| Thu 8 May 2008, 8:00 | | HAR - Harmony - Unaudited Financial Review For The |
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HAR
HAPS
HAR - Harmony - Unaudited Financial Review For The Third Quarter Ending
31 March 2008
Harmony Gold Mining Company Ltd
Incorporated in the Republic of South Africa
Registration number: 1950/038232/06
Share code: HAR
ISIN: ZAE000015228
("Harmony" or the "Company")
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
UNAUDITED FINANCIAL REVIEW FOR THE THIRD QUARTER ENDING 31 MARCH 2008
QUARTERLY HIGHLIGHTS
- Harmony announces Newcrest as PNG partner
- Total cash operating cost down by 8.9%
- Cash operating profit increased to R828 million
- Headline earnings of 42 cents per share for continuing operations
- Restructuring complete, benefits to flow
FINANCIAL SUMMARY FOR THE THIRD QUARTER ENDING 31 MARCH 2008
(All results exclude Discontinued Operations unless otherwise indicated)
Quarter Quarter
March 2008 December 2007
Gold produced - kg 10 347 12 403
- oz 332 662 398 764
Cash costs - R/kg 145 514 133 234
- $/oz 609 613
Cash operating profit - Rm 828 450
- US$m 111 66
Basic earnings/(loss) - SA c/s 41 (49)
- US c/s 6 (7)
Headline earnings/(loss) - SA c/s 42 (43)
- US c/s 6 (6)
Fully diluted earnings/(loss) - SA c/s 41 (48)
- US c/s 6 (7)
Q-on-Q Year to date
% change 2008
Gold produced - kg (16.6) 36 275
- oz (16.6) 1 166 263
Cash costs - R/kg (9.2) 136 608
- $/oz 0.7 598
Cash operating profit - Rm 84.0 1 594
- US$m 68.2 225
Basic earnings/(loss) - SA c/s 183.7 (137)
- US c/s 185.7 (19)
Headline earnings/(loss) - SA c/s 197.7 (32)
- US c/s 200.0 (5)
Fully diluted earnings/(loss) - SA c/s 185.4 (136)
- US c/s 185.7 (19)
CHIEF EXECUTIVE`S REVIEW
Harmony has been through another demanding and active quarter of streamlining
our operations in line with our strategic objectives. Much has been
accomplished in the last two quarters and I am pleased with our progress to
date. The accomplishments are attributed primarily to the sustained commitment
and teamwork of Harmony`s passionate leaders and hard-working people throughout
the company.
Harmony`s internal leadership conference which was held over two days in March
reinforced the elements of `Back to Basics`, which include production, safety,
planning and reviewing, cost control and services. One of the most important
aims of the conference is to spend quality time with the company`s leaders by
exchanging and sharing of knowledge in a more inter-active and productive
manner. The March conference facilitated both a keen understanding of the
changing dynamics within Harmony and assisted leaders to focus on positioning
the company for the challenges and opportunities ahead. We have been through
some pain, but I am confident that we have turned the corner and can begin to
build on the new foundation.
To this end, we have commenced the rebuilding phase and over the ensuing months
the company`s leaders will roll-out the business strategy to all the shaft
teams. Through strategically focused safety and productivity targets, we will
begin to reflect improvements in the critical areas of production, tonnes per
man, grade, cost reduction, but more importantly, in Rand/kg.
To accelerate the rebuilding phase, changes have already been effected to
Harmony`s mining structure with the elimination of coaches and the
re-introduction of mine captains and shift bosses to improve production levels.
We have focused on our strategies of restructuring for profitability by
shedding or closing high-cost operational areas and assets, and accelerating
our underground and surface projects. Our restructuring has had sweeping
implications for Harmony in that some of our high electricity consumption
work-areas and high-cost operations have had to be closed and Conops terminated
where it proved to be ineffective and inefficient. In this way, Harmony was
able to absorb the 10% reduction in electricity supply because we were able to
incorporate this challenge as another component of our restructuring efforts.
However, we have submitted our request to Eskom for additional power that will
be required by our projects as they begin to ramp-up to full capacity.
Over the past two quarters the company`s staff complement has been reduced by
5985 employees. A reduction of 1 421 employees was evident in the March 2008
quarter. Noticeably the company`s restructuring phase has had a negative impact
and consequences on productivity. The termination of Conops at three of our
operations - Masimong during the December 2007 quarter; Elandsrand and Tshepong
during the March 2008 quarter - caused the SA underground tonnages and, to some
extent, the grade to drop due to the reduction of the labour force and, in some
instances, transferring labour to other operations.
