Harmony Gold Mining Co. Ltd. · JSE:HAR
Harmony Gold Mining — Investor Presentation (December 2014)
56 slides from Harmony Gold Mining's investor presentation, Dec 15, 2014
Slide 1: Graham Briggs, 15 December 2014
Graham Briggs 15 December 2014 www.harmony.co.za w w w . h a r mw onwyw. c. hoa. zr m 1 a ony.co.za
Slide 2: Safe Harbour Statement and competent persons statement
Private Securities Litigation Reform Act Safe Harbour Statement and competent persons 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 in
Slide 3: Agenda
Agenda 1 Creating value for shareholders 2 Background 3 Spectacular ore body 4 Mining Golpu – Stage 1 5 Economic value 6 Future flexibility – Stage 2 7 Conclusion 3 www.harmony.co.za
Slide 4: Creating value for shareholders
CREATING VALU SHAR EHOL » ERS
Slide 5: Growing the value of our PNG assets
Growing the value of our PNG assets A COMPETITIVE, VALUE FOCUSED GOLD MINING COMPANY • Safely delivering on plans • Increase free cash flow through 1. Improving our margins higher grades and cost control • Retain flexible balance sheet 2. Growing the value of our PNG assets • Complete Golpu studies
Slide 6: Establishing the value
Establishing the value Enhancement of definition of orebody • 70 000 man hours were spent utilising WorleyParsons led by project team • a total of 52 000 additional drill core samples • 2 700 metres hydrogeology drilling (with pump and packer tests) • 8 000 metres surface geotechnical drilling plus
Slide 7: Driving Golpu up the value curve
Driving Golpu up the value curve Steady state production Project construction Increasing project value Target 1, Unisel, Kalgold, Hidden Valley, Joel, Masimong, Tshepong, Bambanani, Phoenix Doornkop, Phakisa, Feasibility Kusasalethu Prefeasibility study Concept study Phoenix 2 Golpu Exploration Targ
Slide 8: Catalysts for an increase in our share price
Catalysts for an increase in our share price • Restructuring to enhance margins − Doornkop Kimberley reef − Phakisa decline − Target 3 − Kusasalethu • Increased gold production — increase in grade — increase in productivity • Golpu - 2014 updated PFS − low capital − high grade − high returns − affor
Slide 9: Background
IARMONY BACKGROUND
Slide 10: Papua New Guinea (PNG)
Papua New Guinea (PNG) 10 www.harmony.co.za
Slide 11: PNG is on the Ring of Fire
PNG is on the Ring of Fire 11 www.harmony.co.za
Slide 12: Ring of Fire consists of subduction zones
Ring of Fire consists of subduction zones 12 www.harmony.co.za
Slide 13: Development of copper porphyry orebodies
Development of copper porphyry orebodies 13 www.harmony.co.za
Slide 14: PNG - exceptional copper gold province
PNG - exceptional copper gold province Grasberg Ok Tedi 109Moz Au, 38 Mt Cu 4.7Moz Au, 1 Mt Cu Frieda Lihir 21.1Moz Au, 12.9 Mt Cu 60.4 Moz Au Porgera 10.5 Moz Au Yandera 2.8 Mt Cu Wafi-Golpu 28.6 Moz Au, 9.4 Mt Cu Panguna 19.3 Moz Au, 5.3 Mt Cu Hidden Valley 5.6 Moz Au, 105 Moz Ag 0 250 Kilometres
Slide 15: Golpu project - ownership
Golpu project - ownership • Golpu owned by Wafi-Golpu Joint Venture (WGJV) • WGJV 50/50 joint venture between Harmony and Newcrest Mining Limited • PNG government retains right to acquire up to 30% when granting the mining lease – will pay for historical expenditure – becomes equity participant 15 w
Slide 16: Advantageous project location
Advantageous project location Chivaseng Nadzab airport Lae Watut River Demakwa Golpu • Close proximity to regional infrastructure reduces capital • Proximate flat topography reduces bulk earthworks requirements 16 www.harmony.co.za
Slide 17: Location advantages
Location advantages • Project located in close proximity to Lae – 62km on highway, past airport, to proposed mine access road – approximately 40km from highway to mine • Good access to regional infrastructure – Port of Lae – currently being upgraded – Nadzab airport – important regional access point
Slide 18: Main updated PFS objectives met
Main updated PFS objectives met • Targeting higher grades • Low capital • Scalable, ensuring ore body can be exploited at various commodity prices • Modular and phased expansion approach • Minimise infrastructure footprint • Robust returns 18 www.harmony.co.za
Slide 19: Spectacular ore body
SPECTACU LAR ane sO0DY , wae 7.
