Harmony Gold Mining Company Limited (HMY)

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Harmony Gold Mining Limited (HMY)

Q4 2013 Earnings Call

August 14, 2013 9:00 am ET

Executives

Graham Paul Briggs - Chief Executive Officer, Executive Director, Member of Corporate Social Responsibility Committee and Member of Information Technology Communication Committee

Frank Abbott - Financial Director and Executive Director

Analysts

David Haughton - BMO Capital Markets Canada

Stephanie Barsdorf

Presentation

Operator

Good afternoon, ladies and gentlemen, and welcome to the Harmony Gold Mining Company Limited Fourth Quarter and Financial Fiscal Year in 2013 International Conference. [Operator Instructions] Please also note that this conference is being recorded. I would now like to turn the conference over to Mr. Graham Briggs. Please go ahead, sir.

Graham Paul Briggs

Thank you very much, and welcome, ladies and gentlemen, or good morning, if you're in our time zone or good afternoon in South Africa. This is our quarter 4 for the financial year '13 results. We'll also be talking about the year-end results for financial year '13 and have an outlook for year '14, financial year '14. I'm certainly hoping you've all got the presentation, as per our website. If so, Page 2 should be the Safe Harbor statements. And then we go over to Page 3, which is the agenda.

And I'm going to start talking about strategy and talk about the 3 legs of our strategy: optimizing operational delivery; growth; and sharing rewards, and then I'll conclude. It is a little bit of a longer presentation, so please be aware with -- be with me -- bear with me.

Slide 5 is our strategy. It has not changed much over the past few years, been refined a little bit. The 3 legs today, operational delivery, growth, sharing rewards. And I'm going to take you through each of those areas to display a little bit of where we are and what we intend to do.

Slide 6. Share price is obviously not the greatest on any gold company, but particularly, in South Africa and really dealing with the current gold investment plan is a difficult thing for investors, and as well for us. Investors, obviously, are seeking returns. We are aware that most of our investors are averse to large capital investments, big capital projects and so on. Gold prices, certainly much lower than a year ago and no longer are companies is existing for growth at all cost. And balance sheet is certainly one of the important aspects of a gold-mining company.

Just some information on how we went about preparing our plans, and let's start with Slide 7. We really looked each operation by operation and try to maximize the revenue, obviously setting ourselves a relatively conservative gold price. Grade came up as one of the key things that we should be looking at, and therefore, grade is king the word that we've used there. We need to look at de-bottlenecking of those areas where we can de-bottleneck and get better volumes through, and we believe we've got a good reserve base on all our operations for -- that matches our plans.

We looked at the risks and there are several measures on mitigation of risks that we looked at. And then the reducing of costs, you've heard us last quarter talking about cost reduction. We are sort of resensitizing the whole business as to waste or cost management. We have done some improvements. We'll give you the numbers on services, on corporate costs and also looking at capital. Rationalizing and really improving productivity is what we've been looking at, rationalizing the operational levels to see where we can improve it.

On Slide 8, fairly conservative with respect to our business planning. We have adjusted them for the risks that we see and therefore, they are really aligned to our strategy. We need to do our best to manage the impacts of the external environments. There are many impacts and whether they be legislated, whether they be issues of the local nature, communities around our mines or even the gold price, we need to adapt to those very quickly, and I think we have got to the position where we can.

We need to look at productivity. There's a continuous improvement drive, looking at sort of optimization, investigating some of the technology. We've been very proactive on our health strategy. A few years ago, our whole strategy was simply talking about hospitals and the number of sick people. Now, our shift has moved into the very proactive area of trying to keep people healthy and, therefore, keep them healthy at work. Balance sheets, very good, and we've been looking at operation by operation, the total cost of that operation, not just the cash costs, but the costs including capital and all the allocated costs. Then the -- really balancing how much we should be spending on capital, what exploration we should be spending and so on.

Slide 9, 8 major risks. Labor disputes, and I'm sure I'll be answering some questions a little bit later on labor and the wage negotiations. That's the top risk that we've got here. Safety risks, we've done a huge amount, I will show you a graph on safety. Gold price, naturally, and foreign exchange fluctuations. Certainly, that can affect the business very badly and we've seen major changes in lots of companies around the world in this last release -- half-year quarter releases. Looking at major environmental infrastructure incidents, it certainly affected Phakisa. There's good progress on the ventilation shaft, but it would be -- it should be back in operation by December and so we're geared for that. No matter which country in, socioeconomic or political or regulatory changes can happen and do happen. We need to manage through that and, therefore, we need to stay close to governments, stay close to our communities, and obviously, monitor these things very carefully. Integrating and managing projects, well, we spent a great deal of money here in South Africa on these assets that are busy building up. And that's one of the issues we need to continue to drive. And then looking at acquisition or longer-term ore reserves is also a strategic issue that we need to look at.

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