External factors also played their part. Harmony`s operations experienced a
loss of production due to this year`s lengthy Christmas holiday period. The
effects of a five-day power cut were felt and similarly when it was restored at
80% of our previous consumption and thereafter the resultant build-up phase
from 80% to 90% power supply. This resulted in an estimated total loss of more
than 800 kilograms from our operations.
Financials
Harmony`s operational performance from its continuing operations for the
quarter under review was disappointing with 7.2% lower tonnages at 4 125 000
tonnes compared with 4 445 000 tonnes in the December quarter, resulting in a
16.6% decrease in kilograms produced of 10 347kg versus 12 403kg.
Total grade for the group was 10% lower at 2.51g/t, while the grade from our SA
underground operations was recorded at 4.81g/t a 1.2% drop on the previous
quarter. The company`s cash operating costs increased by 9.2% to R145 514/kg
from R133 234/kg.
It is pleasing to note that some of our restructuring efforts were evident in
this quarter with the R147 million reduction in working costs. Total cash
operating costs were down 8.9% to R1 506 million from R1 652 million.
A higher received gold price of US$944.40/oz and a weaker, thus more
favourable, R/US$ exchange rate of R7.43/$ (R6.77/$) resulted in higher
revenues of R2.3 billion compared with R2.1 billion and a net profit of R164
million compared with a net loss of R195 million for the previous quarter.
Headline earnings stood at 42 cents per share versus a loss of 43 cents per
share for the December 2007 quarter.
IT Financial System
We have made progress over the last two quarters with re-implementing the IT
financial system and the retraining of all employees related to the job has
commenced. We have performed the necessary checks and balances and we are
confident that we will have a clean "bill of health" at the end of this
financial year.
Strengthening the balance sheet
We continued to forge ahead with our activities to create value, strengthen the
company`s balance sheet and improve operational performance. Accordingly, we
are determined to get all our operations on a sound footing with all operations
profitable after taking capital expenditure into account. In our short-life
operations we are considering ways of extending the life of mines. The
operations have all the required infrastructure and we are considering options
of increasing development capital.
The conditions precedent for the R1.9 billion transaction with Pamodzi
Resources Fund are progressing smoothly and we are confident that these should
be fulfilled by end of June 2008. Mr John Munro who has been appointed Chief
Executive Officer of the newly named Rand Uranium Company commenced duties on 5
May 2008. We wish him every success with developing the new uranium entity into
a world-class company in which we will hold a 40% stake.
On 17 January 2008, Harmony signed two separate transactions with African
Precious Minerals (APM): in terms of the sale agreement APM would acquire 87% of
Jeanette Gold Mines Limited for a purchase consideration of 1 500 000 ordinary
APM shares and 1 500 000 half warrants. The shares and warrants to be granted
to Harmony are estimated at being worth US$7.5 million (R52.5 million) and
constitutes an 11% shareholding in APM. The second transaction entails two
earn-in agreements for the Evander 6 shaft and Twistdraai assets in the Evander
basin. These are subject to and conditional upon the fulfilment of significant
conditions precedent by APM.
I believe that the earn-in agreement with APM is an excellent way of
progressing our low priority projects to bankable feasibility stage in the
current positive gold-price environment. In addition, the formation of
strategic alliances with other companies allows us to optimise the use of our
resources without placing additional pressure on our capital expenditure.
On 27 February 2008, Pamodzi Gold took full control of the Orkney assets
following the fulfilment of all the conditions precedent. The R345 million
purchase consideration for the assets was settled by the issuing of 30 million
Pamodzi Gold shares, bringing Harmony`s shareholding in Pamodzi Gold to 32%.
Although our Papua New Guinea (PNG) transaction was executed in the fourth
quarter of 2008, I believe it prudent to make mention of the fact that Harmony
and Newcrest Mining Limited of Australia signed a 50:50% joint venture
agreement on 22 April 2008 for the development of Harmony`s PNG assets.
Newcrest will earn its 50% interest in the new joint venture by contributing a
maximum of US$525 million which will be paid in two tranches. An initial US$180
million payment to acquire a 30.01% interest by 30 June 2008, together with a
reimbursement to Harmony of US$45 million in project expenditure, and a farm-in
commitment for the remaining 19.99% of US$300 million, to fund project
expenditure up to the commencement of mining operations at Hidden Valley.
