| Mon 1 Nov 2010, 8:00 | | HAR - HARMONY - Results for the First Quarter FY11 ended 30 September 2010 |
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HAR
HAPS
HAR - HARMONY - Results for the First Quarter FY11, ended 30 September 2010
HARMONY GOLD MINING COMPANY LIMITED
Incorporated in the Republic of South Africa
Registration Number 1950/038232/06
("Harmony" or "Company")
JSE Share code: HAR | NYSE Share code: HMY | ISIN: ZAE000015228
Results for the first quarter FY11, ended 30 September 2010
SHAREHOLDER INFORMATION
Issued ordinary share capital at 428 850 584
30 September 2010 shares
Market capitalisation
At 30 September 2010 (ZARm) 33 450
At 30 September 2010 (US$m) 4 842
Harmony ordinary share
and ADR prices
12 month high (1 October 2009 to
30 September 2010) for ordinary shares R87.00
12 month low (1 October 2009 to
30 September 2010) for ordinary shares R68.65
12 month high (1 October 2009 to
30 September 2010) for ADRs US$11.98
12 month low (1 October 2009 to
30 September 2010) for ADRs US$8.79
Free float
Ordinary shares 100%
ADR ratio 1:1
JSE Limited HAR
Range for quarter
(1 July 2010 to R71.90 -
30 September 2010 - closing prices) R83.80
Average volume for
the quarter (1 July 2010 to 1 863 621
30 September 2010) shares per day
New York Stock
Exchange, Inc. HMY
Range for quarter
(1 July 2010 to US$9.72 -
30 September 2010 - closing prices) US$11.74
Average volume for
the quarter (1 July 2010 to 733 895
30 September 2010) shares per day
Key features
- Wafi/Golpu - size and grade of deposit increasing
world-class copper/gold porphyry system
- Mining Charter targets in line with objectives
- Operational results
6 fatalities
production decreased by 2.9%
cash operating costs up by 11.2% (labour and electricity)
underground grade steady at 4.68g/t
- Healthy operating margin at 20.4%
- Cash operating profit of R652 million
Financial summary for the first quarter ended 30 September 2010
Quarter Quarter
September June Q-on-Q
2010 2010 Variance %
Gold produced (1) - kg 10 471 10 784 (2.9)
- oz 336 650 346 714 (2.9)
Cash costs - R/kg 228 658 201 460 (13.5)
- US$/oz 974 831 (17.2)
Gold sold (1) - kg 10 869 10 739 1.2
- oz 349 447 345 266 1.2
Gold price received - R/kg 287 401 295 580 (2.8)
- US$/oz 1 224 1 219 0.4
Cash operating profit - Rm 652 942 (30.8)
- US$m 89 125 (28.8)
Basic earnings per share* - SAc/s 24 7 >100.0
- USc/s 3 1 >100.0
Headline profit/(loss)* - Rm 141 (27) >100.0
- US$m 19 (4) >100.0
Headline earnings/(loss) per
share* - SAc/s 33 (6) >100.0
- USc/s 5 (1) >100.0
Adjusted headline earnings - SAc/s 51 13 >100.0
per share (2)* - USc/s 7 2 >100.0
Exchange rate - R/US$ 7.31 7.54 (3.1)
* Reported amounts include continuing operations only.
(1) Production statistics for Steyn 2 and Target 3 have been included. These
mines are in a build-up phase and revenue and costs are currently capitalised.
Revenue capitalised includes Steyn 2, 31kg (June 2010 - 29kg) and Target 3,
111kg (June 2010 - 92kg). 120kg were capitalised for Hidden Valley in June
2010.
(2) Headline earnings/(loss) adjusted for employee termination and
restructuring cost.
Harmony`s Annual Report, Notice of Annual General Meeting, its Sustainable
Development Report and its annual report filed on a Form 20F with the United
States` Securities and Exchange Commission for the year ended 30 June 2010 are
available on our website (www.harmony.co.za).
Forward-looking statements
This quarterly report contains forward-looking statements within the meaning
of the United States Private Securities Litigation Reform Act of 1995 with
respect to Harmony`s financial condition, results of operations, business
strategies, operating efficiencies, competitive positions, growth
opportunities for existing services, plans and objectives of management,
markets for stock and other matters. Statements in this quarter that are not
historical facts are "forward-looking statements" for the purpose of the safe
harbour provided by Section 21E of the U.S. Securities Exchange Act of 1934,
as amended, and Section 27A of the U.S. Securities Act of 1933, as amended.
Forward-looking statements are statements that are not historical facts. These
statements include financial projections and estimates and their underlying
assumptions, statements regarding plans, objectives and expectations with
respect to future operations, products and services, and statements regarding
future performance. Forward-looking statements are generally identified by the
words "expect", "anticipates", "believes", "intends", "estimates" and similar
expressions. These statements are only predictions. All forward-looking
statements involve a number of risks, uncertainties and other factors and we
cannot assure you that such statements will prove to be correct. Risks,
uncertainties and other factors could cause actual events or results to differ
from those expressed or implied by the forward-looking statements.
