Harmony Gold Mining Co. Ltd. · JSE:HAR

Harmony Gold Mining — FY2016 Earnings Presentation

61 slides from Harmony Gold Mining's earnings presentation, June 2016

  1. Slide 1: Driven by Excellence

    DRIVEN BY EXCELLENCE Peter Steenkamp, CEO Frank Abbott, FD Results for the 6 months and year ended 30 June 2016

  2. Slide 2: Agenda

    2 AGENDA 1 Our FY16 achievements  gold miner with a growing copper portfolio  growing to become a 1.5 Moz gold producer 2 Enhancing our value  driving costs down to below US$950/oz  securing sustainable cash flows  making a lasting impact 3 Strong balance sheet © Harmony | Year-end results FY16

  3. Slide 3: Our FY16 Achievements

    OUR FY16 ACHIEVEMENTS Peter Steenkamp, CEO

  4. Slide 4: FY16 Objectives Achieved

    4 FY16 OBJECTIVES ACHIEVED  Share price uplift  Growth in copper resources (Golpu and Kili Teke)  Generated strong cash flows, repaid debt  Increased margins  Achieved production guidance © Harmony | Year-end results FY16  Increased grade  Improved safety

  5. Slide 5: Lost Time Injury Frequency Rate Decreased

    5 Y-ON-Y LOST TIME INJURY FREQUENCY RATE DECREASED 25 20 19.22 1 000 000 hours worked 16.53 16.42 15 15.27 12.83 10 9.35 9.57 8.32 8.09 7.72 7.29 6.50 © Harmony | Year-end results FY16 5 5.87 0 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 LTIFR 1 000 000

  6. Slide 6: Y-on-Y Increase in SA Production

    6 Y-ON-Y INCREASE IN SA PRODUCTION 35,000 1,100 34,000 1,050 33,000 1,009 32,000 1,000 31,000 967 31,398 000’oz Kg 30,000 950 30,087 29,000 900 28,000 © Harmony | Year-end results FY16 27,000 850 26,000 25,000 800 FY15 FY16 Kg 000oz Note: Excludes Target 3 placed on care and maintenance in FY15 (483

  7. Slide 7: Operating Margins Strengthened (Rand)

    7 OPERATING MARGINS STRENGTHENED (Average gold price received of R545 000/kg for FY16) 900 700 Bambanani Tshepong 500 Phakisa Target 1 300 Doornkop Dumps Masimong Joel 100 Kalgold Unisel Phoenix Hidden Valley Margin © Harmony | Year-end results FY16 -20% -10% 0% 10% 20% 30% 40% 50% (100) Kusasalethu

  8. Slide 8: Operating Margins Strengthened (US$)

    8 OPERATING MARGINS STRENGTHENED (Average gold price received of US$1 169/oz for FY16) 60 50 Bambanani Tshepong 40 Phakisa 30 20 Target 1 Doornkop Masimong Joel Dumps 10 Unisel Phoenix © Harmony | Year-end results FY16 Hidden Valley Margin - Kalgold -20% -10% 0% 10% 20% 30% 40% 50% Kusasalethu ( 10)

  9. Slide 9: FY16 Net Debt Decreased (US$)

    9 FY16 NET DEBT DECREASED (US$) – REPAYING DEBT A PRIORITY 250 200 192 191 150 162 US$m  61% reduction in net debt 100 111  On track to be net debt free by the end of calendar year 2016 74 © Harmony | Year-end results FY16 50 0 Jun 15 Sept 15 Dec 15 Mar 16 Jun 16

  10. Slide 10: Increasing Our Gold and Copper Footprint in PNG

    10 INCREASING OUR GOLD AND COPPER FOOTPRINT IN PNG  Golpu Stage 1 feasibility study completed  Golpu Stage 2 prefeasibility provides further value uplift  Resource growth at Kili Teke (100% held) – increased to 6 Moz gold equivalents* (30% Au, 70% Cu) © Harmony | Year-end results FY16 * Gold equi

  11. Slide 11: Harmony Outperforms Indices, Gold Price and Peers

    11 HARMONY OUTPERFORMS INDICES, GOLD PRICE AND PEERS (Rebased to 100) 500 450 400 350 300 250 200 150 © Harmony | Year-end results FY16 100 50 0 2015-07-28 2015-09-26 2015-11-25 2016-01-24 2016-03-24 2016-05-23 2016-07-22 Goldcorp Newcrest Newmont Harmony Anglogold Goldfields Barrick Acacia Randgold