The introduction of a quality partner such as Newcrest with significant
technical skills, particularly in copper mining and bulk underground mining
techniques including block caving techniques will provide additional expertise
to the existing Harmony team in PNG and will add to the development potential
of the PNG assets.
For Harmony, the creation of this joint venture facilitates significant capital
investment in the PNG assets and substantially removes Harmony`s obligation to
continue funding the development of these assets entirely from our own cash
flows. A further announcement will be made on SENS and in the press as soon as
the financial effects are finalised.
Class action
We have been made aware of a pending class action in the United States of
America against Harmony whereby some ADR holders are seeking damages pertaining
to the company`s business practices. We have retained legal professionals in
that country to advise Harmony.
THE THIRD QUARTER ENDING 31 MARCH 2008 UNDER REVIEW
Harmony`s SA continuing underground operations, delivered a disappointing
operational performance for the third quarter ending 31 March 2008. Negative
impacts included lower production and kilograms produced and loss of production
due to the December holidays, the power outage and subsequent power build-up
from 80% to the current 90%.
Tonnes Milled
All of the company`s continued underground operations posted lower tonnages for
the 31 March 2008 quarter. Tonnages decreased by 15.8% to 1 934 000 tonnes
compared with 2 297 000 tonnes previously, resulting in the 16.8% drop in gold
production from 11 175 kg to 9 302 kg for the quarter under review. Besides the
above cited reasons the termination of Conops at a further two of the company`s
operations, the restructuring at Evander 7 and Bambanani and the 18 days
suspension of production at Doornkop all contributed to the lower performance.
Recovery Grades
Recovery grades were steady to marginally down at 4.81g/t from 4.87g/t.
Cost Control
Cash costs were higher throughout the company with the exception of Masimong
where costs were well contained during the quarter. Although cost control
measures were applied, operating costs increased by 8.9% to R150 795/kg from
R138 531/kg previously, all as a result of lower kilogram production.
Analysis of earnings per share
Quarter ended Quarter ended
Earnings per share (SA cents) March 2008 December 2007
Cash earnings 207 113
Basic earnings/(loss) 41 (49)
Headline earnings/(loss) 42 (43)
Fully diluted earnings/(loss) 41 (48)
CONDENSED CONSOLIDATED INCOME STATEMENT (Unaudited) (Rand)
Quarter ended
March December March
Notes 2008 2007 2007
*
R million R million R million
Continuing operations
Revenue 2 334 2 102 2 082
Production cost (1 506) (1 652) (1 338)
Amortisation and
depreciation (190) (228) (189)
Corporate expenditure (55) (68) (44)
Exploration expenditure (55) (42) (25)
Care and maintenance costs
of restructured shafts (24) (10) (10)
Employment termination and
restructuring costs 2 (86) (75) -
Share based compensation (4) (9) (14)
Gain/(loss) on financial
instruments 5 (14) (24)
Provision for doubtful debt (5) (75) -
Other (expenses)/income -
net (15) (6) 24
Operating profit/(loss) 399 (77) 462
Loss from associates (10) - -
Mark-to-market of listed
investments - - 29
Profit/(loss) on sale of
listed investments 6 - - 1
Profit on sale of
investment in associate - - -
Investment income 54 74 31
Finance cost (123) (138) (101)
Profit/(loss) before
taxation 320 (141) 422
Taxation (156) (54) (107)
Net profit/(loss) from
continuing operations 164 (195) 315
Discontinued operations 3
Profit/(loss) from
discontinued operations 85 226 (67)
Profit/(loss) on the sale
of assets 100 (51) -
(Loss)/profit from
measurement to
fair value less cost to sell (4) 66 -
Net profit/(loss) 345 46 248
Earnings/(loss) per share
from continuing operations
attributable to the equity
holders of the company
during the year (cents) 4
- Basic earnings/(loss) 41 (49) 79
- Headline earnings/(loss) 42 (43) 78
- Fully diluted
earnings/(loss) 41 (48) 78
Earnings/(loss) per share
from discontinuing
operations attributable to
the equity holders
of the company during the
year (cents) 4
- Basic earnings/(loss) 45 60 (17)
