Good morning, everybody, and welcome to our results presentation for the six months ending December 2018. A special word of welcome to André and Fikile, two of our nonexecutive directors. Thank you for joining us here today, always wonderful to have you with us. Presenting with me today is, we're going to have a full team. And obviously, it's normally myself and Frank Abbott, but we now decided that we also include some other people. So Mashego from Executive Director and Corporate Affairs; on the right-hand side, Boipelo, is the CFO; and on my left-hand side, I've got the 2 Chief Operating Officers of South Africa, Beyers Nel from Africa and then obviously also Phillip Tobias that look after the new business. Unfortunately, Johannes cannot be here today. He is tied up in quite some important negotiations with the government of Papua New Guinea. So he is not here today, but we'll try and field all the questions as far as the operations in Papua New Guinea is concerned. Just please take note of our safe harbor statement. If one look at the half year, I think the full big achievements for the half year is, first of all, our LTI frequency rate. We had a very big improvement in our LTI rate on the back half of all the work we've done so far as far as safety is concerned. Since I've joined Harmony, we had a total different approach as far as safety is concerned, and we're now starting to seeing the fruits of that. Then the 34% increase in production boosted by the Moab Khotsong and also the Hidden Valley figures, which is now in our numbers at the moment. 7% increase in underground recovered grade compared to the previous half year, the comparative half year and…

Good morning, ladies and gentlemen. Just to take you through, obviously, our project management processes, normally you do get this questions about CapEx and all that. So some of the key considerations, areas that we look at whenever we have to make decisions in terms of taking a project forward or maybe curtailing some, we look at, number one, the lowest risk profile. What we want to see. I mean, obviously, we want to see our portfolio derisked. If we have to make a decision between a surface and an underground-based project and the returns are almost similar, we'll most probably go for the surface related, like your high margins and low risk. Those are some of the considerations that we take into account. Safety, obviously, is our value. We do basically take a safety-based view in our approach. And then a lot of questions have been asked about the pillar mining, especially with the Great Noligwa as well. We do follow a very prudent pillar review process and at the end, make sure that it's going to deliver safe profitable ounces. The second aspect is improving margins. Our ore replacement and also our growth projects, basically, it's all about quality. Peter has already mentioned, I mean, going forward, we'd like to move down the cost cave and that will be at the back of good quality project that will be advanced, so that we can continue to migrate into the right cost quartile. The other aspect is generation of returns. I mean, our internal hedge rate that our project need to basically meet is in IRR of at least 15%. If a project is below that, we're not basically taking it forward. So that really already tells you the prudent capital allocation and discipline that we employ in our…

Thank you very much, Phillip. Good morning, ladies and gentlemen. Operational excellence is core to generating free cash flow. And in operations, our operating model is basically nested on the 5 pillars. Firstly, safety and health. Peter mentioned the risk-based safety approach and really the focus on critical controls, and we are encouraged by our best-ever lagging indicator, lost time injury frequency rate performance towards the end of the year as we will not be satisfied until we stopped fatalities and stopped significant unwanted events. Secondly, infrastructure management. Again, happy to report that we continue to make very good progress in asset management and maintenance, and we continue to see good performances on infrastructure issues. And to really -- and from three years ago in Harmony, infrastructure interruptions are really no longer an issue in Harmony. Third pillar, grade and flexibility management. Obviously, very important for us to continue to increase our grade, to have a very disciplined grade management effort with no mining below cut-off and to continue to build flexibility into our plans. Capital allocation. This is really a discipline issue and making sure that capital allocation are done on priorities. And then, of course, cost management is key for us and cost management also in a sense of looking at productivity improvement. Generating free cash flow. If you look at our operation, you could see Moab Khotsong on the far left of the side, which proves the merits of the investment strategy and so also Hidden Valley, the third one then, you can look at the individual mines and how they contributed. And of course, on the far right, you have Tshepong, which I'll talk about in the slide to come. And also Joel, which is on the far right with 137 level decline extension project development…

