Harmony Gold Mining Company Limited

Good morning, my name is Peter Steenkamp, I'm the CEO of Harmony, and it's a pleasure to be here today presenting the half-year results for the six months ended the 31st of December 2022, 23, 22. Okay, I'll just take note of our safe harbour statement. I would like to start with a brief introduction about Harmony and where we operate. Harmony is a 1.4 to 1.5 million ounce specialist gold producer with a growing copper footprint. We are South Africa's largest gold producer by volume with a diversified portfolio of operating assets and projects around South Africa, Papua New Guinea and Australia. These include nine underground mines, two open pit mines and various tailings retreatment operations. our projects present a substantial opportunity as we continue on our growth journey. Various early-stage exploration and advanced-stage projects offer near-term conversion potential, as seen with the Tier 1 Wafi-Golpi project and our recent Eva Copper project acquisition in Australia. Harmony has been operating as an emerging market gold mining specialist for over 72 years. We therefore understand the importance of sustainable mining. With close to 14 million ounces in reserves, Omni's operating model ensures the minerals we extract are converted into shared value for all our stakeholders. To ensure continued positive returns, we directed capital, major capital, towards lower risk and higher margins assets and projects. We have grouped our operations into four business areas, which are our optimized South African underground portfolio, These mines are optimized for cash generation, which will allow Harmony to pursue and fund key projects. Our high-grade South African underground assets, Moab, Katsong, and Mpuneng, and our high-margin South African surface and surface retreatment operations, and a growing international portfolio, which includes Hidden Valley and various other copper gold projects in Papua New Guinea, and the Riesli EVA copper in Australia. To our four strategic pillars of responsible stewardship, operational excellence, cash certainty, and effective capital allocation, Harmony will continue to create shared value for years to come. Harmony has its roots in deep-level South African gold mining. Our every acquisition of Wafi Gold Pool project in 2004 introduced copper to the Harmony story. The value of gold is well documented, dating back over 5,000 years as a store of value and form of currency. While gold remains core to Harmony, the transition to a green economy is a tailwind for copper, presenting good opportunities given our portfolio mix. Consumers tend to be metal blind, not always aware of the prevalence of metals such as copper and gold in production that they use each day. So investing in harmony is indeed investing in the future. 35% of our mineral reserves is now copper. There are two key copper projects, Eva Copper in Australia and Wafi Gold Pool in Papua New Guinea. These projects offer counter-cyclical diversification to our existing gold portfolio and position Harmony as an emerging copper player. Only 26% of our reserves is SI underground mining. The remaining 74% of our reserves are split between SI surface gold, PNG copper and gold, and Australian copper and gold. This illustrates how we have diversified and reduced our portfolio over the last few years. The key highlights for the first half of this financial year include the following. From a safety perspective, we have delivered improvement on both our last time injury frequency rate and our loss of life injury frequency rate. Group loss time injury frequency rate improved to 5.38 from the 5.74. The loss of life injury frequency rate also improved to 0.06 from the 0.13 per million hours worked. As we continue to decarbonize, the first 30 megawatts of renewable solar energy will come online in the fourth quarter of this financial year. Good underground recovered grades drove production in the first half. And operationally, we have had fantastic performances, specifically from Penang, Sepong, Tjepong South in particular, Joel and Massimong. This helped drive the 33% increase in operating free cash flow from our South African underground operations. We have therefore kept our FY23 production cost and grade guidance unchanged. Our derivative program continues to ensure cash certainty and currently stands at a net positive value of $503 million. We have maintained balance sheet flexibility and I'm pleased to report an 18% increase in headline earnings per share to 293 South African cents or 17 US cents per share for the reporting period. From a capital perspective, the Cyplus deepening project and the career on tailings extension in South Africa are now underway. The conclusion of EVA copper acquisition was a major milestone for Harmony in our pursuit of near-term copper. Safety is our number one priority and we continue to strive towards zero harm. We believe that zero harm is indeed possible. Now, 2016 was a landmark year for Harmony. It marked the beginning of our transformation from a reactive to a proactive safety organization. So Harmony has a risk foresight that proactively identifies the risk to prevent them before they occur. Risk management was identified as the best suited vehicle to drive a proactive safety culture. Now, this approach requires us to identify risks, assess the impact, and develop golden controls to mitigate those risks. Our focus was on identified leading