Harmony Gold Mining Company Ltd (HMY) 2006 Q4 法說會逐字稿

Good afternoon and welcome to the Harmony Gold conference. All participants will be in listen-only mode. There will be an opportunity for you to ask questions at the end of today's presentation. (OPERATOR INSTRUCTIONS).

Please note that this conference is being recorded. At this time I would like to turn the conference over to Bernard Swanepoel. Please go ahead, Sir.

Thank you very much, Mike, and good morning, ladies and gentlemen.

I plan to talk to you briefly through today's results for the quarter and I'll also refer once or twice to the year end numbers because this was our financial year end. Then hopefully we will have ample time at the end to address specific questions.

I'm sure most of you have access to the slides on our web site. So I'll just prefer to the slides and briefly speak to them.

The first two slides will deal with the quarterly highlights and thanks to the rise in gold price our cash operating profit is up by 111% to 645 million. Our cash operating profit margin has also jumped from 15,9 to 28,5%.

So as I've indicated already - many thanks to the gold price - the Company is in significantly better shape than we had been a quarter ago.

(indiscernible) Mobiles up by 6% and [circumstance] was up by even more. Because we've managed to achieve all of this with cost expenditure remaining constant, our cost -- cash costs and rent (indiscernible) overall is down by some 10% and by some 7% from underground as well.

Tshepong, our flagship mine, is really now running on (indiscernible) implemented and it's not only an internal benchmark for other mines to get to but it is also a demonstration case, showing that (indiscernible) can make contributions we have always planned for it to make.

The next slide on the quarterly highlights deal with Kalgold, our small open pit mine where we successfully integrated a new mining contractor. Now Australian production is back on track, almost doing the 60,000 ounces we expect from them again. We did in the last, in the previous quarter, that is under review here, we closed out some 75,000 ounces of hedge book in Australia for a net profit of 140 to 143 million (indiscernible) rand.

Hidden Valley - the road - and you'll see a few pictures like on (indiscernible) that has finally reached the lease boundary and we can now continue with construction.

There is also - as we have announced during the quarter - significant upgrade of Wafi and Golpu resources.

My next slide is titled "Investing In Our Future". This is really just [bolting] on the theme of last quarter when we identified our short-term problem or medium-term problem as a lack of flexibility. We indicated that in order to increase mineable price links, we had to increase links we are going to have to increase development. The first quarter had quite a pleasing improvement of 9,6% in development. The bulk of that, of course, reports on the capital expenditure and therefore was not a contributor and good cost control; and opening up is really just an activity on some of our shorter-life mines where we need to continuously open up high-growth [pillars] or pillars at our electrical mining, and that is also getting more attention.

Reducing unit costs per ton is something we decided to get really serious about again in the last six months; and I think the last quarter, we demonstrated that an increase in tonnage, a significant increase in tonnage, was achieved without further increasing our costs and therefore it resulted in a -- quite a substantial reduction in cost per ton.

This, of course, is exactly the [course cue] on which we build Harmony and many of our shops I cue now on our (indiscernible) costs per ton targets, we are making really good progress with that specific aspect.

One of the pillars of what we are trying to achieve where we haven't seen the results of our work yet is the grade management. We are not quite mining to the average mining rate of the ore bodies; and although we were mining in exactly the same grades as the previous quarter, the buildup in volumes resulted in underground and planned [lockups] therefore resulting in a reduction in grades from underground - offsetting or negating most of the benefits of the higher tons at local cost per ton.

My next slide deals with our Safety Performance of Fatality, Injury Rate as expressed per million hours work. And unfortunately the last year was a reversal of what was quite a positive trend; and this has got a couple of reasons for it. The one, of course, was that during the period of drawn out restructuring, it is not that uncommon for people to take the eye of the bull. We also - following the restructuring - have got a significantly higher percentage of production workers to nonproduction workers - and typically those are the higher risk job categories; and we have also closed down quite a few of our sort of shallower and therefore by definition safer mines during the last year.

But this is just a temporary setback and we do believe we can get on top of that again. We did launch some six months ago a safe -- a behavior by safety campaign in the Company; and those benefits we do believe we will see within the next year.

My next slide is a quarter on quarter analysis. The first table, there is a similar table for you is dollar and ounces. The first one is in rands and kilograms; and what you can see there is that our gold production was almost flat, down by just over 1%.