Thank you, Beyers. If we look at Slide 28, this is the extract from our income statement. In the first column, we've got the past six months of our first half of our 2019 year compared to the comparative period ending December 2017 that was the first half of our financial year 2018. If we look at the production profit, we see that, that increased substantially with 25% and that came from Hidden Valley 900 million and also from Moab operations 900 million. Our South African operations, because of Joel and Tshepong had lower production and our profits reduced. If we look at the next column, we've got amortization and depreciation. We see that increased almost 900 million, and the biggest reason for that is Hidden Valley. Now that Hidden Valley is in commercial production, we are depreciating the book value of it and also the capital we spend on the stepping of Stage 5. So that was ZAR900 million. So we had an increase of almost 900 million in depreciation. Our foreign currency impact was affected by the weaker exchange site at the end of December compared to the previous December. And this resulted in our guidance on derivatives being lower than it was the previous period and also translation loss on our U.S. credit facilities of 180 million. So if you look at the total of foreign currency impact, it was 160 million negative versus 530 million positive in the previous period, which gave us a 690 million swing. And I think that explains why our net profit is lower. Although we had much stronger production profits and, in fact, stronger cash flows, because of the amortization and depreciation charge being higher by 900 million and also because of the change in exchange rate at the end of…

Looking forward, I think, just before I continue, I'd just like to also welcome Mr. Mashego. Thanks for joining us, also one of our nonexecutive directors, came a little bit later. Before we go, I just wanted to talk about our value-creating scorecard. A lot of talk was made at the mining about both the Minister and also by the President in terms of our social license to mine in the areas that we operate. And I just would like to maybe highlight a few things that we're doing as Harmony to ensure that we have a proper value creation in the areas that we operate. First of all, we are on faster inclusive growth and really trying to advance local businesses in our communities, and we've created quite a lot of brand-new businesses in our communities. We spend a lot of time in terms of developing and also getting joint ventures going with local business people and also our current business. And from our beneficiation perspective, Harmony, obviously, do have refinery as part of it's refinery process, but we also have the Virginia Jewellery School that operates since December 200 -- 2000, and that jewelry school actually manufactured jewelry that is sold in [Vulcan], but also here in Sandton and then also at the waterfront in Cape Town. The jewelry school is actually there to develop young people to be goldsmiths and then also make -- manufacture jewelry in a very, very successful process that we're running there. On education, skills and training and development, the Harmony bridging school is running since 1996. I think it's probably one of the things that we're very proud of, where we really take people from areas that is underdeveloped, school kids that don't have bright schooling, putting sort of bridging schools and…

It's Adrian Hammond from Standard Bank. Couple of questions just to kick-off. Firstly, how do you see the deployment of your free cash now? And can you touch on dividends going forward? And then following on with your CapEx outlook for Golpu for this remainder of FY '19 and FY '20, please?

Frank, can you take that?

Sure. Yes, thank you. Yes, so I think the first question is on dividends. I mean, as a company, our policy is, we do want to pay a dividend, and we look at our cash flows, our debt levels, the flexibility on our balance sheet in making that decision. So going forward, we would be looking at it, and we do look at it on the six monthly basis. We just, right now, as I mentioned when we looked at capital allocation, our priority one is to repay our debt to pay to reduce our debt. And we believe that, that will give us the flexibility. We went through enormous growth in the last two years through the molding of Hidden Valley and also through the acquisition of Moab. And that's why it's important to pay for the debt first before we consider a dividend.

And just on the CapEx for Golpu.

Yes. So the CapEx on Golpu. The capital expenditure, and I can't recall the capital expenditure for next two years, but it's not that high. And we believe that we can fund that from our cash flows. And we believe that we can fund that from our cash flows. And during that period, often we have got the permitting, and we are sure about all the terms that we believe that we'll be able to come up with the right funding with our advisers and banks.

Okay. Are you happy with the liquidity headroom you have at the moment?

Yes.

And just on capital allocation, you touched on IRRs of 15%. What's the gold price you've assumed for that?

So the gold price that we use is -- we normally work from the current market price or gold price current? So it's not that we have a long-term view on gold price. We always work from the current prices when we calculate that. And in rand terms, we would work on -- we've been working on ZAR550,000 per kilogram.

So I'm just -- okay, so I just need to ask then on Hidden Valley because I'm not seeing these sorts of returns. You've got a production profit of 933 million and depreciation of 915 million before any corporate costs or taxes. So how do you rationalize that investment decision?

