Good day, ladies and gentlemen, and welcome to the Harmony Gold Mining Company Ltd FY2018 Results Conference. All participants are in listen-only mode and there will be an opportunity for you to ask questions later during the conference. [Operator Instructions] Please also note that this call is being recorded. I would now like to turn the conference over to Max Manoeli. Please go ahead.

Good day everyone and welcome. My name is Max from the Investor Relations team. Harmony today released its FY18 results and I am joined by Harmony’s CEO, Mr Peter Steenkamp, and our senior management team to share with you the Harmony story. Over to you, Peter.

Thanks, Max, and welcome everybody. Harmony Gold Mining Company is pleased to announce its operational and financial results for the year ended 30 June 2018. Our growth aspiration to produce 1.5 million ounces and to improve the quality of our asset portfolio was realized by the reinvestment in Hidden Valley – we started in the previous financial year – and the acquisition of Moab Khotsong which ended in this financial year. These operations will increase annual production by 450,000 to 500,000 ounces and at average life of mine all-in sustaining cost of less than $950 an ounce. Really the backbone of the results today is the good performance that we had of our other assets. They performed very well. In addition through our successful hedging strategy we have generated cash flows of ZAR3.6 billion since implementation in FY16, securing cash flow margins and enabling Harmony to pay debt and fund our quality growth strategy. So all in all Harmony has delivered. If you look at the key features of FY18 obviously safety is a big priority for Harmony and we have been embedding our safety culture through our various training and awareness campaigns, and we have done a lot of that work. Our production guidance achieved for the third consecutive year produced 1.228 million ounces of gold at an all-in sustaining cost of ZAR508,000 a kilogram. We had an 8% increase in underground recovered grade, our sixth consecutive year of increasing grade. Our Hidden Valley delivered on its reinvestment plan on schedule and within budget. We had a successful integration of Moab Khotsong operations. We did it in record time of less than three months. We had a 31% increase in the South African underground resources, 11.6% increase in the South African underground reserves, and a ZAR1.8 billion that we have generated in cash flows through an effective hedging strategy. Our headline earnings per share for FY18 amounted to $0.171 cents per share compared with the ZAR0.298 cents per share for FY19. The Harmony team remains committed to deliver on Harmony’s strategy to produce safe, profitable ounces and increase margins. Our key focus areas in FY19 will be safety, repaying our debt, delivering on our operational plans and substantially progressing with the permitting of our Wafi Golpu project. I will take any questions.

Thank you very much. [Operator Instructions] Our first question is from Adrian Hammond of Standard Bank. Please go ahead.

Just a question on your guidance for FY19. Your cost guidance seems quite lacklustre compared to this year’s achievement, yet you talk of some 50,000 ounces below $900 an ounce. So I’m just trying to marry the two together because that’s a third of your base and yet you are saying costs are going to be flat.

Thanks Adrian. Our cost guidance is R515,000 a kilogram for the coming year. Obviously all-in sustaining cost. We do have inflationary pressures on ourselves. We still have the issues of power and also of wages that we are not 100% sure where we will end up this year. We are still busy with negotiations. We have got R515,000 which I think will be a conservative guidance.

Thanks. Okay. So perhaps a bit on your gearing targets and where you see net debt EBITDA. What do you intend to target going forward with respect to the net debt EBITDA number and how soon can you de-gear?

I think the first thing I need to explain is that when you look at the calculation of the net debt to EBITDA ratio the EBITDA which we have used was the past year. So the past year only included Hidden Valley for about a month and Moab for four months. So the EBITDA number is going to improve with those two operations coming in 100%. By not even paying back the debt that EBITDA ratio is going to come down. Now, of course our first objective is to pay back our debt. We do believe that we not very highly geared. If we look at all our covenants we are well within our covenants. But we would like to reduce our debt so we have the opportunity to do get the flexibility to do other things. So I can’t give you an exact answer as to when and where we would be. I’m just telling you that the new cash flow is going to reduce that EBITDA ratio substantially.