indicators that could potentially result in significant unwanted events. Digitization and modernization provided us with real-time and granular data enabling us to take proactive decisions on risk. Now, the implementation of industry-leading best practices has further transformed our workplaces to reduce and eliminate risk. An example of this is incorporation of the International Council of Mining and Metals, ICMM, loss of life prevention guidelines into our risk management strategy. Having established the systems needed to advance the safety strategy, it is critical to ensure that the culture of that safety is embedded throughout Harmony. This is being done through our Tibakotsi Humanistic Culture Transformation Program, and the word Tibakotsi means preventing incidents, And through this program, we conduct training and continuously engage our employees through visible field leadership and safety days. Now, this proactive approach to safety is yielding positive results. South African operations LTI rate improved to 5.65 from a 5.99. Now, this was the fifth consecutive quarter that our LTI rate was below six, which is quite a milestone for us. Harmony achieved its second consecutive loss of life free in January, and here to date we are loss of life free. We are deeply saddened to report that three of our colleagues have lost their lives in a mine-related incident in the first half of the financial year. We pay our respect, send our heartland condolences to those families and loved ones. Our ultimate goal is to eliminate loss of life and to ensure our employees return home to their families each and every day. From a health perspective, we continue to monitor and manage occupational health-related illnesses through our well-equipped medical hubs. And we also extend care and support in non-occupational health-related illnesses to all our employees. And that also includes things like mental health. Now, true sustainability cannot be achieved by simply saying the right things. It has to be translated to actions and results. This is exactly what we do at Harmony. Sustainability is therefore embedded in all we do, and our culture encourages leadership excellence. All aspects of E, S and G are factored into our decision-making process, ensuring we always conduct ethical and transparent mining practices. This is demonstrated in how we care for our people and our consideration for their natural surroundings and environment. An integrated, risk-based approach to mining means Harmony will always mine responsibly, keeping the interests of all our stakeholders at heart. Our corporate culture promotes and encourages diversity throughout harmony, evident in our inclusion in the Bloomberg Gender Equality Index for the fifth consecutive year. We are measured against key performance indicators linked to ESG performance. Our commitment to responsible stewardship has resulted in improvements in our ratings at key external rating agencies. Creating positive change is about doing the right thing every day. This is what we do at Harmony, and that is what we call mining with purpose. I will now hand over to our group chief operating officer, Bayer Snell, to discuss the operating performance.

Thank you, Peter. The interim results were boosted by a strong second quarter performance from most of our operations in harmony. All production metrics improved from quarter one to quarter two in the financial year 2023. There are a few quarterly numbers worth noting before I move to the half-year figures. Firstly, there was a 13% increase in the underground recovered grade to 6g per tonne from 5.4g per tonne. This was mainly driven by our high-grade assets, Moab Kutsong and Mpuneng. Secondly, we have managed to reduce all-in-sustaining costs by 4% in the second quarter, despite the various cost pressures. As a result, operating free cash flow increased by 27% quarter-on-quarter. Year-on-year gold production was down 5%, mainly due to the closure of Bambanani at the end of the financial year 2022. But adjusting for Bambanani's contribution in the comparable period, production was largely flat. Underground recovered grades again increased by 5% to 5.7 grams per tonne from 5.4 grams per tonne. And all in sustaining costs increased by 11%, mainly due to inflationary increases in consumables, the ongoing project at Target 1 and lower mining grades at Kasasaletu. But despite the increase, we kept the all-in sustaining costs below the annual guide at R900,000 a kilogram. Capital expenditure increased by 15% to R3.6 billion as we progress our major projects, including the career-round tailings extension and Zyplard's deepening projects. Despite all-in costs, which include major capital expenditure increasing by 13% to R932,000 a kilogram, we still generated R1.9 billion in operating free cash flow. The strong operating free cash flows were driven by our South African underground operations in the first half of this financial year. Our high-grade mines contributed 29% to the total group production and R1 billion, or 54%, to the group operating free cash flow. Our optimized underground portfolio contributed 46% to group production and 815 million or 42% to group operating free cash flow. As expected in this period, the margins at our South African surface and international operations were low due to capital projects that are underway. These operations have significant upside potential once we complete the career round extension and the waste