Harmony Gold Mining Co. Ltd. · JSE:HAR
Harmony Gold Mining — Investor Day (August 2011)
61 slides from Harmony Gold Mining's investor day presentation, Aug 24, 2011
Slide 1: Investor Day
Investor Day Graham Briggs, CEO 24 August 2011 International An exciting investment proposition 1 www.harmony.co.za
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: Growth journey…
Growth journey… 1 Strategy 2 Safety 3 Financial assumptions 4 Understanding Cu-Au porphyries 5 Wafi-Golpu 3 www.harmony.co.za
Slide 4: Growth journey…
Growth journey… 6 Exploration 7 Production 8 Sustainability 9 Conclusion 4 www.harmony.co.za
Slide 5: Strategy
Strategy 5 www.harmony.co.za
Slide 6: Delivering long-term value
Delivering long-term value Creating a sustainable company – generating earnings that fund dividends and growth…a company with free cash flow Growth assets Growth in quality Geographic diversity Generate free cash flow Grow the company Grow through partnerships Exploration Optimise asset portfolio, I
Slide 7: …more growth to come
World-class assets South Africa South Africa Associates/ International Underground Surface Equity holding • Tshepong • Kalgold • Morobe JV • Wits Gold (12.7%) • Phakisa • Phoenix - Hidden Valley • Doornkop • Rock dumps - Wafi Golpu copper/ gold Exploration • Kusasalethu • Additional exploration • Ta
Slide 8: Better quality, lower costs
Better quality, lower costs (metric)(q-on-q) Kg R/Kg 4 000 300 000 3 500 250 000 3 000 200 000 2 500 2 000 150 000 1 500 100 000 1 000 50 000 500 0 - Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun 07 08 08 08 08 09 09 09 09 10 10 10 10 11 11 Hidden Valley Doornkop Phakisa Kusasalethu R/
Slide 9: Operational cash flow (SA underground operations)
Operational cash flow (SA underground operations) (US$) US$/oz 1 600 1 400 1 200 1 000 800 600 400 200 0 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Cash cost Ongoing capital Growth capital Abnormal & shaft capital Revenue 9 www.harmony.co.za
Slide 10: Growing globally
Growing globally Gold production FY2011 Gold equivalent* resource ounces 30 June 2011 8% 92% 21% South Africa PNG Gold resources 30 June 2011 10% 79% 90% South Africa PNG South Africa PNG * Gold equivalent based on US$1150/oz Au, US$2.50/lb Cu and US$13.50oz Ag at 100% recovery for all metals 10 www
Slide 11: Shareholders – geographic split
Shareholders – geographic split 39% 2% 4% South Africa United States 9% UK Europe Rest of World Singapore 17% 29% 11 www.harmony.co.za
Slide 12: Safety
S Safety 12 www.harmony.co.za
Slide 13: Our approach
Our approach • Dedicated safety and health executive appointed – accelerate execution of safety and health strategy • Behaviour-based safety campaigns and initiatives − leading by example − involvement of all stakeholders − recognition of achievements − in situ training • Compliance • Falls of groun
Slide 14: FIFR trend (SA)
FIFR trend (SA) Fatality injury frequency rate trend 0.35 0.30 0.30 0.29 0.28 0.25 0.22 0.21 0.21 0.21 0.20 0.18 0.17 0.15 0.10 0.05 0.00 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 14 www.harmony.co.za
Slide 15: Financial assumptions
Financial assumptions Fin 15 www.harmony.co.za
Slide 16: South Africa – planning parameters
South Africa – planning parameters • Gold price – cut-off gold price $1150/oz, R7.57/US$ = R280 000/kg – financial plan at gold price $1225.17/oz, R7.87/US$ R310 000/kg • Royalties – included in the plans • Salary increases – minimum wages at entry level: 10% – category 5 to 8 employees: 8.5% – mine
Slide 17: Cash cost elements
Cash cost elements 100% 8% 9% 8% 90% 13% 15% 80% 18% 70% 23% 22% 22% 60% 50% 40% 30% 54% 52% 50% 20% 10% 0% FY10 FY11 FY12 Actual Actual Forecast Payroll Stores Electricity Contractors Water * Royalty* * Water and royalty both represent 1% of cash costs in FY10 , FY11 and FY12 17 www.harmony.co.za
Slide 18: Effect of electricity increases & winter tariffs
Effect of electricity increases & winter tariffs (q-on-q)) Rm 600 500 400 300 200 100 0 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun'12 (FC) (FC) (FC) (FC) Normal usage Increase in electricity Cost Winter Tariffs FC - Forecast 18 www.harmony.co.za
Slide 19: Papua New Guinea – financial parameters