Slide 20: Golpu – one of the best (100%)
Golpu – one of the best (100%) Asian porphyry copper-gold deposits (bubble represents total Resource – gold equivalent ounces) Gold Equivalent is based on a gold price of US$1250/oz and a copper price of US$3.10/lb Source: WoodMcKenzie 20 www.harmony.co.za
Slide 21: Vast resource
Vast resource PROJECTION VIEW North (Looking west) • Five times the height South of the Empire state 5500mRL Wafi Total building Resource Profile 19950mE 5000mRL WAFI¹ 7.2 Moz Au GOLPU¹ 20.2 Moz Au 4500mRL 9.4 Mt Cu Golpu Total PLAN VIEW Resource GOLPU 4000mRL 3850mRL WAFI Direction of view 500 m ¹R
Slide 22: Quality grades and scalable
Quality grades and scalable Stage 1 - mined ore (100%) Gold Copper Gold Tonnes Au Grade Cu grade produced produced Equivalent* (mt) (g/t) (%) (moz) (kt) (moz) 146 1.02 3.7 1.6 2 203 15.7 • Stage 1 targets higher grades upper portion – 30% of the tonnes and 40% of the metal content – underground infr
Slide 23: Slide 23
Slide 24: Major updated PFS findings (100%)
Major updated PFS findings (100%) • Two block caves (BC 1 & BC 2) targeting higher grade zones – scalable operation from 3Mtpa (BC 1) to 6Mtpa (BC 2) • Common path access (twin declines) to the orebody allows future flexibility and expansion • Improved gold and copper recoveries – average copper and
Slide 25: Preferred mining method - Block caving
Preferred mining method - Block caving • Rock mass characteristics of near vertical orebody suitable for block caving • A high establishment cost but a low operating cost • Preferred to sub level caving due to lower operating costs, ventilation and support requirements Undercut Draw bell Orebody min
Slide 26: Mining higher grades first
Mining higher grades first • Block Cave 1 (BC1) – 3Mtpa − Early production cash flow target − 12Mt at 1.12g/t Au, 2.18% Cu − Average NSR* US$143/t BC1 • Block Cave 2 (BC2) – 6Mtpa − The high grade “sweet-spot” business case driver − 134Mt at 1.01g/t Au, 1.55% Cu BC2 − Average grades first 10 years 1
Slide 27: Stage 1 design
Stage 1 design Vent Ridge Watut Portal Ventilation 5250mRL Shaft Jaw crusher 4825mRL Intake Conveyor and return airway Return airway BC1 Gyratory crusher 4300mRL Description Unit Ore mined Mt 146 Life of Stage 1 Yrs 27 BC2 Copper produced Mt 2.2 Gold produced Moz 3.7 First ore Yr 2020 27 www.harmony
Slide 28: 1 and 2 Level BC2 Extraction
BC2 Block Extraction cave 1 and 2 Level Block cave 1 (BC1) Block cave 2 (BC2) 28 www.harmony.co.za
Slide 29: Production profile (100%)
Production profile (100%) • Block Cave 1 (BC1) average grades for 5 years (life of BC1) - 1.12g/t Au and 2.18% Cu • Block Cave 2 (BC2) average grades first 10 years - 1.66g/t Au and 2.3% Cu 29 www.harmony.co.za
Slide 30: Slide 30
Slide 31: Stage 1 (100%) – mining Golpu
Stage 1 (100%) – mining Golpu 6Mtpa Block Description Unit cave Production First ore Date 2020 Steady-state production Date 2024 Ore mined Mt 146 Life of Stage 1 Years 27 Copper produced Mt Cu 2.2 Gold produced Moz Au 3.7 Peak gold production (Year 2025) koz pa 320 Peak copper production (Year 2025)
Slide 32: Stage 1 (100%) – mining Golpu, cont’d
Stage 1 (100%) – mining Golpu, cont’d Description Unit 6Mtpa Block cave Capital Project capital US$bn 2.3 Sustaining capital US$bn 0.8 Total life of Stage 1 capital US$bn 3.1 Maximum negative cash flow US$bn 1.6 Operating Total operating cost (real) US$/t 34.6 Cash cost (C1) (after gold credits) US$
