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SAFM Market Update: Alec Hogg talks to Graham Briggs


Journalist: Alec Hogg

Harmony Gold quarterly results with Alec Hogg and chief executive Graham Briggs

ALEC HOGG:

South African gold mines have come in for a lot of criticism lately, but the financial results from Harmony today will certainly at least deflect part of that. Good numbers, exceptional numbers, with cash operating profit up 49%. Harmony has managed to hold its costs at the same level. An uptick in the rand gold price led to that sparkling result.

Graham Briggs, the chief executive, joins us now. Graham, you've repeated your dividend. You paid 50c last year, and again 50c. It's a long way from the current share price, of course, and it's a very, very small return - but I guess it is sending a signal.

GRAHAM BRIGS:

Alec, yes, good evening. Yes, it certainly is sending a signal. What we've said all along is that we have the intention of rewarding shareholders and obviously we are bullish on the gold business ad we are bullish on where we are as a company, and therefore we see better things to come. So this is an indication to shareholders that there's actually a good company behind Harmony, and we've got some great assets.

ALEC HOGG:

Shareholders might be a little bit worried, though, when you see that the rand per kilogram gold price is at near-record levels and the gold mines are not able to really pump out those profits. Do you think that there is a possibility that the rand/kg price can still grow substantially from here?

GRAHAM BRIGS:

I think so, Alec. I think when you are talking about generally the South Africa industry - of course we've had increasing cost pressures and certainly the exchange rate year on year - last year we had 9[00 000 rand], this year we've got about 750 [000], so the rand has sort of strengthened quite a lot, and the gold mining industry has had declining grades. We are actually promising better grades in future because we've spent this money on new assets, and they are starting to deliver. So we're very confident of our South African assets producing better in the future. We've managed to show that, despite some of the electricity increases, the royalty this quarter, we managed to hold our costs the same.

ALEC HOGG:

Graham, the important thing about gold miners is the ability to replace the ounces that you mined in a year. You are almost 1.5m ounces a year now - are you being able to find new gold to recover that?

GRAHAM BRIGS:

Alec, our sort of year on year figure is 48m ounces, so last year we had 48m, this year we had 48m, so we've kept that static. That hasn't included any new stuff from PNG, because at Wafi-Golpu we've got probably about 38m ounces of resource there ...

ALEC HOGG:

Just wait a little if you can there. PNG, Papua New Guinea, that is an area of great focus for you - in fact, great success.

GRAHAM BRIGS:

Yes, certainly. We've had great exploration success. And really the resources there - we haven't got as far as getting it into reserves; we've studies to go on before we can get there. But to have in just one single area 38m ounces in a deposit is great news, and we've got a lot of hope for exploration in Papua New Guinea as well.

ALEC HOGG:

Could you put that into terms that South Africans, who understand gold mines here can understand; 38m ounces - how big a gold mine would that be?

GRAHAM BRIGS:

It would be a substantial production unit, hopefully something round about 24m tons of ore per annum, so that's quite a big production. It's considerably bigger than Hidden Valley. It would be producing copper, gold concentrate and probably producing around about 700 000 ounces of gold per annum. That's probably a bit more than double one of our biggest mines.

ALEC HOGG:

Wow! That's big numbers. If you think that you produce about 1.4m in the whole of Harmony's...

GRAHAM BRIGS:

Ja, and of course I'm talking at 100% per year to divide these figures by two to get to Harmony's, but it's still a substantial mile that's got potential there.

ALEC HOGG:

When are you going to make the final decision on whether you go ahead with that mine?

GRAHAM BRIGS:

Well, we are doing the concept study right now. That should be another month or so when we've got that finished, then we'll go through pre-feasibility and in the pre-feasibility we'll look at all the different options of where the infrastructure should be, and the different mining options, and home in on the preferred route. The feasibility studies are probably going to require developing and going underground to actually have a look at the ore body and do some design work. So it's going to be quite a few years before we actually get producing there. In the meantime we will continue with exploration because these deposits are often not a single deposit.

ALEC HOGG:

Graham, just to close off with two issues in the local market that I'd love your comment on: the first of them was we saw the deaths of four illegal miners by Aurora, and its wasn't long ago that we were having a discussion about illegal miners at Harmony.

GRAHAM BRIGS:

Ja.

ALEC HOGG:

What would you have advised the people at Aurora?

GRAHAM BRIGS:

Ah, it's a very different situation I think, Alec. At Aurora it's like they are actually mining in old, abandoned areas, very close to the surface where there's an open pit, so the guys can actually get underground quite easily through the sort of numerous holes to surface, whereas in the Free State, where we had our problem, it's been shafts and it's really been securing shaft heads and making sure there's good security. So a very different situation.

ALEC HOGG:

But you wouldn't be going in shooting them?

GRAHAM BRIGS:

Definitely not, no. That's not the way we do things. We have, as you know, had amnesty periods to try and flush people out and so on. In the Free State we've had food bans and that sort of prevents people from spending long times underground. Certainly adding trigger-happy people to that situation is not easy, because these people can get aggressive. So it's not a good situation.

ALEC HOGG:

And the other point is the claim-jumping that seems to be happening at an increasing rate here in South Africa, where politically connected people seem to be getting exploration licences and sometimes even the mineral rights licences over mines that are currently operating. Have you had any issues there, or is there anything you can do to defend yourself against this?

GRAHAM BRIGS:

It's certainly a concerning situation, Alec, but our mineral rights are fairly simple. We don't have joint ventures or partnerships and so on, and again our mineral commodity just being gold is much simpler. So we've had a good look at the situation and we don't believe we'll have any issues.

ALEC HOGG:

Graham Briggs is chief executive of Harmony Gold.

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Integrated annual report 2016

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Investor brief

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

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