Harmony Gold Mining Co. Ltd. · JSE:HAR
Harmony Gold Mining — Q2 FY2014 Earnings Presentation
43 slides from Harmony Gold Mining's earnings presentation, Feb 3, 2014
Slide 1: Q2 FY14
Q2 FY14 GRAHAM BRIGGS FRANK ABBOTT 3 February 2014 1 w w w . h a r mw onwyw. c. hoa. zr m a ony.co.za FY14 Q1 Q2 Q3 Q4
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 Pragmatic mining 2 Profitable ounces 3 Focus on growth in margin 4 Wafi-Golpu 5 Financial results 6 Conclusion 3 www.harmony.co.za FY14 Q1 Q2 Q3 Q4
Slide 4: Pragmatic mining
Pragmatic mining www.harmony.co.za
Slide 5: Our strategy = growing our margin
Our strategy = growing our margin A globally competitive gold mining company – growth in profits, paying dividends to shareholders Safely delivering on projects Optimise operational delivery and operational plans Growth in margin Growth (free cash flow) Sharing profits with Sharing rewards stakehold
Slide 6: Driving costs down (R/kg)
Driving costs down (R/kg) R/kg All-in sustaining costs 480 000 471 150 460 000 440 000 420 000 404 700 397 500 400 000 380 000 360 000 340 000 320 000 300 000 Jun-13 Sep-13 Dec-13 6 www.harmony.co.za FY14 Q1 Q2 Q3 Q4
Slide 7: Driving costs down (US$/oz)
Driving costs down (US$/oz) US$/oz All-in sustaining costs 1 600 1 551 1 500 1 400 1 300 1 264 1 222 1 200 1 100 1 000 Jun-13 Sep-13 Dec-13 7 www.harmony.co.za FY14 Q1 Q2 Q3 Q4
Slide 8: We remain agile
We remain agile All-in Mines currently operating Comments sustaining at these levels costs Less than Joel, Target 1, Steyn 2, • Operating at below US$1000/oz US$1000/oz Bambanani, Phoenix, Less than Hidden Valley, Kalgold, • Predicting an all in sustaining cost of US$1250/oz Dumps, Unisel $1100/oz b
Slide 9: We remain agile, cont'd
We remain agile, cont‟d All-in Mines currently operating Comments sustaining at these levels costs > US$1250/oz Phakisa, Tshepong, Operations with an all-in sustaining cost of Masimong, Doornkop higher than $1250/oz will be restructured: • Phakisa continues to spend capital on its build-up and shoul
Slide 10: Profitable ounces
Profitable ounces www.harmony.co.za
Slide 11: Safety – our core value
Safety – our core value − Executive-led safety audits − Dedicated safety executive − Reward and recognition initiatives − Increase in safety messaging − Non-compliance results in dismissals − Reduced fatality and lost time injury frequency rates q-on-q 11 www.harmony.co.za FY14 Q1 Q2 Q3 Q4
Slide 12: Group operating results (6 monthly)
Group operating results (6 monthly) Six months ended Six months % Dec 2013 ended Jun 2013 change kg 19 150 16 287 18 Gold produced oz 615 686 523 638 18 R/kg 422 386 447 913 (6) Gold price US$/oz 1 309 1 518 (14) R/kg 316 517 352 619 10 Cash operating costs US$/oz 981 1 194 18 Underground recovery g
Slide 13: Group operating results (q-on-q)
Group operating results (q-on-q) % Dec 2013 Sep 2013 change kg 9 515 9 635 (1) Gold produced oz 305 913 309 773 (1) R/kg 415 532 429 566 (3) Gold price US$/oz 1 277 1 342 (5) R/kg 308 665 324 272 5 Cash operating costs US$/oz 949 1 013 6 Underground recovery grade g/t 4.85 4.55 7 Rm 986 1 037 (5) Op
Slide 14: Upward trend in underground grade
Upward trend in underground grade g/t 4.9 4.85 4.8 4.79 4.7 4.6 4.55 4.5 4.4 4.37 4.3 4.2 4.1 4 Jun-13 Sep-13 Dec-13 FY14 forecast 14 www.harmony.co.za FY14 Q1 Q2 Q3 Q4
Slide 15: Stable production (kg)
Stable production (kg) 10 000 9 500 9 000 1 272 1 140 8 500 688 8 000 49 7 500 8 363 8 375 7 000 7 900 7 650 6 500 6 000 Mar-13 Jun-13 Sep-13 Dec-13 Kusasalethu Harmony excluding Kusasalethu Note: Guidance for FY14: 1.2 – 1.3moz 15 www.harmony.co.za FY14 Q1 Q2 Q3 Q4
Slide 16: Stable production (oz)
Stable production (oz) 330 000 310 000 290 000 40 896 36 652 270 000 22 120 250 000 1 575 230 000 210 000 268 877 269261 253 989 245 954 190 000 170 000 150 000 Mar-13 Jun-13 Sep-13 Dec-13 Kusasalethu Harmony excluding Kusasalethu Note: Guidance for FY14: 1.2 – 1.3moz 16 www.harmony.co.za FY14 Q1 Q2