Slide 33: Stage 1 – maximising free cash flow (100%)
Stage 1 – maximising free cash flow (100%) US$1.6bn • Cumulative undiscounted free cash flow of US$5.8bn over life of Stage 1 33 www.harmony.co.za
Slide 34: Attributable low cost, quality ounces (Stage 1 at 50%)
Attributable low cost, quality ounces (Stage 1 at 50%) Average Life of Average value per year production Stage 1 2024-2029 (averages) Gold produced oz/year 130 000 69 000 Copper metal produced t/year 70 000 41 000 Gold equivalent* produced oz/year 500 000 292 000 Gross copper revenue US$/year 480m 2
Slide 35: Increasing Harmony’s gross revenue (50%)
Increasing Harmony’s gross revenue (50%) US$m 800 Copper and gold revenues from Stage 1* (US$m) 700 600 500 400 300 200 100 - Copper revenue Gold revenue *Copper price US$3.10/lb and gold price US$1250/oz 35 www.harmony.co.za
Slide 36: Capital expenditure - Stage 1 (100%)
Capital expenditure - Stage 1 (100%) Area US$m Direct costs Mine 893 Process plant 155 Infrastructure 554 Total direct costs 1602 Indirect costs Project management 284 Owners' costs 127 Total indirect costs 411 Contingency 287 Total project capital 2 300 36 www.harmony.co.za
Slide 37: Advanced exploration work
Advanced exploration work • Acquire additional detailed underground data • Achieves first production in 2020 • Scope comprises work required up to the grant of a special mining lease – new access road, portal, power station, accommodation and ancillary facilities to support and develop the twin decl
Slide 38: Stage 1- infrastructure requirements
Stage 1- infrastructure requirements • Available regional infrastructure reduces capital requirement • Mine infrastructure situated on Watut River flats to minimise requirement for bulk earthworks • Five quotes obtained for decline access and conservative rate of advance applied (105 meters/month) •
Slide 39: Capital and funding scenario’s (attributable)
Capital and funding scenario’s (attributable) Harmony equity (35%) Harmony equity PNG Government Funding options for Harmony (50%) buy-in Project capital Project capital Year US$m US$m 2H FY15 (15) (15) FY16 (55) (55) Internal cash flows FY17 (105) 45* FY18 (205) (140) • Internal cash flows FY19 (25
Slide 40: Operating cost summary for Stage 1
Operating cost summary for Stage 1 6Mtpa Block cave Process (US$/t) Underground mining 11.83 Treatment 12.86 Infrastructure 3.17 General and administration costs 6.78 Total 34.64 6Mtpa Block cave Element (US$/t) Labour 5.15 Fixed overheads 6.84 Utilities 12.31 External services 1.40 Materials and su
Slide 41: Total costs including capital (C3)
Total costs including capital (C3) (US$/lb) 5.00 4.00 Oyu Tolgoi (Phase 1) 3.00 Sierra Gorda Sentinel Toromocho (Phase 1) $/lb Cu Cobre Panama Frieda River Aktogay Caserones MMH Golpu (1.42) Las Bambas 2.00 New Afton Carrapateena 1.00 Grasberg 0.00 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,0
Slide 42: Commodity price sensitivity (100%)
Commodity price sensitivity (100%) Base case Base case Base case -20% +20% Gold price (US$/oz) 1 000 1 250 1 500 Copper price (US$/lb) 2.48 3.10 3.72 Internal rate of return 12% 17% 21% NPV* (US$) 386m 1.1bn 1.8bn * At a discount rate of 8.58% 42 www.harmony.co.za
Slide 43: Future flexibility – Stage 2