You can see from the high revenue rand per kg which is just a little bit higher than our peer group in South Africa you can actually see that we had a very good end of the quarter. In other words, we were delivering significantly more gold at the end of the quarter than the beginning of the quarter and that's why our average revenue per kg is higher. Exchange rate helped us by 35%. Cash cost was virtually flat at 1.1% - a weaker number than the previous quarter.

The cash operating profit, therefore, more than doubled to 645 million. The reason I say we are in pretty good shape is this is a quarter where we generated enough cash to fund all of our ongoing capital, all our gross capital, all the expenses that came with running the Company exploration, overage and so on. And still had a little bit of money left to strengthen our balance - or our cash balance - and I will talk you through that in a slide or two.

Operating margin, you can see at the end of the quarter for this quarter was a 28% cash earnings of 163 cents.

The next slide is the same numbers - just in U.S. dollar terms. Again you can see that both production at 550,000 ounces and revenue, we averaged $631 an ounce - an exchange rate of $647. And that does show that so far in the new quarter supposed we achieved similar if not slightly higher revenues in terms of US$ per ounce. But the exchange rate has tended to be weaker than 647. So far in the next quarter we are averaging a slightly higher gold price again.

Cash costs came down by just under 4% in U.S. dollar terms mainly driven by the exchange rate and the rest of the office slide speaks for itself.

If we do a very quick year on year analysis, you can see our gold production was down almost 20%. This, of course, was mainly influenced by the -- or was mainly driven by the restructuring process dealing with the strong rate - a process that started over two years ago now.

The revenue was up by 24% in dollars per ounce. The exchange rate was very flat year on year and, therefore, our cash costs in U.S. dollars terms went up from 379 the previous year to 433. This is perhaps not exactly what we had wanted to achieve during the restructuring; but I think with the volume increases now coming through, going forward, we would expect our cost performance to also improve.

You can see for the year, our average operating margin was 18,1 but keep in mind by year-end, it was 28%. Significantly better than the average.

On the next slide, where we do a quarter on quarter performance comparison in comparing the South African assets under the normal classifications of quality assets where you can see these assets really as you'll see in the detail a few slides on had an outstanding quarter in all aspects except perhaps grade. And it still managed to improve by some 18%.

The growth projects made a cash operating profit and this is our [Doornkop] mines - quite a significant turnaround.

Leverage assets, we thought that had the worst of the results for the quarter and, yet, thanks to its leverage it went up 147% quarter on quarter. Surface operations has just a good number and this, of course, is where we can really let our higher gold prices flow through to lower [cap] costs in the short-term.

The South African operations had a significant benefit from the higher gold price, improving by 114%; and even our Australian operations produced better results of 89% for the overall 111% improvement, quarter on quarter.

Our next slide shows the quarter on quarter cash operating profit variance analysis. You can see that, after net variance of 340 million, really the bulk of that can be explained through the gold price increase. I think it is perhaps quite an achievement that the bulk of the gold price improvement flowed through to the bottom line.

Higher volumes at lower costs was offset through temporarily lower grades. And I will speak to the grades in a bit more detail. Well, perhaps I should just briefly touch on the grades right now. Our grades really became quite clear to us towards the end of the quarter that the grades were not going to pick up during the quarter as expected; and we obviously went into the organization to establish exactly what is causing the grades to be low.

The blasting grade was found to be okay. What I mean by okay is, it was exactly the same as the previous quarter. 1% down to be exact. So we were blasting the same content; and that is what you would expect because if you think of this volume increase coming mainly through that introduction of CONOPS then obviously the crews have blasted exactly the same tunnels. They are just blasting more often because there are more production shifts.

There are more times at the same grade at the blasting level. A lot of those tons, of course, reported to the most; and that is why we could show a 6 or 7% increase in tons (inaudible). Unfortunately for us the bulk of the tons might come out but really a significant portion of the fine stuff containing a higher proportion of amount of gold got left behind on some of our shops and some of our scopes.

Then also we had a bit of a lockup phenomena in some of our plants where the rest of plants and grade towards the end of the quarter simply didn't report as gold so in final bar form by the end of the quarter. So the grade problem I think can easily be overestimated. I think the lockup in the plant is a well-known phenomena; and we at best are hoping that this new level of lockup has now leveled off and we can therefore get the gold out to the end of the quarter that we put in during the quarter.

It's a little bit of discipline, associated with the gold being left underground; but again during a phase of production buildup that is also not too uncommon. And we are hopefully addressing that already as we speak.

