Harmony Gold Mining Co. Ltd. · JSE:HAR
Harmony Gold Mining — Investor Presentation (June 2015)
54 slides from Harmony Gold Mining's investor presentation, June 2015
Slide 1: Investor brief – May / June 2015
May/June 2015 Harmony Gold Mining Company Limited Registration no. 1950/038232/06 Ticker codes: JSE (HAR), NYSE (HMY) www.harmony.co.za 1 w w w . h a r mw onwyw. c . hoa. rz m a ony.co.za Investor brief – May / June 2015
Slide 2: Private Securities Litigation Reform Act 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: Fast facts
Fast facts • Building and operating world class mines in South Africa and Papua New Guinea − 9 underground mines, one open pit operation and several surface sources in South Africa − Produced 1.17Moz* of gold in FY14 − 50% joint venture in Papua New Guinea, which includes the spectacular Golpu proje
Slide 4: Crystallising value
Slide 5: A competitive, value focused gold mining company
Our 5 year strategy 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 to reflect in ou
Slide 6: Our four key value drivers
Our four key value drivers 1 We are efficient miners 2 Capital spend that ensures future growth and profitability 3 We are experienced explorers, mine developers and operators in emerging economies 4 Golpu will develop into a world-class copper-gold mine 6 www.harmony.co.za Investor brief – May / Ju
Slide 7: Actions to unlock value
Actions to unlock value Actions Steps Action 1 Achieve business plans Operational performance Restructure for profitability Golpu to be on-time and on-budget Action 2 Realising shareholder value Evaluating strategic options and funding Golpu 7 www.harmony.co.za Investor brief – May / June 2015
Slide 8: Taking action
Slide 9: Safety before production - improved safety
Safety before production - improved safety • During December 2014 quarter, the SA operations had zero fatalities 45 42 Fatalities (total Harmony including PNG) 40 35 31 30 29 27 25 22 22 21 21 20 16 15 15 10 10 5 5 0 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 Mar Q3 9 www.harmony.co
Slide 10: Gold economic environment
Gold economic environment • Falling gold prices – no increase predicted • Rapidly escalating input costs • Wage increases - labour more than 50% of costs • Power constraints - load shedding and higher than inflation increases • Policy and regulatory challenges SA operations - cash operating cost Wat
Slide 11: Reducing labour force, increasing costs
Reducing labour force, increasing costs Employees in service Decrease of 11% 38000 36 915 36 266 36 424 36000 34 721 34000 31 880 32000 30000 FY11 FY12 FY13 FY14 FC FY15 Total labour cost (Rbn) Increase 7.0 of 19% 6.7 6.4 6.5 6.3 6.0 5.9 5.5 5.4 5.0 FY11 FY12 FY13 FY14 FC FY15 11 www.harmony.co.za I
Slide 12: Our values
Our values • We live our 5 values and keep communication lines open with our employees • We have a pro-active communication campaign – our employees remain informed – we embrace our social licences to mine and go beyond compliance – we acknowledge that people play a major role in the industry – we t
Slide 13: Gold wage demands
Gold wage demands • Harmony will not survive high wage increases • Massive retrenchments inevitable should high increases be granted • Harmony is not replacing employees that are leaving and there is a moratorium on new recruitments • Win-win to be agreed for all parties • Economic and Social Compac
Slide 14: Electricity consumption vs cost
Electricity consumption vs cost GWh R'm 3 100 2 200 Consumption 2 100 decrease of 13% 3 000 R2 000m 3 000 2 000 1 900 2 900 R1 750m 1 800 Cost 2 800 increase 1 700 2 800 of 34% R1 600m 1 600 2 700 R1 490m 2 700 1 500 1 400 2 600 2 600 1 300 2 500 1 200 FY12 FY13 FY14 FY15 FC Electricity consumption
Slide 15: Controlling costs
Controlling costs (SA total operating costs, including capital) R’bn 16.0 14.0 R0.4bn, 3% R 0.3bn, 3% R1.4bn, 12% 12.0 R1.3bn, 12% 10.0 R13.7bn 8.0 R10.3bn 6.0 FY11 FY12 FY13 FY14 FC FY15 Total FC FY15 15 www.harmony.co.za Investor brief – May / June 2015
Slide 16: FOR rhuCraRing
FOR rhuCraRing ea a i he = | as
Slide 17: Steering each mine to profitability
Steering each mine to profitability (SA underground) Gold price R460 000/kg 14 13 Bambanani 12 11 10 Production grade (g/t) 9 8 7 Phakisa 6 Target 1 Tshepong Kusasalethu 5 Doornkop Unisel 4 Joel 3 Masimong High grade 2 1 0 250 000 300 000 350 000 400 000 450 000 500 000 550 000 600 000 650 000 Low c
Slide 18: Kusasalethu restructured
