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HAR
HAPS
HAR - Harmony Gold Mining Company - Financial Review For The Fourth
Quarter And Year-Ended 30 June 2007
HARMONY GOLD MINING COMPANY LIMITED
Incorporated in 1950
Registration number 1950/038232/06
Share code: HAR
NASDAQ, NYSE: HMY
ISIN: ZAE000015228
Trading Symbols
JSE Limited HAR
New York Stock Exchange, Inc. HMY
NASDAQ HMY
London Stock Exchange plc HRM
Euronext Paris HG
Euronext Brussels HMY
Berlin Stock Exchange HAM1
Issuer code HAPS
HARMONY FINANCIAL REVIEW FOR THE FOURTH QUARTER AND YEAR-ENDED 30 JUNE 2007
ANNUAL HIGHLIGHTS
* Headline earnings of 43 SA cents per share
* Cash earnings per share up by 73%
* First net profit in three years
* Development up by 35%
FINANCIAL SUMMARY FOR THE QUARTER AND YEAR ENDED 30 JUNE 2007
Quarter Quarter Q-on-Q
March 2007 June 2007 % variance
Gold produced - kg 18 010 16 396 (9.0)
- oz 579 032 527 141 (9.0)
Cash costs - R/kg 103 608 149 180 (44.0)
- $/oz 445 655 (47.2)
Cash operating profit - Rm 869 39 (95.5)
- US$m 120 6 (95.0)
Cash earnings - SA c/s 218 10 (95.4)
- US c/s 30 1 (96.7)
Basic profit/(loss) - SA c/s 62 (163) (362.9)
- US c/s 9 (23) (355.6)
Headline profit/(loss) - SA c/s 58 (133) (329.3)
- US c/s 8 (19) (337.5)
Fully diluted earnings/(loss) - SA c/s 61 (163) (367.2)
- US c/s 8 (23) (387.5)
Quarter Financial year
June 2006 2006 2007
Gold produced - kg 17 243 74 242 72 602
- oz 554 373 2 386 925 2 334 198
Cash costs - R/kg 93 968 88 629 112 407
- $/oz 452 433 486
Cash operating profit - Rm 645 1 459 2 554
- US$m 100 229 353
Cash earnings - SA c/s 163 371 642
- US c/s 25 58 89
Basic profit/(loss) - SA c/s (11) (133) 86
- US c/s (2) (21) 12
Headline profit/(loss) - SA c/s (52) (269) 43
- US c/s (8) (42) 6
Fully diluted earnings/(loss) - SA c/s (11) (133) 85
- US c/s (2) (21) 12
TOTAL OPERATIONS - QUARTERLY FINANCIAL RESULTS (Rand/metric) (unaudited)
For the quarter ended
30 June 2007 31 March 2007
Ore milled - t`000 5 308 5 114
Gold produced - kg 16 396 18 010
Gold price received - R/kg 151 552 151 833
Cash operating costs - R/kg 149 180 103 608
R million R million
Revenue 2 485 2 735
Cash operating costs (2 446) (1 866)
Cash operating profit 39 869
Amortisation and depreciation of mining
properties,
mine development costs and mine plant
facilities (208) (308)
Corporate expenditure (87) (50)
Reversal of provision/(provision) for
rehabilitation costs 14 (3)
Operating (loss)/profit (242) 508
Amortisation and depreciation other than
mining properties,
mine development costs and mine plant
facilities (11) (17)
Care and maintenance costs of restructured
shafts (14) (13)
Share based compensation (4) (14)
Exploration expenditure (70) (68)
Impairment of assets (268) -
Loss from associates (1) -
Gain/(loss) on financial instruments 29 (24)
Profit on sale of property, plant and
equipment 93 4
Other (expenses)/income - net (42) 15
Provision for former employees` post
retirement benefits 13 -
Mark-to-market of listed investments 31 29
(Loss)/profit on sale of listed investment (37) 10
Investment income 87 36
Finance cost (236) (106)
(Loss)/profit before taxation (672) 360
Taxation 19 (113)
Net (loss)/profit (653) 247
(Loss)/earnings per share (cents) *
- Basic (loss)/earnings (163) 62
- Headline (loss)/earnings (133) 58
- Fully diluted (loss)/earnings ** *** (163) 61
Dividends per share (cents)
- Interim - -
- Proposed final - -
Prepared in accordance with International Financial Reporting Standards
* Calculated on weighted average number of shares in issue at quarter
end 30 June 2007: 398.6 million (31 March 2007: 398.4 million).