And just on your annual interest bill, what is that now and what is the facility that you are using and the interest charge or the rate please?

We are paying about ZAR 300 million now on interest per year. And if you look at the facilities we’ve got a Rand facility and a Dollar. And on the Dollar facility we are paying LIBOR plus 3.15% and on the Rand facility we are paying JIBOR plus 3%. And if we look at that it is about 5% on the US interest rate if you add that together or about 10% on the South African Rand. Just to take you to the exact figure you will see our finance cost for the year was ZAR 330 million. And there is also a really nice note which we have put in just for you, Adrian, where we actually show, this is point 13 on the notes. You will see that it does show the different facilities we’ve got and it shows that we are paying at LIBOR plus 3.15% and JIBOR plus 3.15% for the Rand facility. That is at the bottom of page 28 on the booklet.

Thanks. And Frank, you seem quite bullish about your free cash flow generation. Why not pay a dividend? Do we expect Harmony to return to a dividend paying position?

Our stated dividend policy is we consider a dividend every six months, and if we can pay we pay. We just believe that we have just had this acquisition and we have got the debt levels that have gone up. And we have just done an equity raising and we don’t believe it sends out the right signal to pay back a dividend just after we’ve done this equity. So, we will reconsider this in December, but for now we’re not paying a dividend, no.

You have given us some guidance, but just in terms of cash commitments for the year coming in addition to what’s implied by your sustaining cash cost what do you envisage now for Golpu expenditure or any other capital you may have planned for as well as exploration please?

So I think we have in our slides our capital at the back. This is on page 39. You will see what our capital is there.

I assume that is all-in sustaining.

Yes. And the capital for Golpu for the coming year is not very high. We are talking about $40 million. So the next two years we are going to spend about $107 million at Golpu. And over the next three years it will be about $300 million for the three years. So we are quite comfortable that we can fund this three years, Adrian.

Thank you. [Operator Instructions] Our next question is from [Tshepo Molefe] of [indiscernible] Fund. Please go ahead.

I seem to have all the controversial questions so to speak. Could you kindly tell us with regard to whether you are in discussions with Nedbank CIB regarding the RCF, and if so when do you envisage those discussions being complete? And furthermore it seems like you have actually tripped up on your covenant of tangible net worth. I don’t know if Frank can elaborate with regard to that. According to your results it seems like you have actually tripped up on that covenant.

No, in fact we haven’t. We have had a discussion with our banks beforehand so that we could relax that covenant for the period up to December. So we haven’t tripped up on that. And yes, we are in discussions about the extension of some of our debt facilities. And we will report that when we are ready to do that. And that would be soon.

Are you saying you have relaxed the covenant i.e. that was done in agreement with them?

Yes.

How come that was not announced, because that is a very important development? How come that was not announced?

Anyway, sorry, we didn’t announce that. We will look into that and we will see if it is necessary to do that.

It is absolutely necessary. Frank, it is important that you announce when you trip up or relax some of these financial covenants.

The reason why we did that is when we did the acquisition of Moab we had to incur further debt. And we incurred the debt. That was the bridging loan. And at that stage we got approval from our banks to change our covenants for this period of time. We will actually put that into the market.

I also just have to add, Tshepo. It’s Marian here. Very important each time anything is done within Harmony we always bounce it off our internal advisors, our legal division, our company secretary and our sponsors. So even though Frank said we will advise the market we will just consult with them to just double check that it is in fact necessary.

The next question is a follow-up from Adrian Hammond. Please go ahead.

Frank, just in your CapEx guidance you have got quite a lot of capital here for Hidden Valley in deferred stripping. What is and isn’t included in your sustaining cash cost guidance please, and I assume the deferred stripping relates to Hidden Valley?

Yes it does relate to Hidden Valley. And we are now producing there. June was the first commercial month of production. But there is still further stripping that takes place at Hidden Valley. Yes, this is stripping at Hidden Valley which we included.

Sorry, is that capital in or not in AISC?