Yes, I mean, if you look at it, let's just go to that. Okay, so the first thing is because of the high capital expenditure over that period, we say it's pretax, but it's also post tax. We will not be paying any tax on that at Hidden Valley. And you can see that we are making -- when I look at this year, it's like ZAR4.4 billion after repaying the investment and our IRR was in the 20%, yes.

On your corporate costs, went up 20% year-on-year, 388 million, which is quite a large portion of your operating free cash, 1.1 billion. Why has it gone up? And are you looking -- are there -- is there scope to bring it down?

Yes, the reason for our increase in corporate cost was really that we've moved some of the employees from the operations to corporate in -- when we sort of restructured it, we've got an ex co team -- operational team, which is now classified as corporate. And that really resulted in the increase between the previous year and this year.

So what's the normalized figure, please?

No, that is the normal number. René Hochreiter: René Hochreiter from NOAH Capital. Just on your 5.85 grams a tonne, is that the average grade over your reserve? Or is that what you can get to with quality mining?

Beyers, would you like to answer on that?

Yes, I think Jaco is also in the audience. Jaco, if you want to take it? The question was the 5.5 grams a tonne, is that the average reserve grade...

I think 5.85.

5.85, sorry. Or is that where you can get your quality mining?

If you look at the reserve grade of Harmony, with the incorporation of Moab Khotsong, that's at 5.65 grams per tonne. So there is a period where we will see a bit higher grade because of some of the mild upgrade operations mining in the next 2, 3 years.

And what is significantly why the grade is also we, as always, we have the philosophy of not mixing waste and reef. And one of the things we had at Moab was that we had -- reef and waste was mixed during the reporting period. We -- and then all of that, we actually put all the systems in place to separate the waste and reef. And so Moab, going from 1st of February, will now be on reef slowly and then waste will be hoisted separately. So that will, obviously, create tick up in the grade. René Hochreiter: Just the Hidden Valley pre-feasibility study, how much life will that add to...

We think, René, about three years of extra life. Depends -- all depends on the tailings facility that we have and can we expand that. That is the constraint, the tailings facility. We have a tailings dam that has got a like a restrictive amount of capacity. If we can find a way of actually doing it more, then we can actually make the life another seven years in total. But we believe the tailings facility is going to be the restricting factor. René Hochreiter: Just on Wafi-Golpu, if you get permission in June this year, so the first year of production will be June, well, 2024.

Yes. It's about a five year lead time to build the mine, of which the first few years are actually just the sinking of the declines, not -- and the building, obviously, of the roads and infrastructure. But the main intent to start building the plant here, too, sir.

It's Patrick Mann from Bank of America Merrill Lynch. You guys showed some slides around the improving quality of the portfolio, and what the all-in sustaining costs and production would have been ex Hidden Valley and Moab, but what that sort of highlighted as well is that, that part of the business isn't really generating any value at this point, I mean, almost ZAR 570,000 all-in sustaining cost rand per kilogram. So how should we think about that part of the business? I mean, I know that Joel has got declines and Tshepong has got a kind of turnaround plan. But it looks at the moment like the rest of the business is carrying the old Harmony. Is there a way to extract value from that? Or is it just about managing these old mines into their closure?

Yes. Thank you, Patrick. Getting back to, I mean, this I'll call the old South African operations without Moab, I mean, Joel is going to -- will generate good cash for another seven years after the decline is finished. We are on track and on time to get a decline now running. So within a year or two from now, it will -- or a year from now, we will start seeing good profits out of Joel. So that will be -- sort of that is actually one of our star performers in the past, and it will continue to -- going forward, it will be one of our star performances. The one that is must -- Unisel mine, we are in this process of mining the shaft pillar. We make good cash out of that. We're harvesting it now, mining the shaft pillar, only mining Basal, and we will mine it out in a year from now. And Masimong is the one that we still don't have a full handle on. We had some very, very good performances from Masimong. Of late, we had a fire in one of the B Reef stopes, which actually, we would like to get back into. If we can't find decent B Reef grades, then Masimong has got a very limited life. But we don't want to pull the plug in it before we actually try to find the right place for it. So Masimong, what we believe is, we're going to get back into those areas that was affected by the fire, it will be great. So Tshepong has got it's own turnaround plan. And the other operations are really about -- all of them is really in the harvesting mode. I mean, Kusasalethu has got a five-year life. We said last year that five year life, could add another five year life of high grade. And Kusasalethu had a very, very good performance in the last six months, so we're quite happy with the performance that we're seeing there. Even though it was impacted by two fatalities, which -- you still had a fairly good performance. So basically, South African operations are really -- every one of those operations has got a plan to either make it decent margins or to actually harvest it and mine it out.