** Calculated on weighted average number of diluted shares in issue at
quarter end 30 June 2007: 403.1 million (31 March 2007: 403.3 million).
*** The effect of the share options is anti-dilutive.
Reconciliation of headline (loss)/profit:
Net (loss)/profit (653) 247
Adjustments:
- Profit on sale of assets (66) (4)
- Profit on sale of GBS investment - (9)
- Profit/(Loss) on disposal of investment in
Goldfields 31 (1)
- Impairment of fixed assets - net of tax 157
Headline (loss)/profit (531) 233
CONDENSED CONSOLIDATED INCOME STATEMENT (reviewed)
For the year ended
30 June 2007 30 June 2006
(restated)*
Notes R million R million
Continuing operations
Revenue 9 148 6 823
Production cost (exclusive of
amortisation and depreciation of
mining properties, mine development costs
and mine plant facilities) 3 (6 866) (5 582)
Amortisation and depreciation of mining
properties,
mine development costs and mine plant
facilities (802) (893)
Amortisation and depreciation other than
mining properties,
mine development costs and mine plant
facilities (61) (57)
Corporate expenditure (249) (174)
Exploration expenditure (194) (71)
Employment termination and restructuring
costs - 72
Care and maintenance costs of
restructured shafts (52) (118)
Share-based compensation (40) (95)
Reversal of provision for rehabilitation
costs 16 20
Profit on sale of property, plant and
equipment 182 40
Reversal of impairment of assets 123 216
Gain/(loss) on financial instruments 4 41 (516)
Other expenses - net (38) (137)
Operating profit/(loss) 1 208 (472)
Loss from associates 5 (19) (105)
(Loss)/profit on sale of listed investment 6 (35) 306
Profit on sale of investment in
subsidiaries - 14
Profit on sale of investment in associate 5 236 -
Provision for former employees` post
retirement benefits 13 (7)
Mark-to-market of listed investments 111 87
Investment income 197 201
Finance cost (515) (436)
Profit/(loss) before tax 1 196 (412)
Taxation (249) (138)
Net profit/(loss) from continuing
operations 947 (550)
Discontinued operations:
(Loss)/profit from discontinued operations 7 (332) 25
Loss from measurement to fair value less
cost to sell 7 (274) -
Net profit/(loss) 341 (525)
Attributable to:
Equity holders of the Company 340 (525)
Minority interest 1 -
341 (525)
Earnings/(loss) per share for profit from
continued operations attributable
to the equity holders of the Company
during the year (cents) 7
- Basic earnings/(loss) 238 (139)
- Fully diluted earnings/(loss) 235 (139)
Earnings/(loss) per share for profit from
discontinued operations attributable
to the equity holders of the Company
during the year (cents) 7
- Basic (loss)/earnings (152) 6
- Fully diluted (loss)/earnings (151) 6
Dividends per share (cents)
- Interim - -
- Proposed final - -
* The comparative figures for 2006 were adjusted to exclude the
discontinued operations.