These forward-looking statements, including, among others, those relating to
the future business prospects, revenues and income of Harmony, wherever they
may occur in this quarterly report and the exhibits to this quarterly report,
are necessarily estimates reflecting the best judgment of the senior
management of Harmony and involve a number of risks and uncertainties that
could cause actual results to differ materially from those suggested by the
forward-looking statements. As a consequence, these forward-looking statements
should be considered in light of various important factors, including those
set forth in this quarterly report. Important factors that could cause actual
results to differ materially from estimates or projections contained in the
forward looking statements include, without limitation:
- overall economic and business conditions in South Africa and elsewhere;
- the ability to achieve anticipated efficiencies and other cost savings in
connection with past and future acquisitions;
- increases/decreases in the market price of gold;
- the occurrence of hazards associated with underground and surface gold
mining;
- the occurrence of labour disruptions availability, terms and deployment of
capital;
- changes in Government regulation, particularly mining rights and
environmental regulations;
- fluctuations in exchange rates;
- currency devaluations and other macroeconomic monetary policies; and
- socio-economic instability in South Africa and regionally.
Chief Executive`s Review
"The current quarter under review has brought us one step closer to achieving
the previously stated production target of 2 million ounces by 2013. Despite
declining gold production in the South African gold mining industry, Harmony
has an exciting growth profile through its portfolio of South African and
Papua New Guinean growth and development projects. Exploration drilling in
Wafi/Golpu showed tremendous results and emphasises the potential for the
Morobe Mining Joint Venture to establish another high quality, world-class
operation in Papua New Guinea", stated chief executive officer, Graham Briggs.
Safety
Performance on the safety front during the quarter was extremely
disappointing. We experienced the loss of six colleagues in work- related
accidents during the quarter, despite the fact that many of the safety
performance indicators continued to demonstrate a positive trend.
Tragically, five Mine Rescue Team members died at the Phakisa mine on 24 June
2010 as a result of an explosion while they were manning a fresh-air base
during an underground fire. They were Brigade Captain Siegfried Hildebrandt
and Brigadesmen Burnett Bothma, Frans Prinsloo, Johannes Bothma and Jose
Randall. The circumstances surrounding this accident are still under
investigation and further detail will be provided upon its completion. Our
condolences are extended to the families, colleagues and friends of these
brave men, who selflessly and voluntarily gave of their time and energy to
protect the lives of others.
In another accident, on 26 August 2010, Raimundo Tala, a winch operator at
Tshepong, died in a fall-of-ground accident. Condolences are extended to his
family, colleagues and friends.
It is our fundamental belief that safety in the workplace can only be
addressed through a co-operative approach that ensures the right
infrastructure is in place from systems, planning, communication and training
perspectives. In addition to this approach, management and employees must
accept joint responsibility for their actions and it is imperative the working
environment empowers people - management, supervisors, workers and union
representatives - to stop work and withdraw when they feel it is unsafe, or to
prevent others from acting in an unsafe way.
Safety is not only about training, using the correct equipment and ensuring a
safe working environment, it is also about the attitude and mindset of people.
Harmony takes full responsibility for the attitude and mindset of its
employees because it is recognised that these influence their behaviour at
work. Therefore a renewed focus has been placed on implementing, communicating
and reinforcing safety in the workplace, through the creation of a centralised
safety function and structure which will co-ordinate initiatives between
various regions and shafts.
A number of operations recorded excellent safety milestones during the quarter
and we commend employees, management and union representatives for these
achievements. Refer to the detailed safety report below.
Gold market
Gold has established itself as a store of wealth and as a currency in the
current uncertain times. We remain bullish on the gold price and continue to
see it in the region of $1 500/oz next year. However, as the gold price and
the continued strength of the Rand are out of Harmony`s control, we continue
to focus on impacting factors within our control - safety, productivity,
production and cost control.
Operating and financial performance
Production growth at our four growth projects of 193kg quarter-on- quarter was
offset by the closure of some of our older shafts, lower grade at Bambanani
and continued work on Joel`s shaft bottom, which resulted in an overall
decline in gold production for the group of 2.9% to 10 471kg for the quarter
ended 30 September 2010.
This reduction can be attributed mainly to:
lower grades at Bambanani (259kg);
planned closure of Harmony 2 (58kg) and Merriespruit 3 (58kg) shafts;
a 43-production day shaft stoppage at Joel to allow for the completion of
modifications to the shaft bottom spillage arrangement (230kg);
the loss of 13 production days at Phakisa following the tragic accident
(39kg);
lower grade at Kalgold (42kg).
Countering these events were improvements at:
Kusasalethu, where gold production rose by 113kg;
Hidden Valley, which recorded an 86kg increase in production;
Doornkop, which recorded an 33kg increase in production;
Masimong, an increase of 62kg in production;
Other South African surface operations, which saw gold production rise by
52kg.
The Rand per kilogram gold price received decreased by 2.8% to an average of
R287 401/kg in the September 2010 quarter, from R295 580/kg in the previous
quarter. However, gold sold increased by 130kg compared with the previous
quarter which resulted in a R38 million increase in revenue.