Leon from Nedbank. Looking at mining, and you say excellent mining creates free cash flows, and I'm absolutely with you there. I just want to understand how it is that you don't know from one quarter to the next that you're running out of flexibility on Tshepong. It doesn't make any sense to me. If you're planning your mining correctly, how do you suddenly discover that you haven't got enough development in place? And then just on what Patrick was asking, then you plot your grade profile against our cost profile, it's sort of the same profile. So it's fantastic to see the grade going up, but you're not really getting the good benefit that you should be getting from that increasing grade because you're cost is consistently falling then higher. Is there any chance of getting this cost profile lower, especially now that you say we've had a hiccup at Tshepong, the costs are now guided higher. But can we guide those costs lower again when we fix up Tshepong and some of these other things?

Peter, I can take the Tshepong development one. It's not quite that you -- on development, figure out in a month or two that you've got a problem. So in the previous reporting period, the realities of Tshepong operations depleted faster than we generated. So we're well aware of the problem, and we were investing effort and time to get the development performance of the mine up and to get that to improve. Now I can say now the development performance at the mine is restored. I mean, the development performance looks good. But as you know, in a development where you got to develop today doesn't give you five things tomorrow. There's obviously a lead time to that. So I mean, Tshepong shot the lights out in the previous reporting period, made a lot of money. And it was basically a big part of being responsible for paying back the debt at the time when we started three years ago. So yes, I mean, Tshepong is disappointing for us. I mean, we didn't want to be in that situation. But I mean, I can say that the development performance is back on track. We did have management issues there. I think you remember, regional general manager. We've got new management in place there. There's really an energy about the mine to get it right. So people have not given up. It's a long-life asset. It's a quality mine. Combining Phakisa and Tshepong is still important for us. And if you look at the two mines individually, the Tshepong mine is actually performing well. It's actually the Phakisa mine where we've got flexibility issues. The northern side of Phakisa is, obviously, the higher-grade part of the mine. So I think we understand where the issue is and working round the clock basically to get that right. On the cost guidance, Peter, I can also take that. If you would have just normalized the Tshepong performance a little bit closer to where it was in the past, there wouldn't have been a unit cost problem on our all-in sustaining cost level. So on the rand side, there's always more that we can do. And, as Harmony, I think we've proven that on the cost side, we're always fit and lean, and we will always do more. But I think we can also fix it on getting the production right from Tshepong. So that's really where the focus is, to get the costs down.

Can costs come down?

Yes. I would like to see that we actually see one year when the costs come down. I remember the previous year, we had a kind of a 2% increase in cost, which is all-in sustaining cost, which was no mean feat if you think about the cost pressures that we do have. I mean, we, obviously, went through a cycle now where we did the three year wage deal with organized labor as part of it. And we probably would have liked to get a little bit of a better deal out of it. But the kind of industrial peace that we had with that, and at the end of the day we sat down with close to 6%, which is more or less the CPI in terms of where you are, a little bit higher than CPI. But we have the three year deal, so we have a long-term industrial stability. And you can see, if you don't do it properly, you can easily get into trouble. And we've paid much less than some of our peers and then slightly more than some of our peers, too. But we believe that we had a fair and just system. Remember, we, in previous years, always greeted with a lot of poverty and eventually, it got to the point that we couldn't -- and we certainly couldn't use that argument this time around because we had quite a turnaround in our performance. So overall, our people are not paid higher than other companies, so talk of individual basis. But we certainly had to do a little bit of an adjustment during the course of the last bit and get this through this now three years of, I think, a fairly good deal for us. But yes, we would like to see the cost coming down. And it's all about the -- I mean, there's not a lot of things we can do at Harmony to bring the overall cost down. I mean, we don't spend money on stuff that we shouldn't be spending the money on. What we can do is to really try and get our volume improvement. And even though we had at Tshepong disappointment improvement, we are still above target with the rest of our operations because they did better than what we thought they would have done.