FUTURE FLEXIBILITY Stag
Slide 44: Stage 2
Stage 2 • Further optimises resource extraction (60% of the reserve) • Optionality of larger operations to follow Stage 1 • Block caves of 10 Mtpa and 22 Mtpa production rate considered • Ability to respond to changing market conditions • Commencement of Stage 2 after Stage 1 payback is a future inv
Slide 45: Stage 2 – future potential of Golpu
Stage 2 – future potential of Golpu Stage 1 BC 1 Total (Blue) resource shell (Green) Stage 1 4285 RL BC 2 (Red) Stage 2 BC3 (Purple) 4100 RL 4300 RL 45 www.harmony.co.za
Slide 46: Stage 1 and Stage 2 production rates
Stage 1 and Stage 2 production rates Tonnes 46 www.harmony.co.za
Slide 47: Conclusion
CONCLUSION
Slide 48: Next steps and milestones
Next steps and milestones • Advanced exploration work – detailed engineering to be completed towards mid 2015 – level 2B environmental permit submitted – engaging PNG government regarding pre-mine development agreement – commencement of new access road, portal, power station, accommodation and ancil
Slide 49: In short…low capex, high grades – excellent returns
In short…low capex, high grades – excellent returns Our strategy Our performance to date Safely delivering on plans • Safety record improved • Production improved Increase free cash flow through • Free cash flow improved higher grades and cost control • Grades higher • • Costs contained Restructur
Slide 50: Email: HarmonyIR@harmony.co.za
Email: HarmonyIR@harmony.co.za www.harmony.co.za 1. We are efficient miners 2. We fund our capital to ensure future growth and profitability 3. We are experienced explorers, mine developers and operators in emerging economies JSE (HAR) NYSE (HMY) 4. Golpu will develop into a world-class copper-gold
Slide 51: Appendix
Slide 52: Capital intensity per annual tonne
Capital intensity per annual tonne (US$ / Cu Eq.t pa) • 0 10,000 20,000 30,000 Caserones 25,933 Aktogay 23,577 Galeno 23,087 Oyu Tolgoi (Phase 1) 23,062 Oyu Tolgoi (Phase 1& 22,551 2) Resolution 22,126 Schaft Creek 20,930 El Morro 19,989 Udokan 19,649 Cerro Casale 19,489 Carrapateena 18,750 Constanc
Slide 53: Development capital (US$bn)
• • Development capital (US$bn) 9.0 0.0 3.0 6.0 12.0 Oyu Tolgoi (Phase 1& 2) 11.6 Resolution 10.0 Oyu Tolgoi (Phase 1) 6.2 Cobre Panama 6.2 Las Bambas 6.0 Cerro Casale 6.0 Tampakan 5.9 Pebble 4.7 excludes sustaining capital Sierra Gorda 4.2 Caserones 4.2 El Pachon 4.1 Relincho 3.9 Galeno 3.9 El Morr
Slide 54: Northern access road to Golpu
Northern access road to Golpu Highlands Highway New bridge site New road Mine Site 54 www.harmony.co.za
Slide 55: PNG tax and project interest
PNG tax and project interest • Company tax rate is 30% • Mining royalty 2% of revenue less shipping and refining costs • Interest withholding tax is 0% (approved resource projects only) • PNG government retains the right to acquire up to 30% of the project up to the grant of the special mining lease
Slide 56: Email: HarmonyIR@harmony.co.za
Email: HarmonyIR@harmony.co.za www.harmony.co.za 1. We are efficient miners 2. We fund our capital to ensure future growth and profitability 3. We are experienced explorers, mine developers and operators in emerging economies JSE (HAR) NYSE (HMY) 4. Golpu will develop into a world-class copper-gold
Harmony Gold Mining Company — Investor Presentation (December 2014) on 6ix