I want to move on to the cash reconciliation for the period March 2006 to June 2006; because here we started the quarter with a cash balance of 1.8 billion rands. We spent just over 1 billion rands from the repayment of the 2001 bond - as well as the final installment of the BOE loan, which is still a loan we inherited when we merged with ARMgold. So effectively after those two repayments our cash and cash equivalents were 773 million rands.

Our cash operating profit of 645 minus operating expenditure of which the bulk was the 480 odd million capital expenditure, you can see actually left us with a higher cash balance at the end of the quarter. Even if you bring it to it, all the other expenditures and adjustments our cash balance, therefore, went up from what was effectively about 770 million to 900 odd million at the end of the June quarter.

If we look at the analysis of earnings per share, gross cash earnings went up very nicely. More than doubling. Basic loss came down and the headline loss with all those other numbers in (indiscernible) per share.

Capital expenditure for the quarter, South African operations which now is inclusive of the capitalized development went up marginally to 390 and is forecasted to go up a bit further. This is very much in line with our plant increase in development; and quite honestly I think it shows that we are budgeting and to increase development and increase productivity of our flexibility going forward.

Under the project CapEx, again, those are all ongoing projects which we are really aware of. Only number worth noting is perhaps the significantly higher number for Hidden Valley; and that is in 12 million A$ we plan to spend in the coming quarter. The quarter after that, the December quarter, should be probably about similar. And we believe that the capital expenditure profile for Harmony is really well within our reach.

I need to remind you - and I will talk to that on a later slide, as well - you know, it's some six or seven years now since we bought major capital expenditure and certainly in the last four-and-a-half years and we've really been (technical difficulty) building these new mines and we are in many many cases now six months, 18 months or maximum of three years away from reaping the benefits.

Our organic profile is typically one of the better ones in the world of gold mining.

If we look at the operational results and the next level of detail, the South African quality assets, you can see that despite the fact that we increased our tons by a good 6%, that this is really the CONOPS benefit coming true. We actually managed to reduce our costs and, therefore, we had a significant cost per ton benefit. The full benefit of course doesn't show because of the grade -- recovery grade being down and just over 7% for the quarter.

The highlights, as I've indicated before, Tshepong, our flagship mine, is really doing extremely well. They have reimplemented CONOPS quite successfully and at Evander, the (indiscernible) intrusion we have been speaking about for the last three or four quarters still continues to (indiscernible) the grade. And we do hope that towards the end of the year, the grade at Evander especially will pick up.

CONOPS also finally got implemented and rolled out there as I indicated last quarter at Masimong and it was very pleasing to see Masimong's square meters were up 17% for this quarter.

If you look at our growth projects, very difficult to look at these numbers in a way that makes sense because - especially at the Elandsrand mine - it's really a case of blended ore coming out of the mine. It is the ore from [the Stokes] and from the new mine blended with an increase in development and also the West Lock because we were doing a changeover.

The numbers are very difficult to interpret; but if nothing else at least, our cost of kilogram came down and our cost per ton is probably over (technical difficulties). I mean overstated in this same (technical difficulties) not quite as good as it looks today.

On the next slide where I deal with the highlights. I alluded to the ore pass changeover on Elandsrand which is finally completed. Was during the last quarter and so this coming quarter we will see little bit less tons but significantly better grades and a more representative set of numbers.

Development at Elandsrand improved by 30% and the reef tons milled also improved by 11%. Very little of that is visible because of the 40,000 odd [wasterock] tons that we hoisted through the same system.

Elandsrand, we do expect both volume and grade to continue to improve towards the end of the year.

Project Phoenix is a little pilot [Slimesdam] retreatment project we approved and commissioned during the last quarter. Our five plus plant was made available by redirecting the tons from the underground mines to some of our other plants. In the process, of course, we can clean up existing [slides] there and rehabilitate them. We plan to treat some 400,000 tons for some 70 kilograms of gold per month.

I showed you some early results and you can see that even during the first quarter of getting it off the ground, we made a 5.2 million rand profit and it was really because the head grades was targeted to be higher initially. We achieved that and the real bonanza surprise for us was that recoveries were so much higher than what we had planned; and all the other costs are being confirmed.

So we really believe this project is going to be quite a nice sweep (indiscernible).

