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Harmony

View Company Profile

September 17, 2024 at 11:40 AM (MDT)|Broadmoor Hotel & Resort

Peter Steenkamp

CEO

B Eng (Mining); Mine Managers Certificate Metal Mines; Mine Managers Certificate Fiery Mines; CPIR; MDP; BLDP

Peter Steenkamp was appointed chief executive officer and executive director on 1 January 2016. He has 45 years’ experience in the mining industry, including his last position as Senior Vice President: Mining of Sasol Mining Proprietary Limited, and executive positions at Harmony, from 2003 to 2007, and at African Rainbow Minerals (ARM) and Pamodzi Gold.

He is a vice-president at the Minerals Council South Africa, a member and past president of the Association of Mine Managers of South Africa, and a member of the Southern African Institute of Mining and Metallurgy and the South African Colliery Managers’ Association.

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Mini Gold. And our presenter is Peter Steenkamp, Chief Executive Officer. And with that, he'll lead us through a presentation and if we have time, we'll have Q and A after good morning. My name is Peter Steenkamp Ceo of Harmony Gold. And it's once again, a pleasure to be presenting at the Denver Gold Forum. Please take note of our safe harbor statement. Allow me to start with a short update on the harmony and our strategy harmony is the large largest gold mining company in South Africa producing approximately 1.5 million ounces each year. We have operated in South Africa for over 74 years and in Papua, New Guinea for over 20 years, we currently operate nine underground mines, two open pit mines and a significant gold toning retreatment business. Our surface gold retreatment business is the largest globally with potential for another 100 years of hydro mining across South Africa. We also produce small amounts of silver and uranium. And although 90% of the production comes from South Africa operations, the future of harmony lies in its international gold and copper projects based on current planning parameters. We expect approximately a quarter of future production to be copper within the next 10 years. This will come from our tier one WAFI gou project in Papua, New Guinea and the Eva Copper project in Australia with AM M Mineral Resources and Mineral Reserve Declaration of close to 100 and 37 million ounces and 40 million ounces of gold and gold equivalent. Harly significantly long life gold mining operation. With the exciting future ahead. Our strategy is aimed at producing safe profitable answers and improving our margins through operational excellence and value. Creative acquisitions safety is embedded in our strategy and all decisions are underpinned by our four strategic pillars, namely responsible stewardship, operational excellence, cash certainty and effective capital allocation harmony should be viewed as four business within one major capital is being allocated towards a higher quality assets which is in the gray qua quadrant. These include Mob Kong and Pun which both have recorded grades of approximately 9 g a ton. We continue allocating sustainable caps to our optimized assets or the red quadrant which we will recall was the old harmony to maintain flexibility and ensure optimal cash generation of the life of the assets. This is essential to funding our growth of plans. Studies are underway to determine how we can expand our Homo homo low risk surface treatment operations. Then we have our international quadrant which is in Black, which consists of the open pit Hidden Valley Mine and two copper projects. Both in PNG and the other in Australia with lower risk profile for further development. These investments will ensure we continue growing reserves and delivering improved margins at a higher profitability. Our investment in quality os and operating excellence enable us to deliver on exceptional combined performance across our operations in the past financial year. Underground recovered grade exceeded guidance improving by 6% to 6.11 g per ton. In fy 24 this was primarily driven by our high grade minds in Pun and Moab Katong gold production also increased by 6% to 1.56 million ounces. Also beating our upward revised guidance. Our cost remained under control with all in sustaining costs decreased by 4% to 1000 $500 per ounce. This has been a function of higher grades and the weaker South African Rand. 90% of our cost is based in South African rand and remains stable and predictable. We continue to move down the global cost curve and are now in line with many of our global peers. As a result, operating free cash flows with Fy 24 increased by over 100% to a record $681 million at the margin of 22%. Each of our asset groupings are performing well, recording double digit margins. This slide illustrate the fy 24 operating free cash flow margins and production from each of our 44 of our good openings of quadrants. This is important as it illustrates our capital allocation strategy as we target quality answers and diversify into copper. Our balance sheet remains robust and it is a net cash position of 100 and $60 million rolling IBR is around $1 billion and we have approximately $7 million available in cash and and room facilities. While we aim to keep the net debt to ear below, we want, we should push this to 1.5 times for the right opportunity. Responsible stewardship is embedded in our operating model. Our sustainable development strategy aims to reduce risk while maximizing opportunities leaving positive impact through shared value creation. As a result of our actions, we continue to receive positive external recognition for our embedded approach to sustainability and disclosure, transparency mining with purpose is what it's all about