Papua New Guinea – financial parameters • Cut-off gold prices – US$1150/oz – silver price – budget US$13.50 – AUD/USD rate – A$0.89 • Financial plan gold price – US$1225/oz – silver price – budget US$26.70 • Diesel – US$80/bbl • Salary increase – 5% • Copper – US$2.50/lb • Molybdenum – US$13.50/lb 1
Slide 20: Capital expenditure (US$)
Capital expenditure (US$) US$m 1 200 1 000 800 600 400 200 0 FY08 FY09 FY10 FY11 FY12* FY13* FY14* FY15* FY16* FY17* (FC) (FC) (FC) (FC) (FC) (FC) Growth capital - SA Abnormal & shaft capital - SA Ongoing capital - SA Hidden Valley Wafi-Golpu * FC – forecast using an exchange rate R/US$ 7.57 (future
Slide 21: Capital expenditure well controlled; spending in line with strategy
Capital expenditure well controlled; spending in line with strategy Rm 4 000 R3 643m 3 500 R3 451m 11% R3 143m 23% 3 000 13% 2 500 89% 77% 2 000 87% 1 500 1 000 500 0 FY11 Budget FY11 Actual FY12 Forecast South Africa South East Asia 21 www.harmony.co.za
Slide 22: Corporate costs and exploration
Corporate costs and exploration 2010/11 2011/12 Rm actual budget Variance Corporate, statutory, admin and other 354 311 42 Care and maintenance shafts 124 105 19 Social investment 84 115 31 Exploration and pre-feasibility 353 474 121 South Africa – exploration and pre-feasibility 56 50 6 Internation
Slide 23: Wafi-Golpu funding (US$m)
Wafi-Golpu funding (US$m) 23 www.harmony.co.za
Slide 24: Cumulative cash flow after Wafi-Golpu capital (US$m)
Cumulative cash flow after Wafi-Golpu capital (US$m) 24 www.harmony.co.za
Slide 25: Understanding Cu-Au porphyries
Understanding Understan Cu-Au porphyries 25 www.harmony.co.za
Slide 26: Benchmarking global copper projects
Benchmarking global copper projects Oyu Tolgoi (Rio-Ivanhoe – Mongolia Pebble Gvt) (Anglo Am.- Nth Dynasty) Resolution Tampaken (Rio) (Xstrata- Indophil) Cobre Panama (Inmet) Wafi-Golpu La Granja (Harmony- (Rio) Newcrest) Toromocho TONNES GRADES METAL (Chinalco) Deposit Mt Au (g/t) Cu (%) Au Moz Cu
Slide 27: Mineralisation model – Arc related gold
Mineralisation model – Arc related gold 27 www.harmony.co.za
Slide 28: World-class Cu-Au resources in SE Asia
World-class Cu-Au resources in SE Asia Wafi-Golpu Project 1Bt @0.82g/t Au, 0.89% Cu Golpu: 26.6Moz Au, 9 Mt Cu (Harmony-Newcrest JV) 28 www.harmony.co.za
Slide 29: Grasberg-Ertsberg Magnetics
Grasberg-Ertsberg Magnetics • Analytic signal • Anomalies sourced from magnetite in potassic altered core of monzodiorite intrusives • Not all deposits have ‘bull’s eye’ magnetic targets owing to alteration overprints and other factors 29 www.harmony.co.za 11
Slide 30: District scale characteristics Grasberg-Ertsberg
District scale characteristics Grasberg-Ertsberg • Cluster of Cu-Au porphyry and Cu-Au skarn deposits • Grasberg discovered in 1988 • Resources – 116.3Moz Au – 45.5Mt Cu • Approximately 60% Skarn and 40% porphyry • Annual production – 2-3Moz Au – 500 000 – 700 000t Cu • Skarn metallurgy complex • Tr
Slide 31: Wafi Transfer Zone
Wafi Transfer Zone PLAN VIEW • Wafi Transfer structure is 17km long Zimake • Under explored • High grade porphyry mineralisation confirmed Bavaga • Mineralisation extended east and west of present resource boundary • Although geochemical anomalies Zenapu occur, drilling will still have to be done Na
Slide 32: Wafi-Golpu
Wafi-Golpu 32 www.harmony.co.za
Slide 33: Substantial increase in Golpu resource
Substantial increase in Golpu resource LONG SECTION Au Grade Contained metal (looking south west) 2010 GOLPU 2011 GOLPU Equiv³ RESOURCE(1) RESOURCE(2) 501Mt @ 870Mt @ Mt Au g/t Cu% Au Moz Cu Mt Moz 0.54g/t Au & 0.69g/t Au & 0.95% Cu 1.03% Cu 500Mt 8.8Moz Au & 19.3Moz Au & Golpu resource 8.8Moz Au, 4
Slide 34: Copper-gold porphyry deposits
Copper-gold porphyry deposits Cu Grade (%) 1.2 1.0 Wafi-Golpu Los Pelambres Oyu Tolgoi 0.8 Grasberg Cerro Colorado Sarcheshmeh Reko Diq Salobo Tampakan 0.6 Frieda River Esperanza Pebble Namosi 0.4 Tujuh Bukit Agua Rica KSM Conga 0.2 Bingham Canyon Cadia East Cobre Panama Batu Hijau Cerro Casale Bodd
Slide 35: Elements that inform budget
Elements that inform budget • Invest early in drilling information Ore body knowledge • Mine plan is guided by the ore body • Early access required Time is of the essence • Landowners and permitting • Develop some infrastructure now • Mine plan to accommodate flexibility Certainty • Mine to be a ‘ro
Slide 36: Why PNG?
