Peter Steenkamp - Chief Executive Officer Frank Abbott - Financial Director

Good day, ladies and gentlemen, and welcome to the Harmony Gold Mining Company Limited Second Quarter for the Financial Year 2016 and Six Months Ended December 31, 2015 Results Conference. [Operator Instructions] Please also note that this call is being recorded. I would now like to turn the conference over to Chief Executive Officer, Mr. Peter Steenkamp. Please go ahead, sir.

Good afternoon, ladies and gentlemen. And I've got with me, I've got Frank Abbott, our CFO and a team of financial people and I've also got Marian van der Walt and her team of Investor Relations and I've also Mashego Mashego, who's an Executive Director of Harmony Gold. We're going to talk off the presentation that I think you all should have. So I'm pretty sure, we're going to start on the 1st Slide and if you look at the agenda. We're going to talk about growing our margins. Frank will take us through the financial results. We also then look at creating the future value through exploration and some conclusion remarks that I would like to make at the end of the presentation. So if we first, we move onto to the growing margins, which is on Slide 4. I think, we're very pleased to announce that we actually ticked all the boxes. Grade improved by 7%. Our production on the back of a very good quarter and the previous quarter, we actually improved further 2%. So we're very proud of that. Our All-in sustaining costs is been down with 7%. Production profit up by 84%. Headline earnings of R74 million and net debt reduced and all-in sustainable cost margin is 17%. Just talking about delivering the results. First of all, I think our restructuring that we started sometime ago is now paid off. We keep in focus on what we can control, which is the safety production and grade. Higher Rand per kilogram gold prices simply a bonus for Harmony. If you look the results quarter-on-quarter. Our safety parameters improved, we're still working to zero harm in that 100% day, but we are working towards that. With a 7% increase in our underground recovered grade, 2% increase in…

Thank you, Peter. I'd like you to turn to Slide 18. This is the extract from our income statement quarter-on-quarter in US Dollars. The first column is the December quarter and then we've got the September quarter. If we look at the revenue line. Our revenue was $321 million, not a big difference from last quarter. Although, our gold sold was 3%, the Dollar gold price is 2% lower and it had a very small difference in the total revenue figure. However, when we look at cash operating cost and off $226 million and that was substantially lower than the September quarter. Now a portion of that was because of the lower electricity cost in the December quarter, we do not buy the winter tariffs. But in the balance of it, the biggest portion of it was because of the exchange rate. As the Rand weakened against the Dollar. The amount that we convert back into Dollar is much smaller, so our costs have reduced in Dollar terms. If you look at the production profit, our production profit was $91 million. It was 68% more than the previous quarter. Amortization and depreciation very much in line. The exploration expenditure went up slightly. This is because of the second [indiscernible] and Kili Teke. Our foreign exchange translation loss $26 million, this is because of the weakening of the Rand against the Dollar. But during the quarter we started buying back our Dollar loan [ph] and currently it's looking at $200 million. End of last quarter it was $250 million. We had taxation of $4 million and we had a profit of $5 million. Thank you. If we - page over to Slide number 20. We done is slight [ph] here, to indicate the reduction in net debt quarter-on-quarter in US Dollars…

Thanks, Frank. The next-- I just want to cover some of the issues, some of the things that we have in terms of future in our exploration. The slide that we have there on the heading. It's actually, we're on Papua New Guinea and that is a lady geologist in Papua New Guinea, that took me through this coal and - was a very exciting trip for me because it's really a world-class exploration team that we have there. We move onto Slide 22, I think this is what we the Kili Teke reserve we actually announced in November. We believe, we are at the right address and even in the right geological setting. The Maiden and further resource on Kili Teke has been declared and it is 128 million tons, at 0.4% copper and a 0.3 grams per ton gold. On a gold equivalent basis this equates about 4 million ounces of gold. The resource in shell [ph] that's been cut off at 0.5% copper and the remains open at further development and you can see in that area, both to the north and the south of the resource. There is still opportunities to find more and also obviously big [ph]. The extra drilling, we added extra drill rig into the resource. We're actually trying to firm the results. It is very difficult terrain and in that area and we have been able to, the second drill is probably the best if we can do. And we believe it's probably around about two years of the drilling program ahead of us. We continue to see good results and we're very excited [indiscernible] that is concerned. And we may move to the next slide, which is the Golpu study that we're currently under final review. The feasibility study of Golpu…

Thank you, very much sir. [Operator Instructions] our first question is from David [indiscernible] from Deutsche Bank. Please go ahead.

Yes, welcome aboard, Pete. I guess, one thing if you really look at South African producers and you highlighted it slightly. Could you tell us, how many shifts you actually work during the December quarter and how that compared to September and what's your budgeting for the March quarter?

I can't offer, but I'll give you that information, there's Marian [indiscernible] in terms of how many shifts we have, but we obviously we've planned accordingly. So that's why our guidance is in line with where we want to because we know, that we're going to have in January quarter we're going to have late shifts because obviously we know, what plans we're going to have Republic Holidays and long weekends in advance. We always know that in the first quarter, we liked. Easter weekend and we also have the Christmas part. It got the biggest impacting in that period. I don't [indiscernible] know precisely how many shifts we have on that [indiscernible] number of shifts, but we'll get it to you, David.

Okay, thanks and I just - going through the headlines this morning. I haven't been through your results in detail. I see some commentary that you're looking for acquisitions. I mean, given the, I guess the tenuous state of the South African asset base. I'm a bit surprised to see that headline out after one quarter profits. Can you just explain where that might be, where that came in, what context?

I think, Frank was quite out of context, that day [ph]. Somebody asking, if you're interested we have no plan at this point in time to find any. We don't have nothing on the table, as far as acquisition is concerned. We obviously with the free cash flow. Our first focus is to, pay our debt, that is our first focus. Obviously and at the end of the year, we have to certainly considered dividend, if there is a dividend available and we will consider that. If the [indiscernible] east, it's obviously a good chance of that. But we're not in the moment looking for any or actively pursuing any acquisition. What we - our plan is still the same. We're focusing on what we can get in terms of making free cash flow and see if we can fund our Papa New Guinea project, which is in the pipeline going forward.

Just one last follow-up question. So the intention is to have a balance sheet that can finance and follow the P&G project.

That is the intention, yes.

Okay, thanks. Best of luck.

Thank you, David.

Thank you very much. [Operator Instructions]. Sir, it appears that we have no further questions. If you have any closing comments.

No. Thank you everybody for being on the call. We certainly appreciate that and we obviously are very proud of our results in the last quarter and we hope to see that going forward. Thank you very much.

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 and you may now disconnect your lines.