- Headline earnings/(loss) 21 57 (19)
- Fully diluted
earnings/(loss) 45 59 (17)
Total earnings/(loss) per
share from all
operations attributable to
the equity holders
of the company during the
year (cents) 4
- Basic earnings/(loss) 86 11 62
- Headline earnings 63 14 59
- Fully diluted
earnings/(loss) 86 11 61
Nine months ended
March March
2008 2007
*
R million R million
Continuing operations
Revenue 6 549 6 085
Production cost (4 955) (4 073)
Amortisation and depreciation (617) (539)
Corporate expenditure (196) (161)
Exploration expenditure (142) (111)
Care and maintenance costs of restructured shafts (42) (42)
Employment termination and restructuring costs (162) -
Share based compensation (23) (36)
Gain/(loss) on financial instruments (5) 12
Provision for doubtful debt (80) -
Other (expenses)/income - net (42) 95
Operating profit/(loss) 285 1 230
Loss from associates (10) (18)
Mark-to-market of listed investments 33 81
Profit/(loss) on sale of listed investments (459) 1
Profit on sale of investment in associate - 236
Investment income 194 102
Finance cost (383) (283)
Profit/(loss) before taxation (340) 1 349
Taxation (207) (342)
Net profit/(loss) from continuing operations (547) 1 007
Discontinued operations
Profit/(loss) from discontinued operations 289 (6)
Profit/(loss) on the sale of assets 28 -
(Loss)/profit from measurement to
fair value less cost to sell 55 -
Net profit/(loss) (175) 1 001
Earnings/(loss) per share from continuing operations
attributable to the equity holders of the company
during the year (cents)
- Basic earnings/(loss) (137) 253
- Headline earnings/(loss) (32) 175
- Fully diluted earnings/(loss) (136) 250
Earnings/(loss) per share from discontinuing
operations attributable to the equity holders
of the company during the year (cents)
- Basic earnings/(loss) 93 (2)
- Headline earnings/(loss) 67 (4)
- Fully diluted earnings/(loss) 92 (1)
Total earnings/(loss) per share from all
operations attributable to the equity holders
of the company during the year (cents)
- Basic earnings/(loss) (44) 251
- Headline earnings 35 171
- Fully diluted earnings/(loss) (44) 249
* The comparative figures were adjusted to exclude further discontinued
operations and interest capitalised, but not adjusted for approximately R250
million in cost, relating to the March 2007 quarter that was only captured in
the June 2007 quarter, as previously reported.
CONDENSED CONSOLIDATED BALANCE SHEET (Rand)
At At At
March December June
2008 2007 2007
Notes (Unaudited) (Reviewed) (Audited)
R million R million R million
Assets
Non-current assets
Property, plant and
equipment 26 407 25 133 24 506
Intangible assets 5 2 477 2 307 2 307
Restricted cash 80 81 5
Investments in
financial assets 6 1 413 1 402 1 387
Investments in
associates 7 341 7 7
Deferred income tax 2 711 2 462 2 321
Trade and other
receivables 7 39 95
33 436 31 431 30 628
Current assets
Inventories 654 709 742
Investments in
financial assets 6 - - 2 484
Trade and other
receivables 993 851 918
Income and mining taxes 58 41 66
Restricted cash - - 274
Cash and cash
equivalents 346 425 711
2 051 2 026 5 195
Non-current assets
classified as held
for sale 3 1 716 2 001 1 284
3 767 4 027 6 479
Total assets 37 203 35 458 37 107
Equity and liabilities
Share capital and
reserves
Share capital 5 25 866 25 677 25 636
Other reserves 731 84 (349)
Accumulated loss (1 779) (2 124) (1 604)
24 818 23 637 23 683
Non-current liabilities
Borrowings 8 1 918 1 878 1 743
Deferred income tax 5 310 5 191 5 031
Provisions for other
liabilities and charges 1 078 1 082 1 216
8 306 8 151 7 990
Current liabilities
Trade and other
payables 722 686 1 488
Income and mining taxes 195 73 50
Provisions and
accrued liabilities 261 222 267
Borrowings 8 2 009 1 995 2 855
Bank overdraft - - 220
Shareholders for
dividends 6 7 7
3 193 2 983 4 887
Liabilities directly
associated with
non-current assets
classified as held
for sale 3 886 687 547
4 079 3 670 5 434
Total equity and
liabilities 37 203 35 458 37 107
Number of ordinary
shares in issue 402 818 020 400 196 978 399 608 384
Net asset value per
share (cents) 6 161 5 906 5 927
The accompanying notes are an integral part of these condensed consolidated
financials statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Unaudited) (Rand)