Why PNG? Morobe Mining JV Resource Inventory² • Emerging as world-class mineral province Moz – bring your elephant gun! 90 Wafi-Golpu 2011(Exploration Target) • Under-explored 80 Golpu Extension • Exploration investment translating into Nambonga resource growth 70 Further growth expected Golpu • Low
Slide 37: Exploration
Exploration 37 www.harmony.co.za
Slide 38: Exploration strategy
Exploration strategy • Established valuable exploration portfolio in PNG • Strategy to unlock value through focused exploration • Requires resources to convert – people – funding – time on the ground • Opportunity to expand regionally (Indonesia – Philippines) – one of the most prospective under-exp
Slide 39: Morobe Exploration Joint Venture (MEJV)
Morobe Exploration Joint Venture (MEJV) (Harmony 50%) An exciting investment proposition 39 www.harmony.co.za
Slide 40: MEJV (Harmony 50%) – key projects/objectives
MEJV (Harmony 50%) – key projects/objectives Wafi Transfer Exploration: • Advance Zimake, Mt Tonn, Zenapu, Bavaga to tollgate • Develop 1 adv. prospect • Target +2 Moz Au discovery (+/- Cu credit) HV District Exploration: • Complete Mungowe-Broader Kerimenge exploration • Generate 5 new targets • De
Slide 41: Harmony Gold (PNG) Exploration Limited
Harmony Gold (PNG) Exploration Limited (Harmony 100%) An exciting investment proposition 41 www.harmony.co.za
Slide 42: Harmony tenement portfolio
Harmony tenement portfolio AMANAB – (EL1708: 932km2 granted) 4 month field work program Define geological prospective areas and mineralisation models MT HAGEN – (EL1596/1611, TARI – (ELA1785/86: 2 804km2 ELA1864/5/66/7: 995km2 renewals & applications) Data collation and generative work applications)
Slide 43: Production
Production 43 www.harmony.co.za
Slide 44: Mineral reserves reconciliation
Mineral reserves reconciliation Mineral reserves reconciliation: 30 June 2010 to 30 June 2011 Gold (tonnes) Gold (Moz) Balance at June 2010 1 496 48.1 Reductions Mined during FY2011 -47 -1.5 Mine closures -2 -0.1 Rand Uranium equity (40%) non-current assets held for sale -37 -1.2 Projects SA - Popla
Slide 45: SA underground reserve grade and ounces
SA underground reserve grade and ounces mineral reserves June 2011 Mine g/t Gold (000oz) Target 1 5.23 1 749 Target 3 6.11 986 Unisel 4.65 434 Masimong 5.44 1 150 Evander 8 7.59 823 Bambanani 11.66 1 113 Steyn 2 8.70 94 Phakisa 8.42 5 164 Tshepong 5.24 3 679 Joel 5.58 530 Doornkop 3.39 942 Kusasalet
Slide 46: Total Harmony Production (imperial)
Total Harmony Production (imperial) oz ‘000 FY12 production expected between 1.45- 1.55Moz 2 000 1 800 1 600 1.8 – 2.0 1.55 – 1.7 1.7 – 1.8 1 400 1 200 1 000 800 600 400 200 0 FY11 FY12 (FC) FY13 (FC) FY14 (FC) FY15 (FC) Doornkop Kusasalethu Hidden Valley Phakisa Target 3 Tshepong Masimong Target 1
Slide 47: Miner of choice
Miner of choice Expected potential Cash cost* Cast costs* Life of mine Operation Comments ounces R/kg US$/oz (LOM) ~ Doornkop 190 000- 220 000 oz R200 000- 220 000/kg US$820-905/oz 14 yrs In build-up Kusasalethu 270 000- 310 000 oz R195 000- 220 000/kg US$800-905/oz 25 yrs In build-up Phakisa 200 00
Slide 48: Achieving our plans
Achieving our plans Key steps Threats • Adhering to safety standards • Safety stoppages • Focus on realistic expectations and achievability • Minor geology causing challenging ground conditions • Expedite development • Logistical constraints • Electricity savings • Critical skills shortage • Transfe
Slide 49: Sustainability
Sustainability 49 www.harmony.co.za
Slide 50: SA corporate social responsibility – (CSR) budget