by focusing our four strategic P. We have delivered a consistent increase in revenue and earnings over the last three years, our headline earnings per share increased by over 7% in the past eight years. On the back of our acquisitions and investment and quality answers. Our share has also performed very well regarding our shares, rewarding our shares with both capital appreciation and through a dividend. So looking back over the past few quarters, you might be thinking what's more to come, what can harly deliver? Well, we believe that the business is yet to come. As I mentioned earlier, we have a globally significant resource base of close to 100 and 37 million ounces of this couple represent 20%. We have demonstrated that reserve conversion is is still one of the most cost effective ways of creating value. As an example, the Munn Extension added 2.3 million ounces at a cost of just over $100 an ounce. There is therefore a sustain a substantial opportunity to con to continue investing in an existing an exciting gold copper story. Eva copper is expected to underpin further resource conversion. Once the study is complete, our production profile has been significantly decreased. And future production will come from a combination of the South African surface and underground gold and Papua New Guinea copper and gold and Australian copper. OK. Gold and copper have both performed well. We believe that there is a strong outlook for both metals as they are supported by the solid fundamentals. The harmony has a balanced capital allocation framework which focuses on five core areas namely ongoing safety and production optimization. As we aim for zero loss of life, maintaining a strong balance sheet and a net debt epi below the one times which we have done organic and integrating growth with improves the quality of our portfolio and returning capital to shareholders in line with our dividend pardons policy. Though the accusation of MPN and Mob Katong and Mind way solutions were transformative and placing harmony and new trajectory by continuing to invest in these assets. We have extended their lives ensuring key con con ensuring they they continue creating value for many years to come. These assets are highly profitable, high grade and generating significant operating free cash flows. Ok. Air quality, let me just get the right slide. Higher quality ounces and a strong balance sheet places harm in an exceptional position to take our copper gold projects up the value curve. We are updating the feasibility study at Eva Copper in Queensland Australia and expect this to be completed by June 2025. Eva Copper is expected to produce between 50 60,000 tons of copper and 14,000 ounces of gold per annum. Over his 15 year life of mine, this will be over 300,000 ounces in gold equivalent all and sustaining cost is expected to be in the middle of the global cost curve. And we are targeting first copper in fy 28 that Wafi Gopi, we are still negotiating, negotiating and converting the sign framework memorandum of understanding into a mining development contract. And this will be followed by supporting documents for a special mining lease. The update on the fy 2818 visibility study will then commence the tier one WAFI gold copper copper, gold copper project will be a game changer for harmony. Now, this is probably the most important slide as it captures our present and our future continuous investment across all our operations. Will ensure that we not only improve our margins but remain a sustainable 1.4 million producer for decades to come. This production profile illustrates what what is currently owned by harmony and how our production mix is set to evolve. The two pie charts on the right provide a breakdown of how a company will look within 10 years from now. I believe we have now entered the next phase out of an exciting gross story. As we bind out our optimized assets represented by the red section, you will notice the quality of our answers improves driving margins higher over time harmony still has long life production profile with the potential for further life of mine extensions, especially at these higher gold prices. And we are excited about our future, especially our international Copper Gold projects which will create significant value for the shareholders and stakeholders. The previous slide excludes possible acquisitions value, creative acquisitions form part of our strategy as we target growth, we will only pursue those opportunities that meet our strict investment criteria and provide quality of improve the quality of our portfolios. Further expansions would either be through the acquisition of late stage project or preferably through the acquisition of producing assets that is immediately cash flow positive. Any new investment opportunity must be, first of all lower, our overall risk profile, improve our margins, deliver a mini phone returns and extend our production profile with quality answers and of course remain pro profitable throughout the cycle. Yeah, in closing, allow me to share why I believe harmony remain a solid investment and offers a compelling gold copper story. We have a lower risk profile and safety remains our top priority. Eg is embedded in our operational model through clear sustainable development strategy. We continue develop, developing our skills and have an experienced management team with a strong succession pipeline in place. A search for my successor is well under way and I as I will retire at the end of this calendar year. After 45 years in mining operational excellence means our key operational metrics have improved and we are maintaining good momentum, momentum at all our minds, we continue driving better efficiencies through various business improvement initiatives