This is also -- we looked at it internally as a bit of a pilot project because it did [best] work and if we do have confidence in the gold price remaining fairly high in rands per kilogram tons for the next two or three years we certainly could easily vote an ergot type treatment project one in the free state (indiscernible) first. Certainly in the past we have done a lot of work in what was then known as Project Libra and a similar [Slimethree] treatment project in Evander and our rent -- rent from paying [dumps] are also begging to be retreated. And if one could get the timing right and the rent we might also even consider extracting some of the uranium which has been left behind in this Slimesdam.

But this is early days; we really have just looked at these three projects from a value proposition point of view. And our project team all tried to take one of them to a prefeasibility point during the next six months and see how we can build on there.

If I move on to our leverage assets you can really see why I say these guys that the worst of the lot although there was good increases in volumes, obviously you would expect these operations to run close to the bone. So the volume increases did come with a cost increase and ultimately although cost per ton came down, the significant drop in recovery grade really just more than offset any benefits we got from decent cost control (inaudible).

In this ,portfolio we have got assets with significant potential for turnaround. Last quarter I spoke about Joel and having [spare race lines] ready to be mined. After the commissioning of the North shaft we achieved that and production was up significantly.

One of the other places where we had significant potential for improvement is Bambanani. But our infrastructure simply couldn't handle the more concentration of mining in the areas where the race lines are and those are all short-term problems. Old Harmony as small as it is that the two old -- [Marysprayed] shaft and Omni 2 shaft improved volume by a good 20%.

And we have since, subsequent to the quarter end, we did incur a fire on Omni 2 shaft operations; and we are just about to the point where we should be able to get back into those sort of working areas but that is not a huge impact. We still are quite positive that we will get improved volumes and grades from these assets, despite that incident at Harmony 2 shaft.

If I move on to the surface operations which include our Kalgold operations. Obviously at Kalgold we are busy with our fourth and final CapEx. We expected that should give us access back to the bit and the D Zone. Certainly by end of October, so we'll continue to treat our strategic stockpile which, of course, comes with significantly lower grades but also significantly lower cost.

Kalgold had a very very profitable quarter as did all of our surface retreatment operations.

At Kalgold also, as we previously indicated, on the next slide again then there was a very seamless handover to a new contractor. This contractor, which will see us through to the end of the life of this but saves us 2 million rands per month on mining costs.

Australian assets can be summed up although the tons look the same, the higher grade resulted in significantly higher kilograms. But, of course the cost per ton is up significantly and that is really because we have a lot more tons from underground and these tons come at a higher cost per ton; but they also come at a significantly higher recovery grade. And so overall the cost per kilogram stay the same but we made significantly more profits in Australia, thanks to the higher kilogram production.

As I indicated previously, and as you can see on the next slide, under the highlights, production was up just touching on our 60,000 ounces target. We did close out 75,000 ounces of hedge book and we did delineate a nice reserve for the short- to medium-term; and also 50,000 ounces at the Shirl pit.

Outlook, unfortunately, still really minute. The hedge book, we did close out some 10,000 ounces at a cost of about A$2 million already and there's a further 25,000 ounces remaining and for delivery remaining into -- by the end of this quarter.

The next slide is just a picture of not only the drilling but also in the background, some of the mining. And as most of the companies now, we have opted to go much more of an owner operated sort of method, to try and curtail some of the cost associated with contracting in Australia.

Hidden Valley, if we speak about the highlights, the access road we said finally reached the mine leased boundary. The EPCM contract was signed off. We are now very happy with the engineering solution that we found for the pipe on layer system; and the slide makes it project conveyor system. I apologize, it should be part conveyor system.

Our team is almost complete now with the signing on of the General Manager for Operations and then we also had a very successful peer review or third-party audit of the [deluge] storage facility which confirms our design and as you may recall, deluge facilities is not such a common feature in Papua New Guinea. People have really been disposing of the deluge in all sorts of manners. We were quite keen to do it in a responsible way on that failing storage facility.

The outlook, we are finally building a mine and we are very excited about how this mine is going to progress over the next two years or so and we do see a significant ramp up. Even though in the next six months, things really pick up speedily and in the six months after that we really start to say a lot of expenditure coming through but also a lot of progress. We are very happy now with the detailed scheduling of the Earthworks that has determined what fleet requirements we had.

We've also been able to secure the right new equipment; and we even believe we may have secured enough tires to operate the equipment for the moment.