  12. Slide 12: Harmony's Value Uplift

    12 HARMONY’S VALUE UPLIFT  6% increase in underground recovered grade  54% reduction in net debt to R1.08 billion (61% to US$74 million)  Net profit of R949 million (US$64 million)  Headline earnings per share (HEPS) of 221 SA cents (US$15 cents)  Dividend of 50 SA cents © Harmony | Year-end re

  13. Slide 13: Enhancing Our Value

    ENHANCING OUR VALUE

  14. Slide 14: Our Objective

    14 OUR OBJECTIVE  Enabling environment  Maintaining disciplined cost management  Positioned high cost operations for profitability Operational  Disciplined mining excellence  Living our values  Increasing productivity Mining safe,  Grade management profitable Producing ounces  Achieving oper

  15. Slide 15: Gold Miner with a Growing Copper Portfolio

    Gold miner with a growing copper portfolio

  16. Slide 16: Gold Miner with Growing Copper Portfolio in PNG

    16 GOLD MINER WITH GROWING COPPER PORTFOLIO IN PNG South Africa Papua New Guinea Limpopo Mpumalanga Gauteng North West Free State KwaZulu- Natal Northern Cape Eastern Cape Western Cape © Harmony | Year-end results FY16 9 underground operations Kili Teke discovery (100% owned) 1 open pit mine 1 open

  17. Slide 17: Quality Reserves (Gold Equivalent) Split

    17 QUALITY RESERVES (GOLD EQUIVALENT) SPLIT SA gold, 45% 16.8 Moz PNG copper, 38% 13.9 Moz  Total reserves of 36.9 Moz  Total resources of 105.2 Moz © Harmony | Year-end results FY16 PNG gold, 17% 6.2 Moz

  18. Slide 18: Underground Recovered Grade Increasing

    18 UNDERGROUND RECOVERED GRADE INCREASING 6 5 5.18 5.29 5.02 5.13 4.73 4.74 4.47 4 4.27 g/t 3 2 © Harmony | Year-end results FY16 1 0 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Actual Plan

  19. Slide 19: Sustainably Improving the Underground Grade

    19 SUSTAINABLY IMPROVING THE UNDERGROUND GRADE Growth projects delivering good results  Phakisa, Tshepong decline on track with grades  Accessed higher grade areas through Doornkop and Kusasalethu deepening  Mining the Bambanani high grade pillar  Completion of Joel decline in FY17 will deliver

  20. Slide 20: Increasing Grades and Volumes at Phakisa

    20 INCREASING GRADES AND VOLUMES AT PHAKISA 700 5.8 6.0 680 686 5.5 660  Delivering on plan 5.2 5.1 640 5.0  Consistent delivery on development targets, ensuring future flexibility 620 Tonnes 4.5  Good understanding of the orebody 611 600 g/t  Ice plants – more effective cooling 580 4.0 method w

  21. Slide 21: Growing Towards 1.5 Moz per Annum

    Growing towards 1.5 Moz per annum

  22. Slide 22: Growing from 1.1 Moz to 1.5 Moz

    22 22 GROWING FROM 1.1 MOZ TO 1.5 MOZ Growth possibilities  Expansion in SA and into Africa  Golpu Stage 2  Kili Teke prospect Ounces  PNG grass roots exploration New / emerging business  Tshepong/Phakisa integration  Tailings re-treatment in Free State  Golpu Stage 1 © Harmony | Year-end res

  23. Slide 23: Mining Only Safe, Profitable Ounces

    23 MINING ONLY SAFE, PROFITABLE OUNCES Nurture, develop, grow High cost, shorter life Operation Comments Operation Comments Tshepong highly productive mine; Tshepong and Phakisa Masimong Low grade, productive; LOM of 2-3 years good synergies with Phakisa Bambanani Low grade. LOM of 5-6 years; Very p

  24. Slide 24: Tshepong / Phakisa Optimisation

    24 TSHEPONG / PHAKISA OPTIMISATION  Tshepong infrastructure is under-utilised  Phakisa infrastructure is fully-utilised  Integration/optimisation study aims – to identify synergies to optimise – to integrate the infrastructure to exploit the synergies – thereby improving the financial metrics of

  25. Slide 25: Next Step to Realising Value of Golpu

    25 NEXT STEP TO REALISING VALUE OF GOLPU Exploration and Implementation Optimisation evaluation strategy strategy strategy study study study Pre-feasibility Feasibility Concept Permitting commissioning Pre concept and scoping studies Construction and Operations  Golpu is a large gold and copper res