CONDENSED CONSOLIDATED BALANCE SHEET (Rand)
At 30 June At 31 March At 30 June
2007 2007 2006
Notes R million R million R million
(reviewed) (unaudited) (reviewed)
ASSETS
Non-current assets
Property, plant
and equipment 24 398 24 472 23 318
Intangible assets 2 307 2 270 2 270
Restricted cash 279 509 255
Investment financial assets 3 912 4 430 2 255
Investments in associates 5 6 - 1 909
Deferred income tax 2 321 1 548 1 975
Trade and other receivables 69 42 107
33 247 33 271 32 089
Current assets
Inventories 742 722 666
Trade and other receivables 801 1 180 721
Income and mining taxes 16 25 27
Cash and cash equivalents 711 476 651
2 270 2 403 2 065
Non-current assets
classified as held
for sale 7 1 267 - -
3 582 2 403 2 065
Total assets 36 829 35 674 34 154
EQUITY AND LIABILITIES
Share capital and reserves
Share capital 25 636 25 590 25 489
Other reserves (370) (79) (271)
Accumulated loss (1 681) (1 023) (2 015)
23 585 24 488 23 203
Non-current liabilities
Borrowings 9 2 794 3 494 2 591
Deferred income tax 5 000 4 211 4 275
Derivative financial
instruments 10 - 448 631
Provisions for other
liabilities and charges 1 250 1 001 983
9 044 9 154 8 480
Current liabilities
Trade and other payables 1 091 1 038 1 199
Accrued liabilities 547 586 259
Borrowings 1 804 401 1 006
Cash and cash equivalents 220 - -
Shareholders for dividends 7 7 7
3 669 2 032 2 471
Liabilities directly
associated with non-current
assets classified as
held for sale 7 530 - -
Total liabilities 4 199 2 032 2 471
Total equity and liabilities 36 829 35 674 34 154
Number of ordinary shares in
issue 399 608 384 398 736 629 394 369 190
Net asset value per share
(cents) 5 902 6 141 5 771
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED
30 JUNE 2007 (Rand)(reviewed)
Issued share Other Retained
capital reserves earnings Total
R million R million R million R million
Balance as at 1 July
2006 25 489 (271) (2 015) 23 203
Issue of share capital 147 - - 147
Currency translation
adjustment and other - (99) - (99)
Net earnings - - 341 341
Dividends paid - - (7) (7)
Balance as at 30 June
2007 25 636 (370) (1 681) 23 585
Balance as at 1 July
2005 25 289 (586) (1 490) 23 219
Issue of share capital 200 - - 200
Currency translation
adjustment and other - 315 - 315
Net loss - - (525) (531)
Balance as at 30 June
2006 25 489 (271) (2 015) 23 203
SUMMARISED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2007 (Rand)
Year Year Quarter Quarter
ended ended ended ended
30 June 30 June 30 June 31 March
2007 2006 2007 2007
R million R million R million R million
(reviewed) (reviewed) (unaudited) (unaudited)
Cash flow from operating activities
Cash generated/(utilised) by
operations 1 221 346 (248) 511
Interest and dividends received 204 224 87 36
Interest paid (226) (201) (83) (48)
Income and mining taxes paid (14) (12) (11) 3
Cash generated/(utilised) by
operating activities 1 185 357 (255) 502
Cash flow from investing activities
Decrease/(Increase) in restricted
cash (29) (203) 225 (215)
Net proceeds on disposal of listed
investments 395 2 462 166 199
Acquisition of investment in
associate - (2 012) - -
Net additions to property, plant
and equipment (2 549) (1 667) (784) (706)
Other investing activities (47) - (10) (52)
Cash utilised by investing
activities (2 230) (1 420) (401) (774)
Cash flow from financing activities
Long-term loans raised/(repaid) 802 (393) 651 152
Ordinary shares issued - net of
expenses 138 183 37 2
Dividends paid (7) (7) (7) -
Cash generated/(utilised) by
financing activities 933 (217) 681 154
Foreign currency translation
adjustments (45) 153 (7) (15)
Net (decrease)/increase in cash and
equivalents (157) (1 127) 18 (133)
Cash and equivalents - beginning of
period 651 1 778 476 609
Cash and equivalents - end of period 494 651 494 476
RECONCILIATION BETWEEN CASH OPERATING PROFIT AND CASH GENERATED/(UTILISED)
BY OPERATIONS FOR THE YEAR ENDED 30 JUNE 2007 (Rand)(unaudited)
Year Year Quarter Quarter