I want to move on them to the Hidden Valley parameters. I'm not going to speak to those numbers again. They are exactly the same as we've indicated before. You can see the gold mine of 280,000 ounces including some of the equivalent ounces - some 350,000 ounces and construction period of some 26 months. And that really means that we should see the first goals in the plant around about end of September. Perhaps early October 2008. A [lack of mining] at this stage is just under 10 years.

My next slide which also speaks to the parameters to show you at two different sets of assumptions for gold price and copper -- and silver. What happens to the pre-tax cash flows. The NPVs and IRRs and then, of course, the cash costs are significantly lower if you see more or higher silver prices because of the effect of the silver credits.

The next four slides really just are pictures showing some of the progress. I think especially the pictures from the road construction and P&G is quite interesting. It really just demonstrates or shows that there's quite a significant road that we have constructed.

My next two slides speak to my favorite topic. The topic of thank goodness, we have been spending money over the last four, five, or six years on these projects because they are all much closer to fruition now. The ones that used to tabulation that you have seen quite a few times now where we're seeing that we are building six new mines to exploit almost 20 million ounces of gold, at a pretty high 1.8 million ounces per annum, at of course significantly lower cash cost and what we are doing right now.

The slide that the pics that just regionally shows you how the sort of Old Harmony shops to one we have acquired over the years have got the normal sort of a declining trend. You can also see that the restructuring of the last two years has taken us down to just below 2.5 million ounces.

And you can see how over the next three or four years, we have a lovely growth profile of just about a million ounces and all through the organic growth and the stuff that we already own - and the mines that we were building.

Going from left to right over the slides is also a great line and it really just shows that the recovery grade of the Company should continue to be higher year on year. This is not because of a newfound ore reserve management model or high grading. It is purely because the higher grade or the new mines are on average of significantly higher grades than the mines that they are replacing.

That should really enable us to have a cash cost competitive advantage going forward.

My next slide which is Wafi, Golpu - updated resource for Golpu. We did put this out a few weeks ago. That's really -- just shows our copper content has been upgraded quite significantly and the gold content has also come up by over 20%. This, really, is just a gold copper discovery that every time we drove, we saw at -- and [butryl]. We are very excited about it.

So the combined resource for Wafi and Golpu now stands at 9.2 million ounces of gold, 3.6 billion pounds of copper and I think that the bold claim we made 15 or -- 18 months ago, when [Dick Rebotski] said to me, "I can tell the world that this will still grow to be a 10 million ounce resource."

I think it is quite clear that we are likely to achieve that in the next couple of quarters.

The next slide is really just a schematic simplified oblique section, showing you where the Golpu copper deposit is relative to the non-refractory gold zone. The so-called A zone, the Link Zone and the B Zone just so that you can see it is all really one little hill. And significant infrastructure synergies could exist one day when we get to bolding Hydra copper or the copper and gold mine (technical difficulties).

Our last slide is really a busy slide just telling you that, some six months into adjusting to this strong or this high gold price environment, we're still very happy with the stuff we are busy with. We certainly put the CONOPS in place, the restructuring is behind us. We have regained profitability. We are busy getting mining flexibility through an improved development focus. The production volumes of the last quarter was really a good performance seeing that we didn't have a hell of a lot more shifts than the previous quarter, that it was still a significant improvement.

And therefore we believe that if it -- if the grades were recovering in the next quarter we will, for the first time, be able to perhaps be in a position to put it to show that we are busy making the most of our current assets. Our cost of [term] focus. We haven't quite lost the total (indiscernible). We will see the benefits of that coming through. The organic growth profile is a standing one and of course, that is the basis on which we can and should continue to look - especially in South Africa - for further acquisition opportunity.

Thank you very much, ladies and gentlemen. We probably have about 20 minutes for questions. I am going to hand back to Mike now to facilitate the questions. My suggestion would be that you put one question at a time and that way we try and give as many as possible people a chance to put their questions there.

Thank you very much and over to you, Mike.

(OPERATOR INSTRUCTIONS). Victor Flores, HSBC.

Good morning. Just coming back to this issue of the tons and the grades. It seems quite extraordinary that as you look across the entire asset base you had an improvement in tons and the grades coming down; and the initial instinct is you moved -- you put the guys or you focused on moving tons and grades suffered as a result.

The explanation that some of it was locked up in the plant and some of was left behind in the [stopes] sort of goes to addressing that. But if that is the case and you've done some auditing how much of it is left in the plan? And how much of it is left in the stopes? Can you get some of that out? I mean what was left in the stopes?