Issued share Other
capital reserves
R million R million
Balance - 30 June 2007 (as previously reported) 25 636 (349)
Change in accounting policy for the
capitalisation
of interest on assets under construction - -
Balance - 30 June 2007 (restated) 25 636 (349)
Issue of share capital 230 -
Currency translation adjustment and other - 1 080
Net loss - -
Balance as at 31 March 2008 25 866 731
Balance - 30 June 2006 (as previously reported) 25 489 (271)
Change in accounting policy for the
capitalisation
of interest on assets under construction - -
Balance - 30 June 2006 (restated) 25 489 (271)
Issue of share capital 101 -
Currency translation adjustment and other - 192
Net profit - -
Balance as at 31 March 2007 25 590 (79)
Accumulated
loss Total
R million R million
Balance - 30 June 2007 (as previously reported) (1 681) 23 606
Change in accounting policy for the capitalisation
of interest on assets under construction 77 77
Balance - 30 June 2007 (restated) (1 604) 23 683
Issue of share capital - 230
Currency translation adjustment and other - 1 080
Net loss (175) (175)
Balance as at 31 March 2008 (1 779) 24 818
Balance - 30 June 2006 (as previously reported) (2 015) 23 203
Change in accounting policy for the capitalisation
of interest on assets under construction 48 48
Balance - 30 June 2006 (restated) (1 967) 23 251
Issue of share capital - 101
Currency translation adjustment and other - 192
Net profit 1 001 1 001
Balance as at 31 March 2007 (966) 24 545
CONDENSED CONSOLIDATED CASH FLOW STATEMENT (Unaudited) (Rand)
Three months ended
March December
Notes 2008 2007
R million R million
Cash flow from operating activities
Cash generated/(utilised) by operations 794 (376)
Interest and dividends received 64 76
Interest paid (123) (118)
Income and mining taxes paid (41) (9)
Cash generated/(utilised) by operating
activities 694 (427)
Cash flow from investing activities
Decrease/(increase) in restricted cash 20 (71)
Net proceeds on disposal of listed
investments - -
Net additions to property, plant and
equipment (884) (734)
Other investing activities 6 65
Cash utilised by investing activities (858) (740)
Cash flow from financing activities
Long-term loans raised - 10
Long-term loans repaid (6) -
Ordinary shares issued - net of expenses 40 5
Cash generated by financing activities 34 15
Foreign currency translation adjustments 43 16
Net (decrease)/increase in cash and
equivalents (87) (1 136)
Cash and equivalents - beginning of period 435 1 571
Cash and equivalents - end of period 9 348 435
Nine months ended
March March
2008 2007
R million R million
Cash flow from operating activities
Cash generated/(utilised) by operations 472 1 469
Interest and dividends received 209 117
Interest paid (300) (143)
Income and mining taxes paid (62) (3)
Cash generated/(utilised) by operating activities 319 1 440
Cash flow from investing activities
Decrease/(increase) in restricted cash 223 -
Net proceeds on disposal of listed investments 1 310 229
Net additions to property, plant and equipment (2 451) (1 765)
Other investing activities 20 (66)
Cash utilised by investing activities (898) (1 602)
Cash flow from financing activities
Long-term loans raised 2 098 151
Long-term loans repaid (1 808) -
Ordinary shares issued - net of expenses 64 101
Cash generated by financing activities 354 252
Foreign currency translation adjustments 79 (11)
Net (decrease)/increase in cash and equivalents (146) 79
Cash and equivalents - beginning of period 494 906
Cash and equivalents - end of period 348 985
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE
QUARTER AND NINE MONTHS ENDED 31 MARCH 2008
1. Accounting policies
(a) Basis of accounting
The condensed consolidated interim financial statements for the period ended 31
March 2008 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 2007, except for accounting policy changes made after the
date of the annual financial statements. These condensed consolidated interim
financial statements are prepared in accordance with IAS 34, Interim Financial
Reporting, and should be read in conjunction with the financial statements for
the year ended 30 June 2007.
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 2008.