ended ended ended ended
30 June 30 June 30 June 31 March
2007 2006 2007 2007
R million R million R million R million
Cash operating profit 2 554 1 459 39 869
Other cash items per income statement:
Other income (Including interest
received and profit
on sale of mining assets) 340 203 138 56
Employment termination, restructuring
and care
and maintenance costs (66) (96) (14) (13)
Corporate, administration and other
expenditure (259) (185) (87) (50)
Exploration expenditure (239) (106) (70) (68)
Provision for rehabilitation costs (3) (6) (1) (1)
Cash flow statement adjustments:
Cost of close out of hedges (576) (344) (367) (70)
Profit on sale of mining assets (182) (65) (93) (4)
Interest and dividends received (204) (224) (87) (36)
Other non-cash items (103) (87) (9) (25)
Effect of changes in operating working
capital items:
Receivables (212) (54) 241 (246)
Inventories (198) (82) (143) 21
Accounts payable 162 (30) 244 (208)
Accrued liabilities 207 (37) (39) 286
Cash generated/(utilised) by operations 1 221 346 (248) 511
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE
YEAR ENDED 30 JUNE 2007 (reviewed)
1. Basis of accounting
The condensed consolidated financial statements for the year ended 30 June 2007
have been prepared using accounting policies that comply with International
Financial Reporting Standards (IFRS), which are consistent with the accounting
policies used in the audited annual financial statements for the year ended 30
June 2006. These condensed consolidated financial statements are prepared in
accordance with IAS 34, Interim Financial Reporting and should be read in
conjuction with the financial statements as at and for the year ended 30 June
2006.
2. New accounting standards and IFRIC interpretations
Certain new accounting standards and IFRIC interpretations have been published
that are mandatory for accounting periods beginning on or after 1 January 2007.
These new standards and interpretations have not been early adopted by the
Group and a reliable estimate of the impact of the adoption thereof for the
Group cannot yet be determined for all of them, as management are still in the
process of determining the impact thereof on future financial statements.
At the date of finalising these financial statements, the following Standards
and Interpretations were in issue but not yet effective:
Title Effective date
New Statement
? IFRS 7 - Financial instruments: # Financial year commencing
Disclosures, and a complementary on or after 1 January 2007
Amendment to IAS 1, Presentation
of Financial Statements
- capital Disclosures
? IFRS 8 - Operating segments # Financial year commencing on
or after 1 January 2009
Amendments
? IFRS 3 - Implementation guidance # Financial year commencing on
or after 1 January 2007
? IAS 23 - (Revised) Borrowings Costs # Financial year commencing on
(Revised March 2007) or after 1 January 2009
New Interpretation
? IFRIC Interpretation 10 # Financial year commencing on
- Interim financial reporting or after 1 November 2006
and impairment
? IFRIC 11 - IFRS 2 - Group and Treasury # Financial year commencing on
Share Transactions or after 1 March 2007
? IFRIC 12 - Service Concession # Financial year commencing on
Arrangements or after 1 January 2008
# Not yet assessed
3. Cash operating profit
The income statement is now presented `by nature` as per the requirements of
IAS1 - Presentation of financial statements.
The major differences are that `cash operating costs` and `cash operating
profit` are not reflected on the face of the income statement. If no change was
effected, the cash operating profit would have been as follows:
30 June 30 June
2007 2006
R million R million
Revenue 9 148 6 823
Cash operating costs (6 866) (5 582)
Cash operating profit 2 282 1 241
4. Gain/(loss) on financial instruments
A decrease in the volatility of the gold price resulted in a decrease in the
mark-to-market adjustment on the Australian gold hedge book.