Sorry, the deferred stripping does form part of all-in sustaining cost. Sorry, I didn’t get that question. Just on the previous question asked, if we looked at point 13 which we’ve put out, note 13, you will see that we talk about the Moab Khotsong operation acquisition. And you can see that in there we say that Harmony has requested the covenant ratio of the tangible net worth to total net debt to be relaxed from 6 times to 4 times for the duration of the loan. The request was granted. Okay, so this was disclosed.

Frank, are you still answering my question?

No, no, I’m just answering the previous question, Tshepo’s question. Sorry about that.

No worries. I just want to be clear that FY19 your all-in sustaining cost is capturing sustaining capital, Hidden Valley capital and deferred stripping, but not the growth capital. Is that correct?

That’s correct.

That’s quite correct. So the capital we spent at Hidden Valley in the past two years was not part of all-in sustaining cost because the whole operation was actually capitalized of that period. Subsequent to that from the 1st June what happens is that all the costs including deferred stripping forms part of all-in sustaining cost.

And you’re comfortable that with Hidden Valley’s capital for FY19 which is this 819 and the 672 you are still on target for below $1,000 an ounce all-in sustaining?

Adrian, the $950 is average for the year. For the first year it will be a little bit higher, just over $1,000 if I remember correctly, but then after that it will go down because obviously our stripping goes down a lot during that period of time.

I don’t know. I’m looking at this chart and deferred stripping stays at 800 or 900.

Remember it is still a few years to go this is only the outlook for the next three years.

Thank you very much. [Operator Instructions] Our next question is from Arnold van Graan of Nedbank. Please go ahead.

Good morning. A question for Frank. I see your corporate and admin cost increased quite sharply. I assume a lot of that has got to do with the Moab deal. Where do you see that settling out in the next few years?

Of course a lot was because of that transaction. It was both legal fees and success fees and what have you. So we see that from next year onwards it would be lower. That will fall out. We have also internally had a bit of a movement of more executives now. The South African executives are also recorded as corporate expenditure and not just overheads anymore. So that has also changed the total cost. But the biggest one is basically the costs of the integration. And then there was quite a big chunk of share based payments that came through in this year which is reducing from next year onwards.

Is there any rough number you can give us? It is between 500 million and 800 million. So where does it come down to?

I would say that you can go for the middle there. Call it 650 million.

Thank you. [Operator Instructions] Our next question is from Chris Nicholson of RMB. Please go ahead.

Just have a look at slide 29 of the presentation that you put out that now looks like quite a scary long-term production profile post 2023. Can I just ask two questions? Firstly has that profile actually changed over the last year post some of the impairments that you put through, post some of the changes to your reserve estimate firstly? And then secondly you have highlighted some short to medium-term organic opportunities. In your internal modeling at the moment do any of those meet cost of capital at spot Rand gold prices?

I will give it first. Thanks Chris. The profile obviously did not change with the impairments because we did a long-term cash flow and all the things. So it is still the same plan that we had. But we managed to move the end of that graph with another two years if you compare it to two years ago. We managed to move it and increase it from 1 million ounces to 1.5 million ounces. So there has been quite a movement in terms of our ability to move that thing forward. What we have here is everything that is currently in feasibility study, which is now Wafi Golpu, and the other things are part of our current life of mine. There are no other, all the things currently still in pre-feas stage like for instance Great Noligwa pillar, the other pillars that we are going to mine in the Orkney area, none of that is actually part of this plan. We are quite comfortable that we will be able to move this line further for 2023 and further downstream. So any one of these organic growth opportunities are things that we are currently busy with and probably will be finished at the end of this financial year. Obviously the Zaaiplaats project is a big one, and that is one that we have to look at quite carefully. But the nice thing about that is we’re already part of that block of Zaaiplaats. We can bring into our plan the development that is done by AngloGold Ashanti at the time. All of them will be measured in terms of typical project things. On the cost of capital we make sure we have a proper rate of return before we continue with any one of these projects. But I think all of these projects that we have on this list here have got a very good chance of making the grade as projects that will in actual fact continue.