It's Yatish from Macquarie. Sorry, just to continue on the cost wagon there. You -- like you said, you battered down your largest cost component, which is wages; and secondly, is Eskom, which is looming on the horizon. From a perspective of harm, what sort of costs increase could Harmony absorb comfortably, say, if Eskom where to go 5 -- between 5% and 7%, would that imply a massive rethink around your strategy and planning? And then just secondly, you've seen a lot of your peers around you restructure potentially close shafts on. Have you seen any potential synergies with any peers in either region that you're currently mining in where you could potentially be a saving grace?

If you look at Eskom, first, I mean, obviously, that's a concern. I mean, we're worried about the Eskom. We're worried about those inflation increases and this so-called 30% and three times in a row, that will kill many of our high cost. Our biggest operations that runs on high electricity costs are Kusasalethu. That will certainly put Kusasalethu under big scrutiny if we can still mine then and mine there. We, obviously, have to increase our cutoffs. The will make the mine smaller and shorter, and see if it's at all viable to do that. Our other operations is, obviously, Moab Khotsong, but that's obviously a big-margin mine, which is a very big electricity consumer. And then Tshepong operations just because of the sheer size of it, is also quite a big consumer of electricity. But certainly, that will change cutoffs. It will change life of mines. It will change the -- have an impact on jobs if Eskom continues with this above -- or very high increases. The other part of your question, Yatish?

Sorry, synergies with potentially other -- with your peers in the regions that you're mining.

Yes, we're on the outlook for something that we can possibly do with -- that make sense. At this point in time, we're not looking at anything with any of one of our peers. We believe that Moab was a very good transaction for us. If we can do another transaction like that, we would be very happy to do that. The -- so yes, I mean, at the moment, like I said, there's no real talk of -- between different -- of wanting to do some sort of facility between the different mines.

Again, maybe just to add on what Peter is saying. Obviously, that's why we're talking about looking also on your derisking of your portfolio. We're looking at the retailings. I mean, if you look at Slide 43, you'll see that the Central Plant reclamation that we're talking about is operating as less than ZAR 400,000 a kilo. So obviously, there's an opportunity with the Mispah, and there's an opportunity with the Central Plant expansion. We said we're drilling and exploring Kalgold, so that's where you'll come in and basically balance your portfolio. So we need to increase those type of opportunities, low risk, high margin so that we can balance off our all-in sustaining costs.

Sorry, last question here. I wasn't quite happy with your answer on Eskom. Eskom is really a serious -- not a short-term issue, a long-term issue. So just to sit back and wait for them to put up their prices and kill the industry doesn't seem to be the way to go. So my first question is, what is the industry doing about it? And looking at -- and that's, all right. And the second question I've got is, I'm not sure that the focus of Harmony is great. You got this mix of assets from legacy to really great prospects in the future. And I think you're bogged down in the old and legacy assets and, therefore, you're constrained in terms of cash flow. Shouldn't you be much more aggressive and focus on something like Wafi-Golpu and list the asset and raise the money and get on with it and not put the asset at risk -- the rest of the group at risk? Because maybe it's just too big for Harmony and too risky in its current format? And also, you've got a lot of other potential. You've got Target North, which could well turn out to be something quite good. Shouldn't you rather focus on these things with a different corporate structure so you guys can keep going?

Thank you. Just on -- first of all on Eskom, we have not set an alarm and just wait for Eskom. We have drastically reduced our consumption in electricity. We talk about the consumption on demand processes we're running now, control systems that currently actually in terms of compressors and in terms of fans and all other kind of things. So there's a huge reduction in terms of our consumption as far as concerned. What we have not done is that to try and generate something on our own. We've started with a process to try and generate -- which we're still working on the project, to generate from one of -- some of these old areas that we now are virtually rehabilitating to create crops that we can in actual effect do buy energy from that. But it's small. It's not big. I mean, it's not the biggest scheme of things. You cannot run big mines without Eskom. But as far as consumption is concerned, we've had a dramatic reduction in the group. Electricity was cheap in the past. We could pilot them, do the things that probably other countries have been doing. But we have a quite a big team working on the reduction. And Beyers, can you report the consumption reductions at time really. Well, maybe you'll sort of remember?

No. I think, Mel, you can go.