5. Investment in associate
The Group accounted for its 29.2% stake in Western Areas Limited through its
subsidiary, ARMgold/Harmony Joint Investment Company Pty Ltd, on the equity
basis for accounting until 1 December 2006. On this date the Group accepted
GoldFields Limited`s (GFI) offer of 35 GFI shares for every 100 Western Area
Limited shares held. This conversion resulted in a profit of R236 million. This
investment in GFI is now classified as available for sale and included in
investments in financial assets on the balance sheet. The GFI shares were sold
subsequent to year-end (refer to note 10).
30 June 30 June
2007 2006
R million R million
6. (Loss)/Profit on sale of listed investments
Loss on sale of investment in San Gold Corporation - (1)
(Loss)/Profit on sale of investment in GoldFields
Limited (35) 307
(35) 306
7. Non-current assets held for sale and discontinued operations
The assets and liabilities related to Mt Magnet and South Kal (operations in
Australia), ARMgold Welkom and Orkney operations (operations in the Free State
and Northwest areas), and Kudu and Sable (operations in the Free State area),
which have been presented as held for sale following the approval by the
Group`s management and the Board of Directors on 20 April 2007.
30 June 30 June
2007 2006
R million R million
Operating cash flows (370) (100)
Investing cash flows 48 339
Financing cash flows - (159)
Foreign exchange translation adjustment 23 18
Total cash flows (299) 99
(a) Non-current assets classified as held for sale
Property, plant and equipment 876 -
Restricted cash 5 -
Investment in financial assets 64 -
Deferred income tax 103 -
Inventories 121 -
Trade and other receivables 84 -
Income and mining taxes 12 -
Cash and cash equivalents 3 -
1 267 -
(b) Liabilities directly associated with
non-current assets classified as held for sale
Borrowings 1 -
Deferred income tax 82 -
Provisions for other liabilities and charges 257 -
Trade and other payables 136 -
Accrued liabilities 54 -
530 -
(c) Analysis of the results of discontinued
operations, and the results recognised
on the remeasurement of assets or disposal group
Revenue 1 567 1 216
Expenses (1 703) (1 190)
(Loss)/Profit from discontinued operations before
tax (136) 26
Taxation (196) (1)
(Loss)/Profit from discontinued operations after tax (332) 25
Pre-tax loss recognised on the remeasurement to
fair value less cost to sell (391) -
Tax 117 -
(Loss)/Profit for the year from discontinued
operations (606) 25
8. Earnings/(Loss) per share
Earnings/(Loss) per share is calculated on weighted average number of shares in
issue for the year ended 30 June 2007: 397.9 million (30 June 2006:
392.7 million)
The fully diluted earnings/(loss) per share is calculated on weighted average
number of diluted shares in issue for the year ended 30 June 2007: 402.4
million (30 June 2006: 392.7 million). The effect of the share options is
anti-dilutive.
30 June 30 June
2007 2006
Total earnings/(loss) per share (cents):
- Basic earnings/(loss) 86 (133)
- Headline earnings/(loss) 43 (263)
- Fully diluted earnings/(loss) 85 (133)
R million R million
Reconciliation of headline earnings/(loss)
Continued operations
Net profit/(loss) 947 (550)
Adjusted for:
Profit on sale of property, plant and equipment (129) (65)
Loss/(Profit) on sale of listed investment 30 (306)
Profit on sale of investment in associate (220) -
Profit on sale of subsidiary - (14)
Reversal of impairment of assets (116) (151)
Headline profit/(loss) 512 (1 058)
Discontinued operations
Net (loss)/profit (606) 25
Adjusted for:
Profit on sale of property, plant and equipment - -
Profit on sale of listed investment (7) -
Impairment of assets 273 -
Headline (loss)/profit (340) 25
Total headline profit/(loss) 172 (1 033)
30 June 30 June
2007 2006
R million R million
9. Borrowings
Unsecured long-term borrowings
Convertible unsecured fixed rate bonds 1 541 1 463
Rand Merchant Bank term loan facility - 1 000
Africa Vanguard Resources (Proprietary) Limited 32 32
1 573 2 495
Less: Short term portion - (1 000)
Total unsecured long-term borrowings 1 573 1 495
Secured long-term borrowings
GoldFields Limited - 5
Westpac Bank Limited 2 -
Africa Vanguard Resources (Nedbank Limited) 170 154
ARM Empowerment Trust 1 (Nedbank Limited) 450 402
ARM Empowerment Trust 2 (Nedbank Limited) 601 540
Auriel Alloys - 1
Performance Equity Swap (Rand Merchant Bank) 752 -
Bridging finance (Rand Merchant Bank) 500 -
Redeemable preference shares (Rand Merchant Bank) 550 -
3 025 1 102
Less: Short term portion (1 804) (6)
Total secured long-term borrowings 1 221 1 096
Total long-term borrowings 2 794 2 591
Subsequent to year end the Performance Equity Swap and the Redeemable
preference shares were settled (refer to note 10).