while project execution discipline remains critical. Given our significant pipeline, our production profile is long and diversified and we have a significant gold copper resource base with excellent reserve conversion potential through our new business team. We are continuing identifying growth opportunities that can potentially lower our risk and increase our margins. We are hoping to introduce near term copper through Eva copper project and of course permit the tier one wafi gou copper gold por free and our balance balance sheet is strong and flexible and our capital allocation framework balance our growth aspiration alongside shareholder returns. Thank you for allowing me to share the harmless story with you today. And I think this is a time for questions. Thank you Peter. How long will it take to, to do the feasibility for Wafi gou once you have the the SML? And how much do you think it's going to cost? And are you going to use the same group that did the last feasibility study or are you thinking of bringing in someone new? Yeah, thank you for the question. In our current memorandum of understanding that we have is that we've got 30 months to redo the feasibility study and then also to actually get to final investment decision. obviously, that is not in the, in a signed agreement yet, but that is what we agreed to in the the cost will not be significant, I think because we will have obviously the the previous feasibility study and is updating that we the very thorough one originally and obviously need to be updated. We do have new partners now in in the project with Newmont taking over New Crest and that obviously will have an impact on that. But yes, I think it will be you know, obviously a very, very good project and, and you know, the time frames that we think is doable in terms of the 30 months. Thank you on June 24th in Quebec Agnico Eagle had a 4.1 Richter event at 2900 m or about 9400 ft and no one was hurt they took a day off to check everything and restarted. The second day Valley Inco up to 8000 ft has 3.5 to 4. Victor events without fatalities. Could you describe the seismic conditions common in the wet waters round how severe the Richter events are the degree of supports that are used and the safety performance? I know it's improved a great deal over the last generation. Yeah. Now the obviously we're mining, you know, you know, from media deep to very deep. we operate our deepest operation is about 4000 m deep. We actually over time through the through our work that we've done in terms of extraction ratios. the type of support, we use the steel nets that we introduce in all the working places. Actually the accidents per 10,000 square meters mine is come down dramatically in, in South African mining. the we the kind of events we get is never at that big kind of magnitude that you talk about. Now it is normally much smaller, the bigger ones around around about 2, 2.5. But we obviously have quite a lot of very small ones that we have in, in, in, in that in you know, that happens on a daily basis in the mines. I think we've got a very good handle on, on the improvement. Obviously, the execution in terms of quality of support are very important. We've got a sequential grid mining that we're now doing leaving strike pillars, the pillars also obviously backfilling you know, very high quality backfill and obviously then the steel nets in the working places and that has been very good. So we've been a very good track for seismic event type of accidents. We haven't had one in many quite a number of years. But yeah, so it is it is improving all the time here. Ok, sorry, I've, I've gone to have you just come closer there. Yeah, obviously we currently are are cash positive. So, you know, obviously paying repaying debt has always been our biggest thing to do, returning money to shareholders and obviously, then obviously putting money back into our businesses in terms of ensuring longevity and also improving the quality of our assets. So, so we have a dividend policy which we follow and we've been following it for quite a number of years now. And, and we don't deviate from that. Obviously, it's always up for review by the, you know, on on on a frequent basis by half yearly basis by the board, but we always stick to our dividend policy over time. As harmony at the moment, we believe that Eva Copper is gonna be a fairly big capital intensive project that we have to build in the next number a couple of years starting at the end of this, this financial year that we're in. And yeah, so we believe that we've got enough money in the bank and obviously also future profits that we can and, and facilities to do that. Ok. And then my next question, are there any aspects of your story that you would like to highlight to investors that you feel are underappreciated by the market? Well, we obviously had a massive performance in share a rating in the, since we've bought the Anglo Boer Sha Shanti assets in South Africa we've seen and, and a lot of shareholders believe that, you know, possibly as good as it get. I think, you know, it's actually not because there's a lot of things to come. We only only started with the journey we've been on this journey now for the last nine years or so. And we only started with the journey and in the transformation of our asset base over the next next number of years is gonna be significant especially with the copper that we bring with Eva and, and, and Wafi Gopu comes in play and obviously also the, you know, extending the life of minds of these quality assets and surface operations that we have in South Africa. And with that, I think we're up on time and thank you very much, Peter. Thank you very much


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