SA corporate social responsibility – (CSR) budget Key strategic objectives • To align mining license requirements and corporate strategy • To be relevant to mining and labour sending communities • To be a responsible corporate citizen FY12 budget • Total CSR cost R115m (US$15m) – Shafts – LED, prope
Slide 51: PNG corporate social responsibility budget
PNG corporate social responsibility budget Key strategic objectives • To align mining license requirements and corporate strategy • To be relevant to mining and labour sending communities • To be a responsible corporate citizen FY12 budget • Total cost R26.9m (US$3.55m) – education programs: R4.9m (
Slide 52: Environmental management
Environmental management Compliance to international standards – ISO 14001 implementation Doornkop plant and shaft, Kalgold and Kusasalethu are certified • Evander was recommended for certification - imminent International Cyanide Management Code • All plants barring Joel and Kalgold have been certi
Slide 53: Environmental rehabilitation
Environmental rehabilitation • Financial liability at 30 June 2011: R2 231m (US$294.7m) – 99.1% of the total environmental liability funded by Harmony • Virginia mine closure initiative to – reduce environmental liability – restore land capability – support socio-economic value-add to affected commu
Slide 54: Conclusion
Conclusion 54 www.harmony.co.za
Slide 55: Scorecard
Scorecard Generate free cash flow Actions Key steps Progress to date Improve cash costs Weekly and monthly reviews Optimise asset portfolio Review operational performance • Correctly targeted development • Achievable plans Majority of shafts perform in Increase production line with plan; exceptions
Slide 56: Scorecard cont’d
Scorecard cont’d Grow the company Actions Key steps Progress to date PNG – Wafi-Golpu 5 drill rigs at Wafi-Golpu; 8 rigs • Resource growing by December 2011 • Drilling continuing Explore • Transfer structure exploration PNG tenements 100% owned One drill rig at Mt Hagen; flurry • Further gold-copper
Slide 57: Increasing project value – Unlocking value
Increasing project value Exploration Target definition Resource definition Pre-feasibility Study Feasibility Project construction Wafi-Golpu Commissioning Production gap and build-up Doornkop, Phakisa www.harmony.co.za Steady state production Hidden Valley, Kusasalethu Masimong, Tshepong, etc. 57 Un
Slide 58: Better quality, lower costs (metric)
Better quality, lower costs (metric) Kilograms produced - Growth shafts (y-on-y) (metric) Kg R/Kg 35 000 250 000 30 000 200 000 25 000 150 000 20 000 15 000 100 000 10 000 50 000 5 000 0 - FY11 FY12 (FC) FY13 (FC) FY14 (FC) FY15 (FC) FY16 (FC) FY17 (FC) FY18 (FC) Hidden Valley Doornkop Phakisa Kusas
Slide 59: Strategic objectives
Strategic objectives Production Cash cost (million oz) ($/oz) Cash cost * ^ Production from: 1100 • SA – 1.4Moz 2.5 • Wafi-Golpu - 400 000oz • Hidden Valley – 200 000oz 900 2.0 p 700 1.5 500 Further decrease Production from SA and Hidden Valley under current copper price scenarios 1.0 No acquisition
Slide 60: Harmony – an exciting investment proposition
Harmony – an exciting investment proposition 1 Wafi-Golpu ‘find of the century’ 9 2 Unhedged, low debt 9 3 Building low-cost, high grade mines 9 4 Experienced, focused management team 9 5 Exciting long-term possibilities 9 6 Dividends 9 60 www.harmony.co.za
Slide 61: An exciting investment proposition
Henrika Basterfield Investor Relations Officer 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
Harmony Gold Mining Company — Investor Day (August 2011) on 6ix