Harmony Gold Mining Co. Ltd. Q2 FY2020 earnings call

• Safety: Had a very good first half with a fatality frequency injury rate of 0.07, the best in history. Focus on visible leadership, behavioral interventions, and critical controls. Progressing towards a proactive safety culture with learning from incidents, psychology of safety work, and leadership programs.
• Production: Gold production had an 8% drop in comparative quarters, but South African operations saw a 4% increase. Kusasalethu mine faced unexpected grade drop due to geological features and VCR mining, expected to recover by end of FY. Operating free cash flow margin rose 63% to 13% due to gold price increase.
• Strategy: Focus on acquiring quality assets, permit and fund Wafi-Golpu, increase margins from current operations, and evaluate organic growth opportunities. In FY '16-19, focused on stabilizing operations, acquiring Hidden Valley and Moab Khotsong, and aiming for 1.5 million ounces production.

Revenue for the 6 months ending December 2019 was ZAR 15 billion, an 11% increase due to a 19% rise in the gold price but offset by an 8% reduction in gold production. Cash operating costs went up 8%. Production profit increased by 21% to ZAR 4.1 billion. The operating free cash flow margin saw a 63% rise to 13%, driven by a 19% increase in the gold price. Kusasalethu mine experienced a grade drop due to geological features, but is expected to recover by the end of the financial year. South African operations had a 4% production increase despite a 4% grade drop, with other operations generally performing as planned.

• Revised production guidance to 1.4 million ounces due to lower underground grade, with all-in sustaining costs between ZAR 600-610/kg.
• Focus on repaying debt and hedging to manage short-term volatility. Secured Wafi-Golpu permitting, with court stay order lifted allowing resumption of discussions with PNG government. Pursue organic growth and mergers/acquisitions, and complete Hidden Valley's access to Stage 6.
• Operating free cash flow sensitive to gold price; 5% increase in gold price could boost it by close to 30%.

• Load shedding: Impacted operations, causing production losses and momentum breaks. Continuous Stage 1/2 load shedding a problem as it requires cutting power usage, affecting high-cost mines and waste retreatment.
• Wafi-Golpu permitting: Previously delayed by court case, though resolved, uncertainty remains in the permitting process.

Q: About Mponeng and Target North, what's the status?

A: Peter Steenkamp says they continuously evaluate opportunities, won't specify Mponeng further, but Target North drilling has intersected reef, grades expected soon.

Q: Impact of load shedding on operations?

A: Peter Steenkamp mentions 80-90 kg of gold lost due to Stage 6 load shedding, continuous Stage 1/2 shedding cuts power usage, affecting production, and in discussions with Eskom to alleviate.

Q: When will Harmony be debt free and plans for acquisitions?

A: Frank Abbott says if gold price stays, debt free by end of next year at current production, and will leverage balance sheet for future acquisitions.