Earnings Labs

Harmony Gold Mining Company Limited (HMY)

Q4 2015 Earnings Call· Tue, Aug 18, 2015

$15.63

-5.07%

Key Takeaways · AI generated
AI summary not yet generated for this transcript. Generation in progress for older transcripts; check back soon, or browse the full transcript below.

Same-Day

+1.00%

1 Week

-8.67%

1 Month

-20.12%

vs S&P

-13.20%

Transcript

Operator

Operator

Good day, ladies and gentlemen, and welcome to the Harmony Gold Mining Company Limited Fourth Quarter and Full Year Results for the Year Ended June 30, 2015, for the International Conference Call. [Operator Instructions] Please also note that this call is being recorded. I would now like to turn the conference over to Mr. Graham Briggs. Please go ahead, sir.

Graham Briggs

Analyst

Thank you very much, and good afternoon or good morning, depending on where you are, to the conference call. It's my pleasure to present the fourth quarter for 2015 and also the year ended results and also, give you a bit of insight into the future and where we are taking Harmony, so that we will do during the call. With me are Frank and Herman and Mashego and the awesome IR ladies, who've done a great job today. So I'll be taking you through the results, and I'll hand over to Frank for the financials. I'm hoping that you've all got the presentation, and slide 2, of course, is the Safe Harbor statement. At the moment, it's still dated June 30, 2014. We're busy with our annual report and 20-F and the like, so that comes out in the next few months and you'll be able to see a change in date there. On the agenda, I'll talk about our strategy, our operations, financial results, the financial year '16 guidance, talk about replacing ounces, and then I will conclude, and then we'll go into questions. Slide 5, on our strategy is quite simple. Our focus has to be on improving margins, and that is by producing safe and profitable ounces, with the emphasis this year certainly on those two items, safety and profitability, generate cash flow, repay some of our debts. Golpu is a key to our future. We are now busy in the feasibility study for stage one, the pre-feasibility for stage two, and we are negotiating with the government on a predevelopment agreement. You'll have seen that we've got - we've advanced some environmental studies, but it is key to our future. So it is very - although I don't talk about it in this presentation, it's…

Frank Abbott

Analyst

Thank you, Graham. If we page over to slide 14, this is the extract from our income statement, quarter-on-quarter, in US dollars. We've got the first column is the June quarter, compared to the March quarter. Our revenue for the quarter was 10% more than the previous quarter, and that was largely due to we sold 12% more gold during the quarter, and as Graham mentioned earlier, we produced more gold also during the quarter. Our production cost increased by the cash operating cost by 5%. This is mainly due to electricity increases, consumable increases and maintenance at Hidden Valley. We also had a negative inventory movement of $10 million, and that's because we sold more gold during the quarter than we produced. So our production profit also T2 [ph] compares with the $55 million in the previous quarter. Amort, $52 million, the same as the previous quarter, and then we have the impairment of assets of $287 million. The largest portion of this is at Hidden Valley. I've got a separate slide to explain that, and then also Doornkop. Our loss on scrapping of property, plant and equipment, $5 million. We have a credit to taxation of $47 million, and most of this credit is due to the fact that our deferred tax - tax rights changed, reduced, on our life of mine plans, as we used lower commodity prices in our life-of-mine models. So we posted a loss of $261 million. If we add back our impairments and other adjustments of $277 million, we actually had a headline earnings of $16 million for the quarter. Just when we look at the impairment of assets, the $287 million, we used the average exchange rate for the quarter of 12.08 to calculate that. When we look at the annual income…

Graham Briggs

Analyst

Thanks a lot, Frank. I'd like to go to slide 20, and talking a little bit about our planning process. We believe we've got some realistic plans on the table right now and again, we're going to focus on safe production ounces. The planning assumptions we've used here in South Africa, at ZAR 450,000 a kilogram. I believe today's gold price and exchange rate translates into about ZAR 463,000 or so. We've identified certainly all those risks and those issues that we've had problems with in the last year, tried to remove all those bottlenecks, look at optimizing development, equipping, ledging, and of course, most of our capital in the growth capital scenario has been spent. We've done some right sizing on our operations. Bambanani is certainly going to be the biggest cash contributor, and the growth in ounces is really coming from those three operations, Kusasalethu, Tshepong and Phakisa. Just to talk a little bit on those assets, Kusasalethu, a big jump in the grade production there. It's due to us taking out the waste and really focusing on the higher grade lower mine resulting from that restructuring. There's going to be some further reductions in electricity costs in the future. So those are the sort of issues that are key to getting the Kusasalethu plant to work. On Tshepong, Tshepong has had a good year in financial year 2015. It had one quarter which was a bit of slippage. But certainly, the focus on the sub 66 decline is really what's driving the improvement, and some good teams on that mine and very productive teams. Phakisa, if you look at the back of the quarterly booklet, you'll see the production results for the development, and they've really been achieving a development target which will go well to build…

Graham Briggs

Analyst

I guess, thank you very much, everybody, for listening to the presentation. If there are any questions, please don't hesitate to send an email to Marian or Henrika , and they will gladly either organize a conference call or try and answer the question or get me to answer the question. And so thank you very much for listening to the call, and I hope you all have a great day.

Operator

Operator

Thank you very much, sir. Ladies and gentlemen, on behalf of Harmony Gold Mining Company Limited, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.