stripping at Hidden Valley Mine. Moving on to the South African optimized operations. This portfolio generates roughly 46% of our total production and consists largely of our older assets. These underground mines are cash generative and highly leveraged to the rand gold prices. The cash generation of these assets means that they play a critical role in funding our growth aspirations. Operating free cash flow increased by 96% to R815 million, and average recovered grades on these mines increased by 10% in this half. All-in sustaining costs on those increased by 8% to R914,000 a kilogram, mainly as a result of the ongoing project at Target 1 and the lower stated grades at Kasasa Letu. The disaggregation of Tupung operations has delivered as we had planned. Both Tupung North and Tupung South delivered strong operational performances and positive operating free cash flow. Joel is performing very well post the completion of the decline project and margins are beginning to normalize. The target one optimization project has been delayed due to some operational challenges, but is nearing completion. And after moving the infrastructure closer to the mining block at target, we expect volumes to increase and costs to improve significantly. This project is planned to be completed by the end of the financial year. At Kasasa Letu, recovered grades were impacted by higher than planned depletion in the high-grade areas in the previous period. And at current planning parameters, we expect these operations to deliver operating free cash flow margins of approximately 19% over life of mine. Our high-grade assets consist of Mpening and Mopkotsong. These two large, high-grade mines have excellent margins, transforming the Harmony portfolio. We expect these operations to deliver up to a 25% operating free cash flow margin over life of mine. As planned, production was flat year on year on these mines, operating free cash flow from these operations increased by 7% to just over R1 billion. We had a very strong performance from Mpuneng with recovered grade, improving by 6% to nearly 8 grams per tonne in the first half. And it's also worth highlighting that second quarter grades at Mpuneng increased by 20% to 8.7 grams per tonne, whilst the all-in sustaining costs increased by 7% to R814,000 a kilogram. Due to the high grades, these mines continue to offer excellent operating free cash flow margins. At Moukotsong, the major Zyplats project development is well underway. This is one of our key projects and extends the life of mine to 22 years. Once completed, Zyplats would further lower the oil and sustaining costs over life of mine due to the high reserve grades of approximately 9 grams per tonne. At Mpuneng, pre-feasibility studies are progressing well to determine whether we can convert the 24 million resource ounces into reserve. And further feasibility studies to mine the Savuka and Tautona shaft pillars are also underway. Harmony surface source operations remain high margin and low risk assets with strong future cash flows. As planned, operating free cash flow decreased due to the major capital deployed at Mineway Solutions for the extension of the career round project. In financial year 25, a quarter of mine waste solutions production will no longer be subject to the streaming agreement with Franco Nevada and will be sold at spot gold prices. This will substantially increase revenue from mine waste solutions each year. Surface source production decreased by 12%, mainly due to the depletion of waste rock dumps. and all-in-sustaining costs thus increased by 25% to just over R800,000 a kilogram, mainly because of inflation increases in the price of reagents. Combined operating free cash flow margins of our SA surface operations are expected to normalise at approximately 24% over life of mine. In addition, studies to determine the feasibility of extracting over 5 million ounces in mineral resources from old free-state tailings dams are progressing well. Lastly, let's touch on our international portfolio. Production from Hidden Valley Mine increased by 6% to 1,983 kilograms, while all-in-sustaining costs increased by 10%. These high oil and sustaining costs resulted in a negative operating free cash flow of R68 million in the first half of the financial year. The primary driver behind the high oil and sustaining costs were the ongoing waste stripping as we accessed the high-grade areas at Big Red and Cavaroy and an increase in diesel consumption as a result of on-site power generation. This was due to the prolonged drought in PNG. which negatively affected hydroelectricity grid supply. We do, however, expect operating free cash flow margin to normalize between 30% to 40% over life of mine. In line with our growth strategy, we're pleased that we concluded the acquisition of Eva Copper in Australia in December last year. The update of the feasibility study is underway, and we expect to have this completed before the end of the calendar year. We've also made progress on Wafi Goldpu regarding the potential terms of a mining development contract, which is required for a special mining lease. The parties are working to align on a range of fiscal and non-fiscal matters, and active engagement continues towards finalising the detailed terms of the mining development contract. I will now hand over to our Financial Director, Boepela Lekubu, to discuss the financial performance in the first half of this financial year. Thank you.