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 of these financial statements, the following
Standards and Interpretations were in issue but not yet effective:
Title Effective date
New Statement
- IFRS 8 Operating Segments ^ Financial year commencing on or after
1 January 2009
Amendments
- IAS 1 (Revised) - Presentation of ^ Financial year commencing on or after
Financial Statements Revised 1 January 2009
- IAS 27 (Revised) - Consolidated # Financial year commencing on or after
and Separate Financial Statements 1 July 2009
- IAS 32 (Revised) - Financial # Financial year commencing on or after
Instruments: Presentation 1 January 2009
- IFRS 2 (Revised) - Share-based # Financial year commencing on or after
Payments 1 January 2009
- IFRS 3 (Revised) - Business # Financial year commencing on or after
Combinations 1 July 2009
New Interpretation
- IFRIC 12 - Service Concession * Financial year commencing on or after
Arrangements 1 January 2008
- IFRIC 13 - Customer Loyalty * Financial year commencing on or after
Programmes 1 July 2008
- IFRIC 14 - IAS 19 The Limit on # Financial year commencing on or after
a Defined Benefit Asset, 1 January 2008
Minimum Funding Requirements and their
Interactions
^ Affects disclosure
* Will not impact materially
# Not yet assessed
(b) Implementation of accounting policy
IAS 23 (Revised) - Borrowing Costs: The company early adopted IAS 23 (Revised)
- Borrowing Costs, retrospectively as of 1 July 2000, which requires that
management capitalise borrowing costs directly attributable to the acquisition
and construction of qualifying assets. Qualifying assets are assets that take a
substantial time to get ready for their intended use.
The impact of this adjustment was as follows:
Quarter ended
March December March
2008 2007 2007
(Unaudited) (Unaudited) (Unaudited)
R million R million R million
Effect on net loss:
Decrease in interest expense 11 22 5
Income tax (3) (7) (1)
Decrease in net loss 8 15 4
Effect on opening accumulated
loss:
Decrease in interest expense 137 115 80
Income tax (40) (33) (23)
Decrease in accumulated loss 97 82 57
Nine months ended
March March
2008 2007
(Unaudited) (Unaudited)
R million R million
Effect on net loss:
Decrease in interest expense 40 14
Income tax (12) (4)
Decrease in net loss 28 10
Effect on opening accumulated loss:
Decrease in interest expense 108 68
Income tax (31) (20)
Decrease in accumulated loss 77 48
The borrowing costs are added to the cost of those assets, until such time as
the assets are substantially ready for their intended use.
All other borrowing costs are dealt with in income in the period in which they
are incurred.
2. Employment termination and restructuring costs
During the December 2007 quarter, a voluntary retrenchment process was
commenced due to the decision to decentralise services.
3. 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),
have been presented as held for sale on 30 June 2007.
On 6 December 2007, the sale relating to the South Kal operation (operation in
Australia) was concluded at a loss, net of tax, of R51 million and the assets
were derecognised.
On 27 February 2008, the sale relating to the Orkney operations (operations in
the Northwest area) was concluded at a profit, net of tax, of R99 million and
the assets were derecognised.
The assets and liabilities relating to the Cooke 1, Cooke 2, Cooke 3, Cooke
plant and relating surface operations (operations in the Gauteng area) have
been presented as held for sale following the approval of the Group`s
management on 16 October 2007.
Underground operations at St Helena shaft were ceased during November 2007 and
was classified as a discontinued operation.
The comparative results have been restated due to these reclassifications.
4. Earnings/(loss) per share
Earnings/(loss) per share is calculated on the weighted average number of
shares in issue for the quarter ended 31 March 2008: 400.7 million (31 December
2007: 399.8 million, 31 March 2007: 398.4 million) and the nine months ended 31
March 2008: 400.0 million (31 March 2007: 397.7 million).
The fully diluted earnings/(loss) per share is calculated on weighted average
number of diluted shares in issue for the quarter ended 31 March 2008: 403.5
million (31 December 2007: 402.1 million, 31 March 2007: 403.3 million) and the
nine months ended 31 March 2008: 402.5 million (31 March 2007: 402.8 million).
The effect of the share options is anti-dilutive.
