Slide 1: Kusasalethu: the way forward
Kusasalethu: the way forward GRAHAM BRIGGS 7 January 2013 1 w w w . h a r mw onwyw. c. hoa. zr m a ony.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: Agenda
Agenda Kusasalethu: History and 1 background 2 Events during December 2012 quarter 3 Impact of recent events 4 The way forward 5 Conclusion 3 www.harmony.co.za
Slide 4: Kusasalethu: History and background
Kusasalethu: History and background www.harmony.co.za www.harmony.co.za 4
Slide 5: History and background
History and background • Harmony acquired Kusasalethu (previously known as Elandsrand) in 2001 – purchase price of R1 billion • Harmony committed to do the deepening project and invested 12 years of capital – resulted in being cash positive during FY11, as the deepening project neared completion • M
Slide 6: Cumulative cash flow since acquisition (R'000)
Cumulative cash flow since acquisition (R’000) Cumulative cash flow since acquisition Rm 0 -200 -400 -600 -800 -1000 -1200 -1400 -1600 -1800 -2000 6 www.harmony.co.za
Slide 7: Kusasalethu's life of mine potential
Kusasalethu’s life of mine potential Tonnes (Mt) Grade (g/t) Gold (000kg) Gold(000oz) Mineral Reserves 35.1 6.30 221 7 112 • Expected potential annual production of 260 000 - 300 000 oz • Estimated life of mine ≈ 25 years 7 www.harmony.co.za
Slide 8: Events during the December 2012 quarter
Events during the December 2012 quarter www.harmony.co.za www.harmony.co.za 8
Slide 9: Events during the December 2012 quarter
Events during the December 2012 quarter • 3rd of October until 25th October 2012: Duration of unprotected strike at Kusasalethu – Lost 35 days, including 12 days of safety start-up days (when workplace assessments, medicals and training took place) – Estimated production lost at the time was approxi
Slide 10: Events during the December 2012 quarter | cont'd
Events during the December 2012 quarter | cont’d • Between 26 October to 21 December 2012 – violence leading to murder of 2 employees and injuring one person – 5 illegal underground sit-ins were conducted – mine property was damaged – physical assault of the mine manager – threats that members of ma
Slide 11: Impact of recent events at Kusasalethu
Impact of recent events at Kusasalethu www.harmony.co.za www.harmony.co.za 11
Slide 12: Specific impact of recent events
Specific impact of recent events • Loss of lives • Non-compliance of the Mine Health and Safety Act, 29 of 1996 • Extremely high risk of a safety incident as standards and procedures are not being followed • Damage to mine infrastructure • Poor production - only about 22%* of planned production for
Slide 13: Kusasalethu: operational cash flow (R/kg)
Kusasalethu: operational cash flow (R/kg) R/Kg Operational cash flow (R/kg)- quarterly 1 300 000 1 100 000 900 000 700 000 500 000 300 000 100 000 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Forecast Growth capital R/kg Maintenaince capital R/kg
Slide 14: Kusasalethu: operational cash flow (US$/oz)
Kusasalethu: operational cash flow (US$/oz) US$/oz Operational cash flow (US$/oz) - quarterly 4 500 4 000 3 500 3 000 2 500 2 000 1 500 1 000 500 - Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Forecast Growth capital US$/oz Maintenaince capital US
Slide 15: Sharp production decrease forecasted
Sharp production decrease forecasted 2 000 Kilograms produced 1 500 1 000 500 - Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Forecast 60 000 Ounces produced 50 000 40 000 30 000 20 000 10 000 - Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun
Slide 16: Free cash flow came to an abrupt end
Free cash flow came to an abrupt end Operational cash free flow (R'000) 200 000 150 000 100 000 50 000 - R’000 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Forecast -50 000 -100 000 -150 000 -200 000 -250 000 -300 000 *Figures used are still a for
Slide 17: Harmony group's sustainability is essential
Various stakeholders- profitability for the Harmony group’s sustainability is essential Shareholders General public Employees/ general unions communities Government NGOs/CBOs & regulators Media and Industry analysts organisations Host Partners, communities/ customers & neighbours suppliers 17 www.ha
Slide 18: Kusasalethu's way forward
Kusasalethu’s way forward www.harmony.co.za www.harmony.co.za 18
Slide 19: Conditions for production to recommence
Conditions for production to recommence • Strict adherence by all role players to the provisions of the Mine Health and Safety Act (MHSA) • Ensuring that the mine’s standards and procedures are followed by all employees • Employees conforming to the disciplinary code of the Mine • No illegal sit-ins
Slide 20: Our intent
Our intent • Engage with all stakeholders in order to reach a collective agreement – to bind all employees of the mine – provide sufficient assurances for a return to normal operations and production • A sustainable and lasting solution – ensure that the security, safety and health situation at the
Slide 21: Decision points
Decision points • The major labour disruptions resulted in a breakdown in labour relations • Secure and safe production not possible should lawlessness persist • Management’s legal and moral obligation and duty to ensure the security, safety and health of all employees and to ensure that the mine's
Slide 22: Conclusion
Conclusion www.harmony.co.za www.harmony.co.za 22
Slide 23: Two processes have commenced
Two processes have commenced • 1. A process of discussion and consultation with labour – Should the aforesaid conditions and goals not be achieved by means of a consultation and discussion process then the company will have no alternative but to continue and conclude the section 189 process which mi
Slide 24: Adjusted guidance for the group
Adjusted guidance for the group Company production guidance FY13¹ FY14¹ FY15¹ FY16¹ Previously guided 1.3 1.45 1.6 1.7 New guidance 1.2 1.45 1.6 1.7 ¹ This guidance assumes that Kusasalethu will be back to planned production on 1 July 2013 24 www.harmony.co.za
Slide 25: An exciting investment proposition
Henrika Basterfield 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 An exciting investment proposi