Slide 17: Lowest cost producer (R/tonne) in SA
Lowest cost producer (R/tonne) in SA All-in sustaining costs R/tonne 3 500 3 000 2 893 2 914 2 500 2 052 2 004 2 000 1 876 1 745 1 500 1 000 500 - Jun-13 Sep-13 Jun-13 Sep-13 Jun-13 Sep-13 Harmony Sibanye Gold AngloGold¹ Note: Harmony has a 30 June year end, while Sibanye and Anglogold have 31 Decem
Slide 18: Focus on growth in margin
Focus on growth in margin www.harmony.co.za
Slide 19: Growing our margins (R/kg)
Growing our margins (R/kg) 600 000 526 404 All-in sustaining costs R/kg 533 624 500 000 503 058 400 000 416 838 397 503 458 501 394 820 447 878 393 782 386 310 373 246 300 000 299 632 280 299 278 028 263 910 241 303 200 000 100 000 - All-in sustaining cost R/kg Quarter average revenue R/kg 19 www.ha
Slide 20: Growing our margins (US$/oz)
Growing our margins (US$/oz) 1 800 All-in sustaining cost US$/oz 1 600 1 640 1 618 1 546 1 400 1 409 1 376 1 200 1 281 1 222 1 210 1 209 1 187 1 147 1 000 921 800 861 854 811 742 600 400 200 - All-in sustaining cost US$/oz Quarter average revenue US$/oz 20 www.harmony.co.za FY14 Q1 Q2 Q3 Q4
Slide 21: R/US$ exchange rate gearing
R/US$ exchange rate gearing US$/oz All-in sustaining costs of R398 000/kg (SA only) at different exchange rates 1 500 1 400 1 374 1 300 1 222 1 200 1 178 1 125 1 100 1 031 1 000 900 800 700 600 500 R9.00/US$ R10.12/US$ R10.50/US$ R11.00/US$ R12.00/US$ (Dec 2013 qtr) 21 www.harmony.co.za FY14 Q1 Q2 Q
Slide 22: Wafi-Golpu
Wafi-Golpu www.harmony.co.za
Slide 23: Globally significant resource
Globally significant resource • Modular, expandable mine planned, with lower capital requirements, • Next phase for the Wafi-Golpu project - commencement of underground access SECTION VIEW SECTION VIEW 2009 Today Surface Diatreme Surface Diatreme 5250mRL 5250mRL 5000mRL 5000mRL 800 m 4750mRL 4750mRL
Slide 24: Increasing value
Indicative timeline Commissioning and ramp-up 1st production Progress underground development and cave establishment Increasing value January 2018 onwards Advance feasibility studies, on-mine infrastructure / early works July 2017 - July 2019 Advance underground access, underground resource definiti
Slide 25: Financial results
Financial results www.harmony.co.za
Slide 26: Income statement (q-on-q) (Rand)
Income statement (q-on-q) (Rand) Dec 2013 Sep 2013 % Extracts from income statement and operating results (Rm) (Rm) change Revenue 4 071 4 018 1 Production costs (3 086) (2 981) (4) Cash operating costs (2 937) (3 124) 6 Inventory movements (149) 143 >(100) Operating profit as per operational result
Slide 27: Impact of foreign exchange translation (q-on-q) (Rand)
Impact of foreign exchange translation (q-on-q) (Rand) Extracts from income statement and HEPS Dec 2013 Sep 2013 % calculation (Rm) (Rm) change Net (loss)/profit (91) 13 >(100) Foreign exchange translation loss* (128) (9) >(100) Net profit excluding translation effects 37 22 68 Headline (loss)/earni
Slide 28: Income statement (q-on-q) (US$)
Income statement (q-on-q) (US$) Dec 2013 Sep 2013 % Extracts from income statement and operating results (US$m) (US$m) change Revenue 402 403 - Production costs (305) (299) (2) Cash operating costs (290) (314) 8 Inventory movements (15) 15 >(100) Operating profit as per operational results 97 104 (7
Slide 29: Impact of foreign exchange translation (q-on-q) (US$)
Impact of foreign exchange translation (q-on-q) (US$) Extracts from income statement and HEPS Dec 2013 Sep 2013 % calculation (US$m) (US$m) change Net (loss)/profit (10) 1 >(100) Foreign exchange translation loss* (13) (1) >(100) Net profit excluding translation effects 3 2 50 Headline (loss)/earnin
Slide 30: Cash flow summary (q-on-q) (Rand)
Cash flow summary (q-on-q) (Rand) Dec 2013 Sep 2013 Extracts from the cash flow statement (Rm) (Rm) Cash flow from operations before exploration 812 380 Exploration expenditure (112) (142) Income and mining taxes paid (28) - Capital expenditure (624) (618) At 31 December 2013: Net debt (957) (871) C