Quarter ended
March December March
2008 2007 2007
(Unaudited) (Unaudited) (Unaudited)
Total earnings/(loss) per share
(cents):
Basic earnings/(loss) 86 11 62
Headline earnings 63 14 59
Fully diluted earnings/(loss) 86 11 61
R million R million R million
Reconciliation of headline
earnings/(loss):
Continuing operations
Net profit/(loss) 164 (195) 315
Adjusted for:
Profit on sale of property,
plant and equipment (1) (29) (4)
(Profit)/loss on sale of listed
investment (Gold Fields) - - (1)
Profit on sale of associate
(Western Areas) - - -
Provision for doubtful debt 4 53 -
Headline profit/(loss) 167 (171) 310
Discontinued operations
Net profit/(loss) 181 241 (67)
Adjusted for:
(Profit)/loss on sale of
property,
plant and equipment (100) 51 -
Profit on sale of investments - - (9)
Impairment of assets/(reversal
of impairment) 4 (66) -
Headline profit/(loss) 85 226 (76)
Total headline profit 252 55 234
Nine months ended
March March
2008 2007
(Unaudited) (Unaudited)
Total earnings/(loss) per share (cents):
Basic earnings/(loss) (44) 251
Headline earnings 35 171
Fully diluted earnings/(loss) (44) 249
R million R million
Reconciliation of headline earnings/(loss):
Continuing operations
Net profit/(loss) (547) 1 007
Adjusted for:
Profit on sale of property, plant and equipment (28) (90)
(Profit)/loss on sale of listed investment
(Gold Fields) 392 (1)
Profit on sale of associate (Western Areas) - (220)
Provision for doubtful debt 57 -
Headline profit/(loss) (126) 696
Discontinued operations
Net profit/(loss) 372 (6)
Adjusted for:
(Profit)/loss on sale of property,
plant and equipment (49) -
Profit on sale of investments - (10)
Impairment of assets/(reversal of impairment) (55) -
Headline profit/(loss) 268 (16)
Total headline profit 142 680
5. Intangible assets
On 28 March 2007, Harmony announced that it had concluded negotiations with Rio
Tinto Limited ("Rio Tinto") in terms of which the parties have agreed that
Harmony purchase the Rio Tinto rights under the royalty agreement, which was
entered into prior to the acquisition by Harmony of the Hidden Valley and
Kerimenge deposits in Papua New Guinea.
In terms of the royalty agreement Rio Tinto had the rights to receive a portion
of between 2% and 3.5% of future ounces produced by the Hidden Valley mine in
Papua New Guinea.
The transaction between Harmony and Rio Tinto concluded on the 21 March 2008.
The consideration paid by Harmony to Rio Tinto amounted to US$22.5 million and
was settled as follows:
? The equivalent US$20 million in new ordinary shares of Harmony Gold Mining
Company Limited, issued as fully paid-up; and
? The balance of US$2.5 million paid in cash.
6. Investment in financial assets
March December June
2008 2007 2007
(Unaudited) (Unaudited) (Audited)
R million R million R million
Current
Investment in African Rainbow
Minerals Limited (see note 7) - - 1 051
Investment in Gold Fields Limited* - - 1 433
- - 2 484
Non-current
Environmental Trust Funds 1 271 1 233 1 332
Other 142 169 55
1 413 1 402 3 871
* During the September 2007 quarter Harmony sold all of its remaining Gold
Fields Limited (GFI) shares for a loss of R459 million.
7. Investment in associate
On 27 February 2008, Pamodzi Gold Limited ("Pamodzi") bought the Orkney
operations from the Harmony Group for a consideration of 30 000 000 Pamodzi
shares. This resulted in Harmony Gold Mining Company owning 32.4% of Pamodzi.
On 31 March 2008 the book value for the investment was R335.5 million.
8. Borrowings
March December June
2008 2007 2007
(Unaudited) (Reviewed) (Audited)
R million R million R million
Unsecured long-term borrowings
Convertible unsecured fixed rate
bonds 1 605 1 583 1 541
Africa Vanguard Resources
(Proprietary) Limited 32 32 32
1 637 1 615 1 573
Less: Short-term portion - - -
Total unsecured long-term
borrowings 1 637 1 615 1 573
Secured long-term borrowings
Westpac Bank Limited* 119 100 2
Africa Vanguard Resources
(Doornkop) (Pty) Limited
(Nedbank Limited) 188 181 170
ARM Empowerment Trust 1
(Nedbank Limited)** - - 450
ARM Empowerment Trust 2
(Nedbank Limited)** - - 601
Rand Merchant Bank - - 1 802
Nedbank Limited 2 000 2 000 -
Less: Transaction costs (17) (23) -
2 290 2 258 3 025
Less: Short-term portion (2 009) (1 995) (2 855)
Total unsecured long-term
borrowings 281 263 170
Total long-term borrowings 1 918 1 878 1 743
* The lease was entered into for the purchase of mining fleet to be used on the
Hidden Valley project.
