FY13 forecast+ Cash operating cost Maintenance capital (SA) Growth capital Revenue US$/oz *Excludes Evander Financial plan at gold price of US$1606/oz, US$/R7.55 = R390 000/kg +FY13 forecast converted at R8
Slide 52: Cash flow funding Golpu (US$m)
Cash flow funding Golpu (US$m) US$m 900 800 700 US$1 600/oz gold price 600 500 US$1 500/oz gold price 400 US$1 400/oz gold price 300 200 100 - FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 Actual Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Net cash generated
Slide 53: Funding options
Funding options Cash flow from operations Corporate debt Corporate bonds Pre-paid copper forward Project finance Convertible bonds 53 www.harmony.co.za INVESTOR DAY 29 AUG 2012
Slide 54: In conclusion
In conclusion www.harmony.co.za
Slide 55: Achieving our strategic objectives
safe Achieving our strategic objectives Growth • Ore reserve growth - increased by 27% • Dividend growth – increased by 50% • Lowered net debt by R823m (US$123m) • Operations funded all capital expenditure (R3.2bn; US$414m) Exploration • Increased expenditure by 54% • Increased number of gold and co
Slide 56: Achieving our strategic objectives | continued
safe Achieving our strategic objectives| continued Optimising operational delivery • Improved safety • Disposed of non-core assets • Improved margin – 26% in FY11, 35% in FY12 • Leverage to gold price - 36% increase in R/kg gold price, resulting in an 80% increase in Rand profit - 23% increase in US
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 An exciting investment proposi
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