Slide 31: Cash flow summary (q-on-q) (US$)
Cash flow summary (q-on-q) (US$) Dec 2013 Sep 2013 Extracts from the cash flow statement (US$m) (US$m) Cash flow from operations before exploration 80 38 Exploration expenditure (11) (14) Income and mining taxes paid (3) - Capital expenditure (62) (62) At 31 December 2013: Net debt (91) (86) Cash ba
Slide 32: Borrowings renegotiated
Borrowings renegotiated • New three year Nedbank debt facility of R1.3bn − replaces previous R850m facility − matures in December 2016 − outstanding R458m was settled by drawing down on new facility • Covenants renegotiated for US$ and Rand facilities − the group‟s interest cover shall not be less t
Slide 33: Conclusion
Conclusion www.harmony.co.za
Slide 34: Harmony's foundations are in place
Harmony‟s foundations are in place What we Going What we have done say forward Replaced All mines Unprofitable under- operating Growth in Restructured areas performing below margin labour force closed management R400 000/kg teams AISC¹ Improve Lowest infrastructure Optimise R/tonne Ore Capital and a
Slide 35: Upside in share price
Upside in share price Market capitalisation/Reserve oz Increasing grade US$/oz 200 Lowest R/tonne SA gold producer 187 180 Greater capital discipline 160 140 Free cash flow 120 100 No hedging 80 65 60 Balance sheet strength – low debt 40 24 Geared to SA currency 20 0 2013 Earnings gr
Slide 36: In short…
In short… “Harmony has been in operation in South Africa for the past 63 years. We have positioned the company to remain sustainable for many years to come. We manage costs and production to ensure profitability at all gold prices. We mine profitably. That is what our approach to management is all a
Slide 37: Contact us
Contact us: HarmonyIR@harmony.co.za Henrika Ninham Investor Relations Manager Tel: +27 (0)11 411 2314 Mobile: +27 (0)82 759 1775 Email: henrika@harmony.co.za Marian van der Walt Executive: Corporate and Investor Relations Tel: +27 (0)11 411 2037 Mobile: +27 (0)82 888 1242 Email: marian@harmony.co.za
Slide 38: Appendix
Appendix An exciting investment proposition 38 www.harmony.co.za FY14 Q1 Q2 Q3 Q4
Slide 39: Benchmarking our grade
Benchmarking our grade Adjusted Mineral Recovered (-5%) to Actual grade Actual grade Sep 13 qtr Dec 13 qtr reserve grade Mine compare with (g/t) achieved (g/t) achieved Recovered Recovered grade (g/t) forecast for recovery in FY12 in FY13 grade (g/t) grade (g/t) June 2013 FY14 grade Kusasalethu 5.97
Slide 40: Driving costs down (R/kg) (year to date)
Driving costs down (R/kg) (year to date) Six months ended Dec Guidance for FY14: Guidance for FY14: Six months ended Dec 2013: 2013: Annual average Average Cash operating Capital and cash operating Operation Cash operating costs Capital and cash operating costs (including royalties)¹ costs*² (includ
Slide 41: Driving costs down (US$/oz) (year to date)
Driving costs down (US$/oz) (year to date) Six months ended Dec Guidance for FY14: Guidance for FY14: Six months ended Dec 2013: 2013: Annual average Average Cash operating Capital and cash operating Operation Cash operating costs Capital and cash operating costs (including royalties)¹ costs*² (incl
Slide 42: All-in sustaining costs 2% lower q-on-q (R/kg)
All-in sustaining costs 2% lower q-on-q (R/kg) R/kg 600 000 All-in sustaining costs - December 2013 quarter 550 000 Kusasalethu Target 3 500 000 Phakisa Total Masimong Jun 13 qtr 450 000 Tshepong 14% Gold price received Doornkop Total Sep 2013 qtr 400 000 Dumps 2% Unisel Kalgold Hidden Valley Total
Slide 43: All-in sustaining costs 4% lower q-on-q (US$/oz)
All-in sustaining costs 4% lower q-on-q (US$/oz) US$/oz All-in sustaining costs - December 2013 quarter (US$/oz) 1 700 Kusasalethu Target 3 1 600 Total Phakisa Jun 2013 qtr 1 500 1 400 Masimong 19% Tshepong Gold price received Total 1 300 Sep 2013 qtr Hidden Valley Doornkop 3% 1 200 Dumps Kalgold To
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