Graham Paul Briggs - Chief Executive Officer and Executive Director Frank Abbott - Chief Financial Officer, Financial Director and Executive Director

Good day, ladies and gentlemen, and welcome to the Harmony Gold Mining Company Limited Operating and Financial Results for the Third Quarter Financial Year '15 and 9 Months Ended 31 March 2015 Teleconference. [Operator Instructions] Please also note that this conference is being recorded. I would now like to turn the conference over to Graham Briggs. Please go ahead.

Thank you very much, and good morning or good afternoon, depending on where you are, to all the listeners. And it gives me great pleasure in presenting these quarterly results. I'm certainly hoping that you have seen the documentation, the press release, the quarterly booklets as well as the presentation, which I'm going to take you through now. So thank you very much for dialing in. Slide 2 is the Safe Harbor statement. Slide 3, a bit of the agenda to what we're going to discuss. Firstly about what sort of action we've been taking, restructuring for profitability. Frank will take us through the quarterly results, and then I'll conclude by talking about crystallizing value. So if we you go to Slide #5, talking a little bit on the gold environment that we're in. Of course, you're all acutely aware of what's happening to commodity prices, not just gold, but generally in rand terms, of course, our gold price has been fairly static for the last 4 years, somewhere between 430,000 and 460,000 rand a kilogram. At the same time, rapid increase in cost and escalating input costs as I've got here on the page. Wage increases have been substantial, but wage and salaries are more than 50% of our costs. Electricity, of course, is another big issue. Not only are we been exposed to sort of electricity curtailment as it's called in the industry, but there's also higher-than-inflation increases. So in April, we were given a 12.7% increase in labor tariffs. It's certainly expensive, but then the load-shedding certainly takes its toll on our organization, because we have to switch off things and try and reschedule and catch up in other hours. And then there's the issue around policy and regulatory challenges. We can talk a little bit about…

Thank you, Graham. If we turn to Slide 17, we've got our operational results quarter-on-quarter and we'll see that our gold produced for the quarter was 10% lower at 245,000 ounces. We didn't have a very good March quarter with production, and this is largely due to the Christmas break. Our gold price is slightly higher at $1,220 an ounce. Our cash operating cost is very much the same as the previous quarter, and our production profit was in fact, in dollar terms, the same as the previous quarter at $55 million. Our all-in sustaining costs, because of the weakness in the rand, was in fact slightly lower than the previous quarter at $1,258 an ounce. If we page to the extracts from our income statement in dollar terms, and this is Slide 19, and we start at the top with the revenue. We see revenue was lower, we had 13% less gold sold during the quarter. It was slightly offset by a better gold price. Our production cost, fortunately, was lower and that was partially because of the restructuring, where we had savings on consumables and also labor, and it's also partially because of the weaker rand versus the dollar. Our inventory movement, we locked up some gold during the quarter and that had also effect on our production cost. So our production profit was in line with the previous quarter, $55 million. If we move down to the net loss figure, you'll see the net loss for the quarter was $22 million versus $79 million the previous quarter. Fortunately, we already provided for employment termination in the previous quarter and we didn't expense anything during this quarter. That's the $16 million. Where also, the previous quarter had a loss on scrapping of property, plant and equipment of $38 million, which wasn't repeated in this quarter. If we look at our headline loss, we've added back the loss of scrapping, we've had a quarter loss of $22 million, this is $47 million in the previous quarter. If we turn to our cash flow summary, which also extracts from our cash flow, this is the Slide 21 in dollar terms. You see we had $32 million cash flow from operations in this quarter. Our capital expenditure was $60 million. And so the difference between the $32 million and $60 million of about $30 million, our debt was increased from $151 million to $177 million. This is our net debt. So that increase of $26 million, which is really the difference between the cash flow from operations and the capital that we spent during the quarter. Our cash balance is reduced from $190 million to $58 million. You can see we paid back some of our debt during the quarter and the debt reduced with $35 million from $270 million to $235 million. Thank you. Graham?

Thanks a lot, Frank. So on Slide 22, we stack all the assets here. So not just the underground assets, rand per kilogram on the left-hand axis and the bottom in percentages. Bambanani is doing well, and then you can see on the extreme right, Kusasalethu, this is year-to-date figures. Kusasalethu has certainly improved quite dramatically quarter-on-quarter, but the focus is really on that one getting below the line, below the gold price line there. A lot of focus I've spoken about on Doornkop and Hidden Valley and Masimong, and I've spoken a little bit about Phakisa. So I'll try to deal with all the -- all the ones above the gold price line. It's the same figure, of course, whether it's on Slide 22 or 23, simply the gold price there. And here, we're not talking -- sorry, we're not talking all-in sustaining costs. We're using cash operating and capital. So just takes away sort of, I don't know, the ZAR 15,000 a kilogram or so from that. If we look at the crystallizing value, and this is really getting into the conclusion now, we have a section, again, which you've seen before, on Slide 24 -- or 25, sorry, of Golpu. It still remains a spectacular orebody. Stage 1 is in the process of a feasibility study. We have to start earthworks in September of this year. We're making good progress on the negotiation with the government for some pre-mine development. So that's still on schedule. Stage 2 is going to prefeasibility. So that, again, should be done by the end of the year, in line with our plans. It's a fantastic orebody. It deserves to be built. It's one of those orebodies in mines that when built will withstand all sorts of low commodity prices. Slide 26,…

[Operator Instructions]

Well, it sounds like we haven't got any questions.

No. I think your presentation was quite firm.

Okay. Let me quickly sum up and say, ladies and gents, we had quite a difficult quarter, but at the same time, we've made some progress with the restructuring. We're still going to continue with that during this quarter until there's a real emphasis on operations achieving their business plans. Thank you very much. If there are any questions, which you want to send through, please send it to us.

Sorry, Mr. Briggs? Sorry to interrupt. We do have a question from Business Day, are you willing to take it?

Yes, I can take it.

Graham, Allan. Sorry about that. Do you have any idea when you could conclude the work on the strategic study into Golpu? Do you have a time by which you have to present that work to the board?

Allan, thanks. Yes, so Golpu in the sort of near term has fairly small financial requirements. As the shareholders will know and the market knows, the first couple of years was sort of fairly small financial commitments. And after that, it starts becoming bigger. The financial commitment continues up to 2020, fast forward, further 5 years. So whatever the solution is, we need to think of a longer-term solution for it, and also be able to fund that period. So this is not just going out for a bank loan, which typically only has a 3-year sort of life. So we certainly got time on our side and we're in the position now where I think it is right for us to actually talk about these things while we study the various options. We haven't landed on any option yet, but we've got a bit of time on our side still to be able to do something like this.

So no decision for 1 year or 2 then?

No, it will be sooner than that, I would say. [indiscernible] would be probably within the next 12 months, we'd have to land on some sort of plan going forward.

There are no questions left.

Okay. Well, thank you very much, ladies and gentlemen. I hope you have a great day.

On behalf of Harmony Gold Mining Company, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.