I think you can actually hear myself. Thank you, everyone. Peter, we reduced year-on-year by 10% of our electricity consumption really driven through the energy efficiency program that's been run. Coupled to the energy efficiency we're also looking at energy mix. In fact, we've just gone out on procurement for a 30-megawatt solar in Welkom. And once we've got the licensing in place to run this, we'll be able to decide whether or not we progress it.

On the other corporate development, I think the way we are as a company is that we take it a step at a time. We, first of all, want to see what Wafi-Golpu brings. Before that, we cannot make any funding plan or corporate activity whatever. So we have to sit down and actually get the SML in our hands. If we get the SML in our hands, we need to sit down as Harmony and say, okay, how are we going to fund it? How are we going to be part of it? What structure should it -- actually Wafi-Golpu be part of it, et cetera? But not having the SML in their hands is -- so I think it's premature to make that decision. The holding cost of Wafi-Golpu and the development cost of the first to -- we don't have to make the decision also on the first year. We can make it at the right time, at the right place, and we can take our time and make sure that we have the right decision as far as Wafi-Golpu. What we want to do is ensure that our shareholders get the maximum value out of Wafi-Golpu going forward. Whatever structure we're going to be at the end of the day, there's so many different things that we can do with it. But certainly, our first step is get the SML. Get it done, get our 40-year mining license for Wafi-Golpu. And we know what the regime is, we know what the tax regime is so that we can actually have something in our hands that we can now take somewhat forward. At the moment, it's all speculation still. What is equity participation? What is the taxes that we're going to pay and then we'll see. So we have to take that first steps. Now I know people get impatient with us making because we're not making that next step, but it was important that we take it step-by-step.

How optimistic are you that, that [indiscernible].

Really good, really good, very optimistic. Like I said, we signed an MoU. The terms of the MoU we're quite happy with. We're not sure if that terms is going to be the final SML. We think it will be. We are optimistic that it will be the same. And if that's the case, we are quite happy with the outcome.

So Arnold Van Graan, Nedbank. Looking at reinvestment, and a question for Phillip. Given all the risk that we've discussed surrounding underground mining, do you apply a much higher discount rate when you're looking at underground opportunities versus surface? So you say, you're looking at least 15% return for a project. So let's say, 15% on dump retreatment. What level would you apply? What discount rate would you apply for something like Zaaiplaats, which is exposed to all of these challenges that we've discussed earlier? Can you give us an indication of how you look at this? And how you try and balance the risk with potential. Can you give us an indication of how you look at this? And how you try and balance the risk with potential returns coming out of these assets?

Thank you very much, Arnold. Obviously, the first thing is to look at your -- of volume potential, as you are well aware, and then look at the different mining method, what could be the optimized method. Our IRR is a minimum of 15%, but as you mentioned in terms of the mining deeper, our electricity cost will be higher. I mean, your efficiencies, traveling distances, those would be higher. So we have seen that in that regard, we'll have to really look at it on its merit and make sure that we incorporate some of these things. But for now in terms of the first run, I mean, they must meet the 15% IRR.

But the discount rate is fairly high. So would one of you also...

So yes, I think that bankers like to just increase the discount rate that they think is best. This is not what we do. What we would do is we've actually got a chance that cash flows to be conservative depending on what the circumstances are. So we have much more certainty on the surface treatment plant on our future costs and revenue then we would have underground. So what we do is we will be -- take more conservative views of our costs and production targets than we would with a surface operation. So that's where we get the change, that we use the same discount factor. René Hochreiter: Just one more question. Sorry, just following on Wafi-Golpu and John's question. You're obviously getting a better than 15% IRR on Golpu. What gold and copper price did you use to get that?

Oh, sorry. The -- our internal rate of return is 18.2%, and that's based on a $3 a pound copper price and a $1,250 gold price dollar pounds.

Okay. Marian say that we must now start wrapping up. But -- so but we are still available here if you've anymore questions and more things that you would like to ask us. And I thank you very much for being here this morning. I'm glad to see that we had such a good turnout. It shows just a little bit of interest now in Harmony that -- I'd say my first time that I've came here, a lot more interest now. We got exciting stuff coming our way. Hopefully, we will give you a lot more clarity as we continue through the next few months and then rest of this year. Thank you very much for joining us.