Kusasalethu restructured MM RV Levels 78 to 95 closed SHAFT SHAFT SUB SHAFT 73 L 77 Belt level 75 L 78 L 80 L 82 L 85 L Old mine 78 level 88 L to 95 level 92 L 95 L 98 L 102 L 105 L 109 L New mine 98 level to 113 level 113 L 18 www.harmony.co.za Investor brief – May / June 2015
Slide 19: Kusasalethu restructured, cont'd
Kusasalethu restructured, cont’d • Section 189A process complete − 389 transferred − 224 voluntary separation packages − 223 retrenched − 227 contractors replaced • New plan FY16 − grade of 5g/t to 5.6g/t − gold production of 170 000oz to 180 000oz − total cost of +/- R400 000/kg (+/- US$1 050/oz) 1
Slide 20: Restructuring Masimong, Doornkop and Hidden Valley
Restructuring Masimong, Doornkop and Hidden Valley Masimong • Substantial reduction in development • Life of mine to be reduced to 2 years • Approximately 400 employees may be impacted • Continue to focus on the high grade areas Doornkop • Focus on development for improved higher grade mining • The
Slide 21: Golpu - a game changer
Slide 22: Papua New Guinea (PNG)
Papua New Guinea (PNG) 22 www.harmony.co.za Investor brief – May / June 2015
Slide 23: 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 24: Resource growth from 2009 to today
Resource growth from 2009 to today • Golpu is a globally significant resource • Next phase for the Golpu project - commencement of Feasibility Study SECTION VIEW SECTION VIEW 2009 Today Surface Surface 5250mRL 5250mRL 5000mRL 5000mRL 800m +1,700m 4750mRL 4750mRL 2009 GOLPU 2014 GOLPU RESOURCE(1) RES
Slide 25: Golpu – one of the best Au-Cu porphyries (100%)
Golpu – one of the best Au-Cu porphyries (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 25 www.harmony.co.za Investor brief – May / Jun
Slide 26: 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 27: Creating value for our shareholders
Creating value for our shareholders Our considerations • Investors seeking return on investment • Project with lower capital and near term cash flow • Scalable start-up mine • Portfolio creates shareholder value through success • Sustainable approach New outcomes • Robust returns (IRR of 17%) • Flex
Slide 28: oe! was wy
oe! was wy i Be a yt c f ii
Slide 29: 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 30: Northern access road to Golpu
Northern access road to Golpu Highlands Highway New bridge site New road Mine Site 30 www.harmony.co.za Investor brief – May / June 2015
Slide 31: 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 32: 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 32 www.harmony
Slide 33: Stage 1 – maximising free cash flow (100%)
Stage 1 – maximising free cash flow (100%) 1 500 6 000 Cumulative Undiscounted Free Cash Flow (USD M) 1 250 5 000 1 000 4 000 750 3 000 Cash Flow (USD M) 500 2 000 250 1 000 0 0 (250) -1 000 (500) -2 000 US$1.6bn (750) -3 000 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
Slide 34: Stage 1 (100%) – major statistics
Stage 1 (100%) – major statistics 6Mtpa Block Description Unit cave Production First ore Date 2020 Steady-state production Date 2024 Ore mined Mt 146 Life of Stage 1 Years 27 Copper produced Mt Cu 2.2 Gold produced Moz Au 3.7 Peak gold production (Year 2025) koz pa 320 Peak copper production (Year 2
Slide 35: Golpu's gross revenue (50%)
Golpu’s gross revenue (50%) US$m Copper and gold revenue from Stage 1* (US$m) 800 700 600 500 400 300 200 100 0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 Copper revenue Revenue Gold revenue Total Operatingpl
Slide 36: Attributable low cost, quality ounces (Stage 1 at 50%)
Attributable low cost, quality ounces (Stage 1 at 50%) Average Life of Average value per year production Stage 1 2024-2029 (averages) Gold produced oz/year 130 000 69 000 Copper metal produced t/year 70 000 41 000 Gold equivalent* produced oz/year 500 000 292 000 Gross copper revenue US$/year 480m 2
Slide 37: Stage 1 (100%) – mining Golpu will drive down costs
Stage 1 (100%) – mining Golpu will drive down costs 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) (exclude realisation costs) US$/t 34
Slide 38: Operating cost summary for Stage 1
Operating cost summary for Stage 1 6Mtpa Block cave Process (US$/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$/t) Labour 5.15 Fixed overheads 6.84 Utilities 12.31 External services 1.40 Materials and su
Slide 39: Major updated PFS findings (100%)
