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Summit TV speaks to Graham Briggs chief executive of Harmony about their third quarter

Watch the Summit TV broadcast on summit.co.za

Heather D'Alton: "Welcome to Face to Face. Harmony released their third quarter results on Friday not meeting expectations with headline earnings per share up 1.7% to 123 cents where the markets forecast 141 cents. Graham, perhaps the highlight - although not beating market forecasts - was that you’re now debt free?"

Graham Briggs: "Excellent. That’s something we had been working on for some time now - it’s taken us about 18 months and a lot of hard work and planning around that - but being debt free at the end of the quarter, and April as we stand here we will have zero debt and some money in the bank. It’s a great place to be"

Heather D'Alton: "Let’s look in a moment at what you intend to do with that money that’s in the bank - one of the downsides for your results was production down around 3% - what happened there?"

Graham Briggs: "Production is down. Really it’s a slow start-up after Christmas - January is not a good time in the mining industry as it takes a while to get going. Really that’s the main issue there - the slow start-up after the Christmas break..."

Heather D'Alton: "I suppose with April being full of holidays that’s not really going to help the coming quarter?"

Graham Briggs: "Yes, April was a difficult quarter - but it would be better. At least there wasn’t the long stop of January so it doesn’t quite take so long but the holidays are certainly a little bit of a curse for us."

Heather D'Alton: "That money you now have in the bank - what do you intend doing with that?"

Graham Briggs: "We are in no hurry to spend it quickly - but we have got a lot of good projects within Harmony. That’s something we haven’t released or done anything about - we’ve been progressing some of them, but we haven’t committed to expenditure on those. We have been looking around the world - in September 2008 we thought this may be a good opportunity to look at possible acquisitions - but in reality there isn’t much out there. Although we have looked there isn’t really much out there to acquire. Looking to where we are possibly growing now it’s probably going to be the assets we have - the potential opportunities that we have in South Africa for organic growth. In Papua New Guinea there’s good exploration there - lots of potential at Wafi-Golpu. Those are the regions where we’ve currently got operations that we will probably grow"

Heather D'Alton: "There is talk also of a dividend potentially down the line?"

Graham Briggs: "Yes, that’s certainly something we’ve put on the targets - it’s something that the board has to decide on the policy. We haven’t been paying dividends for more than four years now. A lot really depends on our shareholders - we’ve got different shareholders and some of them like dividends, and some of them don’t. Some of them want to see growth. We’ve been testing the feeling of shareholders out there. Certainly some of our shareholders deserve a dividend for their loyal support over the last few years."

Heather D'Alton: "When would you hope potentially then to start paying a dividend?"

Graham Briggs: "Certainly not before the end of our Financial year in June - but certainly in the next financial year."

Heather D'Alton: "Obviously your balance sheet is looking a lot stronger than it has in the past analyst suggesting that might be more to do with the fact that you’re disposing of assets - which might not be as sustainable as one would hope for - what would you say to those analysts?"

Graham Briggs: "We did a whole lot of things together - we rolled out a whole lot of programmes one of which was disposal of 60% of Randfontein, 50% of the PNG assets - so we did those and reduced our capital expenditure, and we also restructured our operations. If you look at our costs right now the operations pay their capital - so not only their ongoing costs, their capital costs and the total costs of growth capital as well. Our total costs including all the capital is something around R225,000 to R230,000 a kilogram - with the gold price at the moment somewhere around R250,000 we have got money to spare after that so we are actually paying for everything on our current production. We have been selling assets - it’s true to that extent - but we had to get the company into a better position. We had almost R5billion worth of debt less than two years ago - we’ve wiped that off and now have R1.6billion in the bank."

Heather D'Alton: "Looking at your share price it’s underperformed in comparison to the gold mining sector - you’re down about 9% on the year, the gold sector is up around 10% or so - how do you intend to turn that around?"

Graham Briggs: "We can’t manage the share price. We have to perform - we need to perform consistently, we need to do what the market expects us to with respect to results. The other thing is that we are a high cost producer therefore the volatility in the share price at Harmony is very big - if people think that the gold price is going to go up then there’s obviously a lot of leverage in the Harmony share price. If people think that the gold price going to go down then our share price is certainly the first to be affected"

Heather D'Alton: "What do you think is going to happen to the gold price over the next six months or so?"

Graham Briggs: "With everything that’s been happening in the world - with everyone printing money - there is good potential for the gold price certainly to stay above $900. Going down below $850 I think is extremely unlikely - so we are bullish on the upside $900 to $950 and that’s the sort of range where we would peg it."

Annual report

Integrated annual report 2016
Integrated annual report 2016

(HTML & PDFs)

Investor brief

Harmony Investor brief, Sep 2017
September 2017 -
Harmony Investor brief

(PDF - 6.5MB)

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