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SAfm Market Update: Interview with Graham Briggs

Publication: MoneyWeb
Journalist: Felicity Duncan

Listen to the SAfm Market Update broadcast


Felicity Duncan: Harmony Gold reported its results for the quarter ended in March today, and the group said earnings per share were down 26%, but that's because of the sale of some operations that were included in last quarter's numbers. If you exclude that, the group grew after-tax profits by 120%. Harmony CEO Graham Briggs joins us now. Graham, gold production was down 3.4% this quarter - why is that?

Graham Briggs: Mainly because of the Christmas break. The Christmas break is a little bit difficult in the mining industry. January is problematic - everyone is getting back to work. But there is a substantial break there, and it affects production.

Felicity Duncan: So for the full year you are still looking on target?

Graham Briggs: Well, we are going to be slightly down on the full year from our prediction. We said 1.6m ounces; we'll be down on that. But this coming quarter will be better.

Felicity Duncan: Looking at your results, one of the possibly most interesting things was that you are now debt-free.

Graham Briggs: Debt-free - what a position to be in! Actually there is money in the bank.

Felicity Duncan: We all wish we were in that position.

Graham Briggs: Ja, I'm starting an advisory service - so when you go out of here... [Laughs]

Felicity Duncan: Tell us how you got to that position.

Graham Briggs: Well, it took quite a while. This was 18-months-plus in the planning. We decided that the company shouldn't have debt, a gold mining company is not something that should have debt unless it's got a particular project to build, and so 18 months ago when we had debt of round about R5bn we said we want to get debt-free - and today we have about R1.6bn positive.

Felicity Duncan: Nice to have that in the bank. What are you going to do with it?

Graham Briggs: Well, we don't have to spend it. We can keep it in the bank. No, we've got a lot of projects, a lot of growth potential, nothing that we've released yet. But that doesn't mean to say that we have to spend it just because we've got money in the bank. And that's a question a lot of people ask - they seem to think that it's going to burn a hole in our pocket. We are going to be very careful with our money.

Felicity Duncan: I like to hear that. Looking at the position that you are in now, with regard to the gold price, you are unhedged, it's a very straightforward operation, and so any increase in the gold price drops right down to the bottom line. Now, what do you anticipate gold price-wise [to be] for, say, the next quarter?

Graham Briggs: Well, the quarter we are in is probably going to be round about R250 000/kg, but we have a sort of prediction going forward, which is probably plus 900. We don't see gold dropping. It is not a commodity any more, it's an investment. ETFs, central banks are collecting. I mean, there's a lot of financial instruments around gold. At the same time, production is going down in the world, so that is a big thing on the supply side, certainly. Going forward there isn't that much supply, and mine costs are going up everywhere. So we see good potential for gold. Our shareholders want us to be unhedged.

Felicity Duncan: Right, that would make sense. They want to benefit of course as much as they can. Looking at your goal target of 2.2m ounces by 2012, where are the extra ounces going to come from? You are currently just under 1.6.

Graham Briggs: Yes. Mostly from operations which have been spending a lot of capital - Phakisa, Tshepong is about the same, but Doornkop is going to grow, Elandsrand is going to grow. So we've got some core assets which are going to continue like Tshepong, but we've got others which will grow in the future. The other big one that's coming on stream mid this year is Hidden Valley in Papua New Guinea, so that's also adding to it.

Felicity Duncan: You have some interest in that one. What exactly is the size of the reserve there? When do you plan to start producing?

Graham Briggs: The reserve is about 2.8m ounces, and its is 4.2m-ton-per-annum plant. We think there's a bit of upside on that. The resource is over 5m ounces, however, so there's going to be quite a few challenges on increasing that and increasing the throughput. And it's got potential, for sure, to increase that.

Annual report

Integrated annual report 2016
Integrated annual report 2017


Investor brief

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

(PDF - 6.5MB)

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