Major updated PFS findings (100%) • Two block caves (BC 1 & BC 2) targeting higher grade zones – scalable operation from 3Mtpa (BC 1) to 6Mtpa (BC 2) • Common path access (twin declines) to the orebody allows future flexibility and expansion • Improved gold and copper recoveries – average copper and
Slide 40: Commodity price sensitivity (100%)
Commodity price sensitivity (100%) Base case Base case Base case -20% +20% Gold price (US$/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% 40 www.harmony.co.za Investor brief – May / June 2015
Slide 41: Total costs including capital (C3) (US$/lb)
Total costs including capital (C3) (US$/lb) 5.00 4.00 Oyu Tolgoi (Phase 1) 3.00 Sierra Gorda Sentinel Toromocho (Phase 1) $/lb Cu Cobre Panama Frieda River Aktogay Caserones MMH Golpu (1.42) Las Bambas 2.00 New Afton Carrapateena 1.00 Grasberg 0.00 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,0
Slide 42: We will build Golpu
We will build Golpu • From FY21 Stage 1 will be cash flow positive after capital expenditure Harmony equity Harmony equity (35%) Funding options (50%) PNG Government buy-in for Harmony Project capital Project capital Year US$m US$m 2H FY15 (15) (15) FY16 (55) (55) • Internal cash flows FY17 (105) 45
Slide 43: Golpu has the flexibility to increase its footprint: Stage 2
Slide 44: Stage 2
Stage 2 • Further optimises resource extraction (60% of the reserve) • Optionality of larger operations to follow Stage 1 • Block caves of 10 Mtpa and 22 Mtpa production rate considered • Ability to respond to changing market conditions • Commencement of Stage 2 after Stage 1 payback is a future inv
Slide 45: Golpu – a spectacular ore body
Golpu – a spectacular ore body Stage 1 (BC1 and BC2) • Earth works to start September 2015 Stage 1 BC 1 Total • Feasibility study to be completed end 2015 (Blue) resource • First production in 2020 shell (Green) Stage 1 4285 BC 2 RL (Red) Stage 2 BC3 (Purple) Stage 2 (BC3) 4100 4300 • Updated prefea
Slide 46: Life of mine production profile
70 year production profile t’000 Productions schedule – Portfolio 1 12000 360 000 10000 300 000 Gold (oz) and Copper (t) recovered 8000 240 000 6000 180 000 4000 120 000 2000 60 000 0 0 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045 2047 2049 2051 2053 2055 2057 2059 2061 2063
Slide 47: Schematic cross section of Golpu porphyry deposit PFS 2012 compared to PFS 2014
Schematic cross section of Golpu porphyry deposit PFS 2012 compared to PFS 2014 47 www.harmony.co.za Investor brief – May / June 2015
Slide 48: Financial
FINANCIAL BNL S Py oly BQ” fs aah, SS" f; 3
Slide 49: Extract from income statement (q-on-q) – Rand
Extract from income statement (q-on-q) – Rand Mar 2015 Dec 2014 quarter quarter % Extracts from income statement and operating results (Rm) (Rm) change Revenue 3 428 3 715 (8) Production costs (2 785) (3 096) 10 Cash operating costs (2 888) (3 021) 4 Inventory movements 103 (75) >100 Production prof
Slide 50: Extract from income statement (q-on-q) – US$
Extract from income statement (q-on-q) – US$ Mar 2015 Dec 2014 quarter quarter % Extracts from income statement and operating results (US$m) (US$m) change Revenue 292 331 (12) Production costs (237) (276) 14 Cash operating costs (246) (269) 9 Inventory movements 9 (7) >100 Production profit as per o
Slide 51: Cash flow summary (q-on-q) – Rand
Cash flow summary (q-on-q) – Rand Mar 2015 Dec 2014 Extracts from the cash flow statement (Rm) (Rm) Cash flow from operations before exploration 380 19 Exploration expenditure¹ (27) (83) Income and mining taxes refunded 26 39 Loan to associate - (120) Capital expenditure¹ (710) (748) At 31 March 201
Slide 52: Cash flow summary (q-on-q) – US$
Cash flow summary (q-on-q) – US$ Mar 2015 Dec 2014 Extracts from the cash flow statement (US$m) (US$m) Cash flow from operations before exploration 32 1 Exploration expenditure¹ (2) (7) Income and mining taxes refunded 2 3 Loan to associate - (11) Capital expenditure¹ (60) (67) At 31 March 2015: Net
Slide 53: Cash operating cost and capital (Rand)
Cash operating cost and capital (Rand) R/kg 700 000 600 000 Kusasalethu Hidden Valley 500 000 Phakisa Doornkop Gold price received Unisel Tshepong Masimong Dumps Total 400 000 Harmony R436 000/kg Joel Kalgold Phoenix Target 1 300 000 Bambanani 200 000 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Cumu
Slide 54: Contact: 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 4. Golpu will develop into a world-class copper-gold mine JSE (HAR) NYSE (
Harmony Gold Mining Company — Investor Presentation (June 2015) on 6ix