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Harmony 2011 Investors Day: Graham Briggs - CEO, Harmony Gold


Publication: Money Web
Source: Money Web

Harmony expects double-digit production growth next year.

ALEC HOGG: Graham Briggs has had  a busy day. He’s the chief executive of Harmony, telling investors what's going on in the company – your strategy, your exploration, your operations, and maybe you can just tell us what's going on in Papua New Guinea, Graham. There were reports that the indigenisation process is gathering momentum there. David and I discussed it the other evening. Unfortunately we ran out of time. We apologise for not bringing you on that night. It seems like a storm in a  teacup to us, but what’s the real story?

GRAHAM BRIGGS: I agree with your commentary the other night, Alec. You sort of hit it on the head. I think there’s a lot of this sort of talk that happens with a new government – and this is effectively the opposition party. The prime minister was in office. There’s a bit of rules and regulations, so the opposition basically has got control of the government. It's not an elected party – and we are heading for elections next year. So there’s a lot of politics around this. The state actually owns the mineral rights, much like they do here in South Africa, and this was sort of comments by the mining minister, Byron Chan, to get more of those mineral rights in the landowners – remember there’s traditional landowners in Papua New Guinea; they won about 95% of the land – into their hands because obviously they will want to partake. But if you look at the history, certainly the history of Harmony operating in Papua New Guinea since basically 2002, we've taken very much cognisance of the local landowners, of the community. We have employment numbers which show local employment. We have women in mining, which really in Papua New Guinea’s history hasn’t been a big issue at all. So we are actually incorporating the local landowners in a lot of what we do. I guess one could see this as a bit of electioneering, getting the future votes if you like. I don’t think the individual actually necessarily has support from his cabinet. But Papua New Guinea is very pro-mining – 80% of the exports are mining, mainly copper and gold, and certainly I don’t think that Papua New Guinea and government is going to so anything to damage that relationship. This is not about nationalisation at all.

ALEC HOGG: It hit your share price. I remember the Friday evening your share price was down 5%, and we were scratching our heads and wondering why. Do you have a partner, though, in PNG? What happened to the share price of Newcrest?

GRAHAM BRIGGS: Well, I believe their share price went down $1. Then, because the gold price was going up, it went up $2. The net effect was up a little bit on the day, so it didn’t affect theirs. Now they should have been affected more than us in that situation, because not only do they have 50% of the joint venture, which is Wafi Golpu and also Hidden Valley, but they also operate Lihir Mine, which they acquired last year. So they have, potentially, I don’t know, somewhere between 30 and 50% of their value in Papua New Guinea, yet it didn’t affect them.

ALEC HOGG: So it could just have been a South African overreaction.

GRAHAM BRIGGS: I think it was a lot of South African – and remember that Harmony is a fairly well-traded share. During the last months we've been trading roughly $50m a day in Harmony shares. So certainly the brokers are making a bit of money out of Harmony. It's a well-traded share and I guess if there was a big fellow on that day, then that’s the reaction that would happen.

ALEC HOGG: Well, not as well traded as it was, because David Shapiro is a shareholder. Are you still holding on to yours, David?

DAVID SHAPIRO: I'm out of gold a long time ago.

ALEC HOGG: Well, there you go. Graham, now you know the share price is really going to start running. It was interesting going through your presentation that you gave to shareholders today to see that the South African shareholding is still very high in the company, 39%, whereas one might have thought, being a gold stock, it would have been even more internationally held.

GRAHAM BRIGGS: Ja, I think we have some big core shareholders in South Africa. One of course is ARM, African Rainbow Minerals. They own nearly 15% of us. We have the PIC, which is the Public Investment Corporation – they are a big shareholder. And we've got quite a few big funds.

ALEC HOGG: Allan Gray was big. Are they still?

GRAHAM BRIGGS: Allan Gray are still there. They are still big shareholders of ours, ja. So we've got some big funds that hold shares in Harmony. I don’t think it's really traded very much as a retail stock in South Africa, so it's really in the big funds.

ALEC HOGG: They would have been really delighted, no doubt, to hear your production forecast today. That’s what pepped the wires up – between 11% and 19% next year from an already large base. Those are big numbers.

GRAHAM BRIGGS: Alec, we've been working hard on really transforming the whole company, spending a lot of capital in the last few years on developing these assets, and they are really on the cusp of producing more. So they are ramping up in production, and that’s really what our focus has been on South Africa. So we've got some really good assts going forward in South Africa. All the older, tired, low-grade assets have really been closed down and we've been focusing on these newer assets. So it's really good news going forward.

ALEC HOGG: Was that the thrust of the message that you gave investors today?

GRAHAM BRIGGS: Ja, that was the thrust. There are several things. One is that the company is really quite transformed. It used to be known as a sort of a high-cost, low-grade marginal type of operation with short life. The lives of our mines are very much longer now, we've got much better grade coming out of our operations, and then we are more diversified. We used to be only in South Africa, and now, if you look at on an equivalent gold-resource basis, we've got 21% of our resources actually in Papua New Guinea. So we are becoming more diversified.

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