  26. Slide 26: Growing Our Ounces Through Acquisition

    26 GROWING OUR OUNCES THROUGH ACQUISITION Acquisition criteria  Gold mines  1 - 2 Moz reserves  More than 100 000 oz per annum  Life of mine of 10 years  Low cost, cash generative asset (all-in sustaining cost of less than US$950/oz) © Harmony | Year-end results FY16  South Africa, the rest of

  27. Slide 27: Driving Costs Down to Below US$950/oz

    Driving costs down to below US$950/oz

  28. Slide 28: Cost Increase Lower Than Inflation

    28 COST INCREASE LOWER THAN INFLATION 460,000 455,929 440,000  R/kg cash operating cost and R/kg 442,895 capital increased by only 3% y-on-y 420,000 400,000 FY15 FY16 Total cost and capital (R/kg) 1,400 1,200  Total cash operating cost and © Harmony | Year-end results FY16 1,203 US$/oz 1,000 capit

  29. Slide 29: Planned Capital Expenditure

    29 PLANNED CAPITAL EXPENDITURE* 3,000 2,505 2,000 Rm 2,151 2,010 1,860 1,000 0 FY16 FY17 ¹ FY18 FY19 200 179 150 © Harmony | Year-end results FY16 148 US$m 144 133 100 50 0 FY16 FY17 ² FY18 FY19 * Excluding Golpu 1 – FY17 includes R176m for the Central Plant retreatment 2 – FY17 includes $13m for th

  30. Slide 30: Productivity Increasing at Our Operations (SA)

    30 PRODUCTIVITY INCREASING AT OUR OPERATIONS (SA) 40,000 No. of employees 35,000 36,944 36,359 34,696 30,000 31,012 30,441 25,000 20,000 FY12 FY13 FY14 FY15 FY16  Good momentum at operations  Safety performance (focus on zero fatalities) 90  Grade management Grams/total in service 85 86 Increasin

  31. Slide 31: Experienced Operational Team (SA)

    31 EXPERIENCED OPERATIONAL TEAM (SA) Peter Steenkamp CEO Philip Tobias Beyers Nel COO COO Safety business development, special projects and company strategy (SA Operations) Moses Mothlageng Simphiwe Kubheka James Mufara Target 1 RGM RGM RGM © Harmony | Year-end results FY16 Kusasalethu Kalgold Doorn

  32. Slide 32: Securing Sustainable Cash Flows

    Securing sustainable cash flows

  33. Slide 33: Increase in EBITDA (Rand)

    33 INCREASE IN EBITDA* (RAND) (FY16) 4,500 4,000 3,982 3,783 3,500 3,000 2,500 2,663  Operations geared to take Rm 2,000 advantage of higher gold price 2,022 1,500  Focus on grade and good cost management increased our margins 1,000 1,241 © Harmony | Year-end results FY16 500 0 FY12 FY13 FY14 FY15

  34. Slide 34: Focus on Cash Generation, Investment and Repayment of Debt

    34 FOCUS ON CASH GENERATION, INVESTMENT AND REPAYMENT OF DEBT 6.0 5.0 2.6 4.0 4.5 Rbn 3.0 Facilities available 3.4 2.0 1.7 Facilities available 0.9 1.0 © Harmony | Year-end results FY16 1.1 1.3 - FY15 Cash generated by Cash utilised by investing Debt repaid FY16 operating activities activities

  35. Slide 35: Making a Lasting Impact

    Making a lasting impact

  36. Slide 36: Holistic Approach to Health

    36 HOLISTIC APPROACH TO HEALTH  Promotion and awareness of risks Proactive  Prevention and assessment of risks  Intervention (awareness programs) Holistic approach  Health hub at each operation to wellness Proximity  Doctors on-site improves productivity  Doctors part of management team © Harm

  37. Slide 37: Leader in Mining Rehabilitation

    37 LEADER IN MINING REHABILITATION  Rehabilitated 32 disused or closed shafts and a number of processing plant sites  Created >200 jobs and utilised local procurement  Promote economic sustainability in communities – commercial agricultural project in implementation in Welkom – vegetable hubs  C