Maybe if I could ask the first part of my question differently. I know impairment is an accounting thing. If I look at the reserves year on year your reserve base is pretty flat as a group. But obviously you had the Moab acquisition coming in. so there must have been some depletion elsewhere. I was just wondering if that had actually changed from some of the existing mines excluding Moab.

It’s Jaco here. We had depletion of about 1.2 million ounces and we have added 1.6 million ounces from Moab Khotsong at about 9g per ton. So you will see our reserve grade actually goes up from 5.5g to just over 6g per ton. The other mines remained relatively stable. The only mine where we had a reduced life of mine was really Unisel, but that was not big in our portfolio anyway.

Thank you. The next question is from Emma Townsend of HSBC. Please go ahead.

Good morning Frank. I was wondering, I see you have put a slide in, the residual of the hedging programme, given with the recent moves in the currency whether you have taken advantage and extended those in any way.

Thank you. So you can see on page 42 [Technical Difficulty]

Hi guys. Are you back on the call again?

Yes, sorry. That was Emma’s line that went to hold.

Okay thank you. Frank will…

On slide 42 of the presentation you will see that we’ve got the current hedging programme as at the end of June 2018. And you can see the positions we had there. Subsequent to this period of course the Rand was weak again and we’ve been able to do additional Rand hedging or forward contracts in that period. We haven’t disclosed that because we only disclose to the end of June. But when we actually show our quarterly production results we will publish our up to date hedging programme at that date.

Okay. Thanks very much. I’m very sorry about the screeching phone line.

No problem.

We were just worried we’d lost you, Emma.

I was worried I’d lost myself. Sorry.

Thank you very much. The next question is from Yatish Chowthee of Macquarie. Please go ahead.

Just a quick one on the synergies realized at Moab with the acquisition. Frank and Peter, I recall that you guys said that with the acquisition you expect to reduce that overhead cost base by about 20%. Looking at the Moab cost per ton you guys reported it was about ZAR3,100. What is amore longer-term number you are looking at for Moab?

I think we were quite happy with the integration. If you look at what we have done in terms of our current things we are above 20% in terms of our cost that we were able to save on the mines looking forward to next year. And then obviously on the overhead side of it we look at what was allocate to Moab at the time of Anglo. What we have done is more than 50% of the allocated cost to Moab in terms of off shaft, off mine or off region type of cost. But remember we still have competition commission laws in terms of retrenchments and stuff like that. So we have really streamlined where we can. We opened some very few voluntary separations, but that was very few of the people. But we managed to bring the cost down quite substantially during the process. Obviously our systems are not as expensive as the stuff Anglo is using. So all of the savings are flowing through to the bottom line.

So in terms of the rationalization of the operation in terms of retrenchments were there any or were most of them voluntary severance packages.

It was just voluntary people that didn’t want to work for us going forward that we allowed to go. We are not allowed to retrench. But we are not foreseeing any forced retrenchments at all. It’s an integration within our organization. Harmony has not been force retrenching anybody over the last few years and we don’t believe there is any reason to going forward. We obviously had to restructure Unisel. We have done it without any forced retrenchments. I think we’ve got a very good relationship with our unions and with our workforce and we keep on doing what we should be doing and not wait for one big event to do that.

Thank you very much. [Operator Instructions] Sir, it would appear that we have no further questions. Do you have any closing comments?

First of all thank you very much for joining us this morning. Certainly it has been a fantastic year for Harmony. We really have done what we said we wanted to do, recapitalize Hidden Valley and also bring Moab Khotsong into our portfolio. But over and above we also had a very good performance from our operational team in South Africa, a much improved performance. The one area where here is certainly a lot of focus from our side is our safety performance. Of course we regressed year on year as far as the TRIR is concerned and certainly we need to fix that part of our operation. But all in all we are very happy with the team and the performance that we have done in the last year, and looking forward to FY ‘19. Thank you very much.

Thank you very much sir. Ladies and gentlemen, that concludes this conference call and you may now disconnect your lines.