Thank you, Bayers and Peter, and good morning to all. Please note that all U.S. dollar figures are included in the annexures. Harmony reported a strong financial performance in the first half of the financial year 2023. Revenue increased by 6% to 23.3 billion rand from 22 billion rand and headline earnings per share increased by 18% to 293 SA cents. EBITDA decreased by 12% to 8.1 billion from 9.3 billion rand. Due to the major capital projects, there was a 14% decrease in group operating free cash flow to 1.9 billion from 2.3 billion rand. This was expected as we invest in quality ounces and higher margins. However, this figure was boosted by good recovered grades and the higher average gold price received. The acquisition of Eva Copper, which costs US$170 million or R3 billion, was funded using available facilities. This resulted in net debt increasing to R4.7 billion from R757 million. Net debt to EBITDA is still at comfortable levels below one times and well within our covenant thresholds. Net free cash flow declined 73% to R338 million from R1.3 billion, mainly as a result of the Bambinani closure, the Tsepong North restructuring and mergers and acquisition costs attributable to Eva Copper. Harmony's dividend policy is to pay a return of 20% of net free cash generated to shareholders at the discretion of the Board of Directors. As Harmony invests in margin expansion, life of mine extension and various other growth opportunities, it is prudent to maintain a strong balance sheet and good liquidity. A decision has therefore been taken to not pay an interim dividend for this reporting period. Cash operating costs in the first half of the financial year 2023 increased by only 6% to R17 billion from R16 billion in the comparable reporting period. This increase is below inflation and importantly below 8% used in our planning parameters. The closure of Bambanani reduced annual cash operating costs by R612 million. Total labour costs, which represents 42% of cash operating costs, increased by only 3% in this half compared to the comparable reporting period. This was mainly due to a reduction in the number of employees who left Harmony, either voluntarily or for medical reasons. Consumables, which represent 27% of cash operating costs, increased by 26%. This increase was driven mainly by diesel at Hidden Valley and other inflationary increases such as reagents. All other cost increases were in line with our inflationary forecasts. Addressing energy security has been an increasingly important focus area for all companies operating in South Africa. Our energy efficiency program has resulted in over 1.4 billion rand in cost savings since 2016. We are looking at further optimizations, especially at our newly acquired assets. We've been able to make use of excess capacity to ensure limited impact on production during load curtailment. This includes making use of the large dams for water storage, hoisting during off-peak times and stockpiling. Our renewable energy program is also progressing well. In addition to helping with our decarbonisation efforts, these projects will lower electricity costs, alleviate pressure on the grid and lower energy supply risk. We anticipate full commissioning of Phase 1 of 30 MW by the end of the financial year. Feasibility studies have been approved for the 137 MW Phase 2 project, with construction expected to commence soon. The first 100 megawatts will be on balance sheet and largely funded using the 1.5 billion or 88 million US dollar green loan and is expected to be completed in September 2024. As with phase one, the remaining 37 megawatts will be delivered under power purchase agreement. Moving to our balance sheet, The acquisition of Eva Copper has resulted in an increase in net debt to EBITDA from 0.1 times to 0.6 times. We're very comfortable at these levels, and it's important that we utilize our balance sheet to grow and create value in the long term. Since 2018, we've been actively growing our business through value accretive acquisitions. Net asset value has increased by 23% since 2018 through effective use of capital. Our strategy remains to allocate capital in a manner that will continue benefiting all our stakeholders. With $4.5 billion in available headroom through cash and available facilities, our balance sheet remains flexible. I'll now hand back to Peter to conclude.