  38. Slide 38: Strong Balance Sheet

    STRONG BALANCE SHEET Frank Abbott

  39. Slide 39: Currency Hedge to Secure the Gold Price

    39 CURRENCY HEDGE TO SECURE THE GOLD PRICE (Spot vs floor and cap) 19 18 17 R/US$ exchange rate 16 15 Assuming an exchange rate of R13.50 till the end of June 2017, expected gain of R1 billion 14 R77m gain © Harmony | Year-end results FY16 realised FY16 13 12 Jul Feb Jun Jun 15 16 16 17 USDZAR spot

  40. Slide 40: Securing Our Cash Flow

    40 SECURING OUR CASH FLOW (Average hedge price vs spot gold price) 750,000 700,000 650,000 600,000 R/kg 550,000 500,000 © Harmony | Year-end results FY16 450,000 400,000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY16 FY16 FY16 FY16 FY17 FY17 FY17 FY17 FY18 FY18 FY18 FY18 Average hedge price per quarter R/

  41. Slide 41: Income Statement Extract (6M-on-6M) – Rand

    41 EXTRACT FROM INCOME STATEMENT (6M-ON-6M) – RAND June 2016 December 2015 Six months Six months % (Rm) (Rm) change Revenue 9 627 8 707 11 Production costs (6 535) (6 715) 3 Cash operating costs (6 610) (6 584) - Inventory movements 75 (131) >100 Production profit as per operating results 3 092 1 99

  42. Slide 42: Income Statement Extract (6M-on-6M) – US$

    42 EXTRACT FROM INCOME STATEMENT (6M-ON-6M) – US$ June 2016 December 2015 Six months Six months % (US$m) (US$m) change Revenue 625 639 (2) Production costs (424) (493) 14 Cash operating costs (429) (483) 11 Inventory movements 5 (10) >100 Production profit as per operating results 201 146 38 Amortis

  43. Slide 43: Income Statement Extract (Y-on-Y) – Rand

    43 EXTRACT FROM INCOME STATEMENT (Y-ON-Y) – RAND Year ended Year ended June 2016 June 2015 % (Rm) (Rm) change Revenue 18 334 15 435 19 Production costs (13 250) (12 632) (5) Cash operating costs (13 194) (12 373) (7) Inventory movements (56) (259) 78 Production profit as per operating results 5 084

  44. Slide 44: Income Statement Extract (Y-on-Y) – US$

    44 EXTRACT FROM INCOME STATEMENT (Y-ON-Y) – US$ Year ended Year ended June 2016 June 2015 % (US$m) (US$m) change Revenue 1 264 1 348 (6) Production costs (914) (1 103) 17 Cash operating costs (910) (1 081) 16 Inventory movements (4) (22) 82 Production profit as per operating results 350 245 43 Amort

  45. Slide 45: Reduction in Net Debt (Y-on-Y) – Rand

    45 REDUCTION IN NET DEBT (Y-ON-Y) – RAND Debt Cash Net debt (Rm) (Rm) (Rm) Opening balance 30 June 2015 (3 399) 1 067 (2 332) Net cash generated - 1 914 1 914 Cash generated by operating activities - 4 513 4 513 Cash utilised by investing activities - (2 599) (2 599) Foreign currency translation and

  46. Slide 46: Reduction in Net Debt (Y-on-Y) – US$

    46 REDUCTION IN NET DEBT (Y-ON-Y) – US$ Debt Cash Net debt (US$m) (US$m) (Rm) Opening balance 30 June 2015 (280) 88 (192) Net cash generated - 131 131 Cash generated by operating activities - 311 311 Cash utilised by investing activities - (180) (180) Translation adjustments 1 (14) (13) Net debt rep

  47. Slide 47: Conclusion

    CONCLUSION Peter Steenkamp, CEO

  48. Slide 48: FY17 Production Guidance

    48 FY17 PRODUCTION GUIDANCE  Plan to produce ~1.05 Moz in FY17, at – an average recovered grade of ~5.13g/t, and – an all-in sustaining cost of ~$1 100/oz (~R495 000/kg at an exchange rate of R14.00/US$) © Harmony | Year-end results FY16

  49. Slide 49: Net Operating Cash Flow

    49 NET OPERATING CASH FLOW R10.65/share 5,000 4,000 4,659 Rm 3,000 R4.42/share 2,000 1,928 1,000 0 FY15 FY16 Cash generated by operations (Rm) 400 US$0.73/share 300 321 © Harmony | Year-end results FY16 US$m 200 US$0.39/share 168 100 0 FY15 FY 16 Cash generated by operations (US$m)