I fully appreciate the fact that if, only the quarter could be a month longer, that more of the gold could have reflected in the numbers. But, unfortunately, the way the quarter started with the normal Easter break and the unfortunate and sort of grouping of public holidays, we clearly had a significant bit of buildup towards the end of the quarter and we simply just ran out of time, to get some of the gold firstly out of the mine, secondly out of the plant.

The gold has come into the plants either in the form of a higher level of lock up. Of course, one doesn't worry about that. That's gold that now exists. It sits there in your silos, your (indiscernible) , your molds, if you are not just part of your basic sort of load. And most importantly for us, this quarter would be if there can be no further lockup in the plants and this higher level is now the current level. So whatever we put in this quarter comes up.

From underground we put a huge effort into towards the end of the quarter and, subsequently, to get some of the gold that was left underground out of the mine. Because, as you know, if you don't get it out I mean you know, through collapse of the old areas or through back [ferruling] or whatever. I mean you just aren't going to go into old areas and back areas to try and do backlog sweepings and so on.

Time will tell what percentage of that does come out. We certainly -- the reason why I am quite comfortable in my assessment that this is not because of volume asset. We push the guides sometimes and therefore we [blasted] lower grade working places is because you can actually track that. Our average blasted rate is exactly the same one - as I indicated - 1% down in the previous quarter.

But the fact is the more volume did result in us being unable to gear up everything out to that level and, therefore, not all of the gold reported in the form that we could sell it. It is therefore with some confidence that we can indicate that the coming quarter would be more representative, in terms of grade. It's just extremely difficult to make exact predictions.

This generalized statement I've made - it certainly is true at the level of groupings we show our quality assets versus our leverage assets. Of course that is not absolutely still true when we go to first shaft level. I mean there were some shafts where the guys have managed to grade better and managed to get the tons and the grade better.

Victor, the end of the quarter was the 30th of June and we could only disclose in [under] gold we had in bar form for selling purposes.

My best estimation is that of the almost 7% of sort of gold and that we had less than what we would like to have had, about 4.5% of that 7% was actually shaft gold factory-related or so (indiscernible) you know and left underground; and the balance 2.5-odd% was in a plant lockup or plant loadings that increased.

Thank you. If I could just ask a quick follow-up?. On Project Phoenix and some of your other proposed surface retreatment projects, what sort of sustainable gold price do you need to make those give you a return?

They do make a return - a decent return at 110,000. But I also would think, unlike the Phoenix, where we had existing infrastructure - if we were to scale this up to ergot type that operation in three of our regions, each one of those will require an order of 400 to 500 million range.

About half of that is for the plant, for the treatment facility and about half of that is for all the infrastructures associated with retaining disposal facility which, of course, you know nowadays in this country is quite a challenge to get licensed. So quite honestly we would probably look for a gold price planning -- gold price of 125,000 rand per kg to justify the commitment to set higher levels of capital.

Just to repeat, it is a good six months before we will be at the next stage. The value proposition is quite a good one and it is another six months before we will get to the point where we can say we have done a prefeasibility; and we will probably do that prefeasibility before the free state first simply because that is where the current Project Phoenix is.

(OPERATOR INSTRUCTIONS) [Steve Sheppard] of J.P. Morgan.

Good afternoon. Again, I just want to take this question on the grade a little bit further if I may -- ? It's kind of really important to figure out the potential for a turnaround in this September quarter. So I'm going to ask some very specific questions about this.

Could you please if you can tell us what the mine core factor on average you think should be in a normal situation for the South African underground operations? What was the mine core factor for the South African underground mining operation in March? What was it in June and what was the mine grade in June and what was the mine grade in March please? The head grades. (MULTIPLE SPEAKERS)

Yes. I will give you sort of average numbers as dangerous as they are as you can appreciate. But again these would be numbers that we could just (indiscernible) you at a more detailed level even a shaft level. Not necessarily ongoing; but to help you have a level of understanding.

We want our mine core sector to be at 82%. Now, please, this is a completely different type of mine core factored to the sort of good old days when we managed mine core factors through despiking etc., etc. This is consistent with the statistical evaluation tools that we use in Harmony on average. 82%.

Now we aren't quite at 82%. I think our last sort of normalized number was at 79% Companywide and to the last -- sorry, Steve. Are you with me?