10. Derivative financial instruments
Hedge book
During May 2007, Harmony closed out the remainder of the Australian hedge book
inherited with the acquisition of the Hill 50 mine in Western Australia. 220
000 ounces were closed out at an average spot rate of AUD808.887 per ounce, for
a total cost of AUD72.8 million (R418.4 million).
On year-end partial settlement was effected with available cash resources,
leaving AUD14.12 million (R84.7 million) to be settled during July 2007.
The mark-to-market movement for the year was a positive R35.4 million. The
mark-to-market value of the hedge book as at 29 June 2007 was a negative
AUD14.12 million (R84.7 million) (at 30 June 2006: R631 million) and represents
the residual cash settlement cost associated with the unwinding of the book.
Forward exchange commitment
Abele an indirect subsidiary, had entered into a contract in November 2006 for
the purchase of the mining fleet to be used on the Hidden Valley project. The
contract is in four different currencies and the estimated value is R241.7
million. The delivery date for the equipment has been split into two phases
with the first phase received in April 2007 and the second phase being expected
in November 2007.
The underlying cash flows that will be required by the contract will therefore
be modified in accordance with movements in the foreign exchange rates to which
the contract is linked. The embedded derivative relating to the exchange rates
were calculated based on the adjusted price at 30 June 2007 and Price Retail
Index (PRI) movements since September 2005.
The mark-to-market movement for the embedded derivative was a positive
R5.4 million.
30 June 30 June
2007 2006
R million R million
11. Commitments and Contingencies
Capital expenditure commitments
Contracts for capital expenditure 352 153
Authorised by the directors but not contracted for 1 881 2 678
2 233 2 831
This expenditure will be financed from existing
resources and where appropriate, borrowings.
Contingent liabilities
Guarantees and suretyships 18 18
Environmental guarantees 129 129
147 147
12. Subsequent events
(a) On 24 August 2007 the Group entered into an agreement with RMB Morgan
Stanley (Pty) Ltd (RMB) to sell 7 348 079 of its GFI ordinary shares at R100
per ordinary share, resulting in a loss of R35.02 per share. The proceeds were
used to settle the Randfontein redeemable preference shares issued to RMB on 5
April 2007.
(b) On 24 August 2007 the Group also settled the Performance Equity Swap with
RMB linked to the balance of its GFI shares (5 747 000 shares) at R100 per
ordinary share, resulting in a loss of R35.02 per share.
13. Audit review
The condensed consolidated financial statements for the year ended 30 June 2007
have been reviewed in terms of Rule 3.23 of the Listings Requirements of the
JSE Limited by the company`s auditors, PricewaterhouseCoopers Inc. Their
unqualified review opinion is available for inspection at the company`s
registered office. The results for quarter 3 and 4 and the convenience
translation of the 2007 financial year presented in this document has not been
reviewed.
27 August 2007
Sponsor: Merrill Lynch SA
Date: 27/08/2007 09:15:02 Produced by the JSE SENS Department.
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