  50. Slide 50: Aspiring to Grow Our Ounces – FY17 to FY20

    50 ASPIRING TO GROW OUR OUNCES – FY17 TO FY20 Operational excellence Mining safe, profitable Producing ounces 1.5 Moz Cash at less than US$950/oz over a Certainty THREE YEAR PERIOD Increasing © Harmony | Year-end results FY16 margins Effective capital allocation

  51. Slide 51: Questions

    QUESTIONS Peter Steenkamp, CEO

  52. Slide 52: Appendices

    APPENDICES

  53. Slide 53: Y-on-Y Financial Results

    53 Y-ON-Y FINANCIAL RESULTS Year ended Year ended % June 2016 June 2015 change kg 33 655 33 513 - Gold produced oz 1 082 035 1 077 466 - R/kg 544 984 449 570 21 Gold price US$/oz 1 169 1 222 (4) R/kg 392 026 369 203 (6) Cash operating costs US$/oz 841 1 003 16 Underground recovery grade g/t 5.02 4.7

  54. Slide 54: Six Months Ended June 2016 Results

    54 6 MONTHS ENDED JUNE 2016 RESULTS Six months ended Six months ended % June 2016 December 2015 change kg 15 974 17 681 (10) Gold produced oz 513 576 568 459 (10) R/kg 605 476 490 773 23 Gold price US$/oz 1 223 1 121 9 R/kg 413 796 372 358 (11) Cash operating costs US$/oz 836 851 2 Underground recov

  55. Slide 55: Currency Hedge to Secure the Gold Price

    55 CURRENCY HEDGE TO SECURE THE GOLD PRICE Currency hedge  Initiated and maintained a foreign exchange hedging programme  Zero cost collars, establish a minimum (floor) and maximum (cap) Rand/US dollar exchange rate  Nominal value of hedging contracts US$500 million and spread over a 12 month per

  56. Slide 56: Securing Our Cash Flow

    56 SECURING OUR CASH FLOW Gold hedging  Create cash certainty  Short-term gold forward sale contracts – 432 000oz over a 24 month period (~20% of production)  Shareholders retain full upside exposure on the balance of Harmony’s gold production © Harmony | Year-end results FY16

  57. Slide 57: FY17 Production Guidance

    57 FY17 PRODUCTION GUIDANCE FY17 production FY16 actual Life of mine Operation (oz ) (oz) (years) Tshepong 155 000 161 751 19 Phakisa 135 000 128 217 10 Bambanani 90 000 96 870 5 Target 1 110 000 108 895 10 Doornkop 85 000 87 772 17 Joel 67 500 73 239 11 Kusasalethu 140 000 124 198 5 Masimong 67 500

  58. Slide 58: FY17 AISC Guidance (R/kg)

    58 FY17 AISC¹ GUIDANCE (R/KG) FY17 Avg guidance FY16 Operation (R/kg) Actual (R/kg) Tshepong R495 000/kg R438 401/kg Phakisa R485 000/kg R436 477/kg Bambanani R350 000/kg R304 634/kg Target 1 R465 000/kg R471 876/kg Doornkop R540 000/kg R473 562/kg Joel R465 000/kg R424 617/kg Kusasalethu R525 000/k

  59. Slide 59: FY17 AISC Guidance (US$/oz)

    59 FY17 AISC¹ GUIDANCE (US$/OZ) FY17 FY16 Avg guidance Actual Operation (US$/oz )* (US$/oz ) Tshepong US$1 100/oz US$940/oz Phakisa US$1 080/oz US$936/oz Bambanani US$780/oz US$654/oz Target 1 US$1 040/oz US$1 012/oz Doornkop US$1 210/oz US$1 016/oz Joel US$1 040/oz US$911/oz Kusasalethu US$1 170/oz

  60. Slide 60: FY17 Grade Guidance

    60 FY17 GRADE GUIDANCE Reserve grade Adjusted reserve Actual grade (g/t) FY17 grade Operation (g/t) grade (-5%) achieved in FY16 guidance (g/t) Tshepong 5.30 5.04 4.62 4.65 Phakisa 6.72 6.38 5.81 5.55 Bambanani 11.08 10.52 12.99 11.21 Target 1 4.69 4.45 4.58 4.82 Doornkop 5.14 4.88 4.33 4.41 Joel 4.

  61. Slide 61: Safe Harbour Statement

    61 PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOUR STATEMENT This presentation contains forward-looking statements within the meaning of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, with r

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