June quarter, 79%, was it?

No, this was not the June quarter. The June quarter was down by - and that is where I get my - of the 7% gold that I did not have to declare at the end of the quarter - 4.7% of that sat in the shaft core factor. And then the shaft core factor plus the plant core factor is your mine core factor just to bore everybody on the line with a huge level of detail now.

So our mine core factor on a sort of a comparative sort of basis in the June quarter averaged up in the order of 75%. It may have been, I can't remember, 74,9; 75,1. But as they gathered between the 75 and the 79%, what that blasted grade was the same which is indicative of the fact that this stuff didn't come out of the plant -- out of the shaft.

That is what the shaft core factor indicated. The balance, therefore, reported to the plant but didn't come out to the end of the plant.

So that would be the two numbers I would be able to give you - would be the way we want to be is 82 where we were during the previous quarter was 79. And the last quarter, the 100 reflection now, was around about 75%.

Could you just tell us what your mine grade was? If you can recall it from March?

Again can I please come back to that again? That is meaningless as it is. By the time you look at these numbers from where I sit you look at things sort of averaged out over the mine, and let's say at least on how we (indiscernible). But let's say the previous quarter we were mining 1482. The next quarter we were mining 1470 or so. But you know that was the order of the difference quarter on quarter. This is and at the same time (indiscernible), as you know is probably the better indicator of numbers. We did check but there was no extra funds coming from stoking (indiscernible) increase of the grade with that number. We also add up in weighted average.

That is really why I make the statement that I make. That when you look at our blasted grade we -- 1% over 13 mines was completely statistically insignificant. We blasted the same stuff. We had not major surprise from the unit, because the bulk of the tonnages came from groups of people giving you more tons from the same working place and, therefore, arguably from more or less the same sort of grade place.

They can at least correct these two numbers with actual specific numbers for you if and when I can just lay my hands on them again. I mean, (indiscernible) for this at the end of the quarter. (MULTIPLE SPEAKERS) --

-- very simply to try and get a handle on where we should be looking to in the September quarter for the year?

Yes; for the moment we are still blasting grades very similar to what we have been blasting before. And that's very dangerous to read too much into four weeks post quarter end. I've burned my fingers enough in many ways of (indiscernible).

But we are blasting the same grade and the grades that are reporting to the plants already at a very good 6 or 7%. So, clearly, that's sort of a temporary lag between blasting the same grades but because of high-volume lower grades reporting to the plant, they get certainly - in the month of July - if there's anything to go by, seems to be worked out of the system.

I think the best we'd be able to do this back some way, some sort of eight months into the quarter we would have to put out proper communication to all of our shareholders but I think it would be a one-month sort of update for what that's worth.

You can see where I am coming from here. I mean if we look at yield in the December quarter it was 4.2 grams a ton I think - thereabouts. We are sitting on a very low base now. It should be reasonable to expect the gold production to increase significantly in this September quarter shouldn't it?

You just need to be careful. When we talk yields that we don't use the Company average yields which, of course, includes huge fluctuations in surface damages. So but certainly our March quarter yield from underground was by no means satisfactory. So this is a drop off that base. I mean certainly I acknowledge and that was what I was trying to communicate today that our average mining grade -- this grade makes us for the moment say I happen to remember the right number of 1482 cm grams per ton.

That number is still a good 7% below where we want (technical difficulties). So we have got the double challenge to -- the huger one, quite honestly, is making sure that what we currently blast reports to the plant, comes out of the plant.

And we are quite optimistic that some of that happen in the June quarter. That will really take the fruits of our flexibility creation that will enable us to then mine that sort of fraction of 6 or 7% higher grade. In other words mine to the average mining grade of the ore body. There is no short-term promise there.

But totally the recovery grade from what we are currently mining, one would realistically expect advance in the coming quarter from there.

There appear to be no further questions at this time, Sir. Would you like to make any closing comments?

It's really just up to me to thank everybody who bothered to listen in. I do hope that we haven't scared off some of the people with the level of detail but I do appreciate at least the level of detail that we need to get to people in order for them to find a level of comfort in the numbers.

I want to thank everybody for listening in and will probably see most of you before we present more quarterly results. Thanks to the investor relations program (indiscernible). Thank you.

Thank you, sir, and good day to you. On behalf of Harmony Gold that concludes this afternoon's conference. Thank you for joining us. You may now disconnect your lines.