** The guarantees relating to the Nedbank loans were cancelled on 28 September
2007 and consequently Harmony has no further obligations to Nedbank.
The ARM investment and associated Nedbank loans were derecognised from this
date.
The future minimum lease payments are as follows:
March December June
2008 2007 2007
(Unaudited) (Reviewed) (Audited)
R million R million R million
Due within one year 27 26 -
Due between one and five years 102 97 -
129 123 -
9. Cash and cash equivalents
Comprises of:
March December March
2008 2007 2007
(Unaudited) (Reviewed)
R million R million R million
Continuing operations 346 425 985
Discontinued operations 2 10 -
Total cash and cash equivalents 348 435 985
10. Commitments and Contingencies
March December June
2008 2007 2007
(Unaudited) (Reviewed) (Audited)
R million R million R million
Capital expenditure commitments
Contracts for capital expenditure 1 191 819 352
Authorised by the directors but
not contracted for 1 422 1 987 1 881
2 613 2 806 2 233
This expenditure will be financed
from existing resources
and where appropriate, borrowings.
Contingent liabilities
Guarantees and suretyships 18 18 18
Environmental guarantees 173 152 129
191 170 147
11. Subsequent events
Contingent liability
On 18 April 2008, Harmony Gold Mining Company Limited was made aware that it
has been named or may be named as a defendant in a lawsuit filed in the U.S.
District Court in the Southern District of New York on behalf of certain
purchasers and sellers of Harmony`s American Depositary Receipts ("ADRs").
Harmony has retained legal counsel, who will advise Harmony on further
developments in the U.S.
Papua New Guinea (PNG) assets
On 22 April 2008, Harmony Gold Mining Company Limited ("Harmony") announced
that they had signed an agreement with Newcrest Mining Limited ("Newcrest"),
which allows Newcrest to earn a 50% interest in Harmony`s Papua New Guinea
(PNG) gold assets. Newcrest will earn its 50% interest in the new joint venture
by contributing a maximum of US$525 million.
The commitment will be in two stages: (i) an initial US$180 million payment to
acquire a 30.01% interest by 30 June 2008, together with a reimbursement to
Harmony of US$45 million in project expenditure and (ii) a farm-in commitment
for the remaining 19.99% of approximately US$300 million, to fund project
expenditure up to the commencement of mining operations at Hidden Valley.
A further announcement will be made on SENS and in the press as soon as the
financial effects are finalised. Accordingly, Harmony shareholders are advised
to exercise caution when trading in their securities until such time as a
further announcement is made.
12. Segment report
The primary reporting format of the company is by business segment. As there is
only one business segment, being mining, extraction and production of gold, the
relevant disclosures have been given in the condensed consolidated financial
statements.
CONTACT DETAILS
Harmony Gold Mining Company Limited
Corporate Office
PO Box 2
Randfontein, 1759
South Africa
Corner Main Reef Road
and Ward Avenue
Randfontein, 1759
Johannesburg
South Africa
Telephone: +27 11 411 2000
Website: http://www.harmony.co.za
Directors
P T Motsepe (Chairman)*
G Briggs (Chief Executive Officer)
F Abbott*, J A Chissano*^,
F T De Buck*, Dr D S Lushaba*
C Markus*, M Motloba*,
C M L Savage*, A J Wilkens*
Dr C Diarra*, K V Dicks*
(*non-executive)
(^Mozambique)
Further Information
Amelia Soares
General Manager, Investor Relations
Telephone: +27 11 411 2314
Cell: +27 (0) 82 654 9241
E-mail: amelia.soares@harmony.co.za
Marian van der Walt
Company Secretary
Telephone: +27 11 411 2037
Fax: +27 11 411 2398
Cell: +27 (0) 82 888 1242
E-mail: marian.vanderwalt@harmony.co.za
South African Share Transfer Secretaries
Link Market Services South Africa (Proprietary) Limited
(Registration number 2000/007239/07)
5th Floor, 11 Diagonal Street
Johannesburg, 2001
South Africa
PO Box 4844
Johannesburg, 2000
South Africa
Telephone: +27 11 832 2652
Fax: +27 11 834 4398
United Kingdom Registrars
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
United Kingdom
Telephone: +44 870 162 3100
Fax: +44 208 639 2342
ADR Depositary
The Bank of New York
101 Barclay Street
New York, NY 10286
United States of America
Telephone: +1888-BNY ADRS
Fax: +1 212 571 3050
Date: 08/05/2008 08:00:16 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
