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Classic FM Classic Business: Interview with Graham Briggs


Publication: Classic FM
Journalist: John Fraser

Listen to the Classic FM Classic Business broadcast

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John Fraser: Harmony is now the third of the big mining companies to bring out quarterly results following Gold Fields and DRDGold and their results for the third quarter as they call it or the nine months to 31 March 2009 show headline earnings up by 5%. There is a bit of a decline in production of 3% and 2% increase in cash operating costs and once again the safety challenges are graphic with three fatalities. To talk about how they are doing and how things are looking going forward we are delighted to welcome to Classic Business, the CEO of Harmony, Graham Briggs.

What I didn’t say in that introduction is that you are pretty financially sound and that presumably is something that is the culminating of quite a lot of strategising at work?

Graham Briggs: Yes we are in excellent financial position – money in the bank – we can pay all our debts and still have R1.6. billion left over and it goes back. There has been a lot of hard work. This goes back eighteen months or so. A lot of planning that went around that. This is party time to celebrate that achievement. We really believe we shouldn’t be running our company on debt. If we have a great project that needs investment – maybe we need to look at project finance but we believe that the company should be in a sound position and it is. After working costs, after capital we still have money to spare. We are putting money in the bank so we’ve got good cash flow.

John Fraser: And of course Harmony remains completely un-hedged.

Graham Briggs: Yes completely un-hedged and that’s the way our shareholders want it. They buy that fluctuation in the gold price. They buy us in the morning and sell us two days later if they believe they have got a nice ride out of gold price. We’ve got enough issues to worry about without that but that’s what our shareholders insist on.

John Fraser: Presumably at some stage your shareholders would like a dividend?

Graham Briggs: We have some shareholders that certainly would like dividends. We have a large number of trades a day – about six million shares of Harmony trade everyday so liquidity is very high but we have some key shareholders which would appreciate dividends and it is something that we have got on the cards and it won’t happen during this financial year but we have certainly got on the cards for next year.

John Fraser: Looking at these quarterly results – a 3% decline in total gold production and a 2% increase in cash operating costs. The two things are heading in the wrong direction aren’t they?

Graham Briggs: Yes the gold production down a little bit because of the thing we do have in this country of Christmas. It is quite extensive – ten to twelve days in most companies and it does affect production and because of the lower production, the cost is slightly higher because there are some fixed costs and you can see that there is some variation in that – otherwise costs should have gone up by 3% or 4%. So we have managed to keep control of our costs – so the costs went up marginally.

John Fraser: Last night we were chatting to some CEOs who were worried about the number of holidays that there had been in the month of April not just the one day for the elections but a lot of other weekends, a lot of short weeks. Looking forward, is that going to be a factor in the current quarter?

Graham Briggs: In this country we have a large number of public holidays and unfortunately when we have them on a Friday then it’s a long weekend and there are all those issues around it. It is not good for business and I think if you look at business in general in South Africa it is not good for business. Maybe for the retail people because they keep their shops open but it’s not good for us. April was a difficult month because of the holidays and then the election added to that just a bit more than we really wanted. It’s problematic.

John Fraser: At one stage Harmony was going very intensively into what you call con-ops or continuous operations which meant producing 24 hours a day, seven days a week. You seemed to have retreated from that strategy?

Graham Briggs: Yes we have. Con-ops on paper work very well but it does also rely on getting agreements for holidays worked and so on. So it wouldn’t have taken the holiday out of the equation but it did take for instance, Saturdays and Sundays out of the equation but the financials in con-ops in Harmony weren’t working and that’s why we ceased it.

John Fraser: Just returning to safety which it is something I am sure you worry about a lot 24/7. Just tell us how you are doing on that. I see you did report three deaths.

Graham Briggs: Yes – three deaths in the quarter – we would like to have zero deaths. A lot of our graphs are going in the right direction but then again April was not a good quarter for us as well. So it’s something we are struggling with. Something we are working hard at. We are spending a lot of money, changing people’s attitude, doing a lot of training – really it is as you said – No. 1 focus. I spend a lot of time worrying about safety and our teams are getting there. In essence we are getting a lot right in the face. In the most dangerous places in the mine we are getting things right. Elsewhere we haven’t got quite there yet.

John Fraser: Now you are primarily a South African miner but you are moving into production into Papua New Guinea of all places. Tell us about that project.

Graham Briggs: it’s going well - a lot of action there in the last while. Really the build of that mine is going well. It’s like a giant Meccano set and I see photographs of things getting put together. Production should be the middle of this year towards the end of June into the end of July. Probably ramping up through the commissioning, full production probably somewhere around October month and our equity value there will be about 130 000 ounces this year. So it’s looking good and P&G is magic – it’s got lots of potential and we have got other projects there as well.

John Fraser: And finally the gold price – where is it going?

Graham Briggs: The gold price is going to go up of course. I am a bull and a gold miner. With all that is happening in the world, I don’t think the gold price is going to go up magically to $1500 an ounce but I think $900 is a fairly good price. I don’t see it going down. You can go down to maybe $850 for a short while but it is going to come back to $900 and it may in fact creep up. That’s my view but guess everyone has got their view and maybe I am wrong but we are bullish on it.

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