As expected, cash operating costs for the quarter increased by R238 million
(11.2%) when compared with the previous quarter mainly due to:
Hidden Valley in Papua New Guinea (PNG) being in production for the full
quarter (R50 million);
cost increases at the South African operations comprised mainly of:
- electricity cost increases owing to winter tariffs (R123 million);
and
- labour costs increases of R46 million.
Consequently, unit costs rose by 13.5% to R228 658/kg.
Capital expenditure decreased by R75 million (9.1%) to R749 million in the
quarter under review compared to R824 million in the June 2010 quarter.
Cash operating profit for the September 2010 quarter of R652 million was 30.8%
lower when compared to the June 2010 quarter`s cash operating profit of R942
million.
In line with our strategy of asset optimisation, a number of corporate
activities were concluded during the quarter. As a result of this strategy,
certain non-core assets were divested and shafts closed so that the management
team may focus its resources on growing, developing and operating its
portfolio of core, quality assets.
These divestments and shaft closures include:
The sale of the Mount Magnet Gold project in Western Australia to Australian-
based Ramelius Resources Limited for R238 million (A$35 million) cash on 20
July 2010 as well as R31 million (A$5 million) released from the replacement
of performance bonds by the purchaser.
The conclusion of two transactions with Witwatersrand Consolidated Gold
Resources (Wits Gold). In terms of these transactions, Wits Gold will obtain a
prospecting right over Harmony`s Merriespruit South area and the option held
by ARMGold/Harmony Joint Venture Company (Proprietary) Limited (Freegold), a
wholly-owned subsidiary of Harmony. The option was to acquire a beneficial
interest of up to 40% in any future mines established by Wits Gold on certain
properties in the Southern Free State (Freegold option). The total
consideration price of the transactions is R336 million (R61 million for the
prospecting area and R275 million for the cancellation of the option
agreement), which will be settled in cash or in a combination of cash and
shares in Wits Gold. The agreements were signed on 3 September 2010 and
outstanding conditions precedent are expected to be fulfilled by November 2010
for the option agreement and June 2011 for the prospecting right.
On 10 September 2010, Harmony concluded a sale of assets agreement with Taung
Gold Limited (Taung), in which Taung acquired the Evander 6 shaft, the related
infrastructure and surface right permits as well as a mining right over the
Evander 6 and Twistdraai areas. The total purchase consideration is R225
million which will be settled in cash, when all remaining conditions precedent
to the transaction have been fulfilled.
Following careful and considerable review, the company announced on 18
October 2010 that it would be closing the Merriespruit 1 shaft in Virginia at
the end of October 2010. Earlier this year a productivity-linked deal with the
trade unions was reached that allowed Merriespruit 1 to continue its
operations, provided it did not make a loss (on a total cost basis, including
any capital expenditure) for two consecutive months and total costs remained
under R250 000/kg. Despite the operational team`s best endeavours,
Merriespruit 1 has failed to meet these conditions and closure procedures have
commenced.
We have embarked on a formal consultation process with employees in terms of
section 189A of the Labour Relations Act to consider alternatives to
retrenchment. Approximately 1 470 employees are affected by the closure and,
of this number, 1 200 will largely be transferred to our growth operations so
as to preserve as many jobs as possible.
Milestone at Hidden Valley
30 September 2010 marked an exciting milestone for Harmony when the Hidden
Valley mine was officially opened at a ceremony attended by PNG dignitaries,
directors and senior management of both Harmony and Newcrest Limited
(Newcrest) and employees. Hidden Valley, part of the 50/50 Morobe Mining Joint
Ventures (MMJV) with Newcrest, was Harmony`s first offshore greenfields
project, and represents an important step in our group`s strategy for
geographical and asset diversification.
While the development of this project was not without its challenges - given
its remote location and relative lack of infrastructure - the government and
communities of Papua New Guinea (PNG) and Morobe Province have provided
enormous support to the project, and have worked closely with the MMJV to
ensure that the development of the Hidden Valley mine has long-term, positive
and sustainable consequences for the region.
Hidden Valley also completed its first full quarter of commercial production,
where post-commissioning and ramp up activities are making good progress.
The experience we have gained with the development of Hidden Valley will stand
us in good stead as we continue to seek growth, both in Morobe Province as
part of the MMJV and elsewhere in PNG on Harmony`s 100%-owned exploration
portfolio.
Wafi/Golpu Joint Venture (part of MMJV)
Excellent progress was made and reported at our Wafi/Golpu joint venture
project during the quarter.
The concept study was finalised in September 2010 and shows that a copper gold
mine at Wafi/Golpu is technically and financially viable, and that a number of
development options could be considered in a pre-feasibility study. Production
could potentially be between 400 000 to 700 000oz of gold, and 100 000 to 200
000t of copper per annum.
This would be sustainable over a 20-year mine life without considering the
Golpu resource extensions currently being identified by drilling.
Cash costs would be in the lower quartile (assuming copper credits) and
capital expenditure would be of the order of US$3 billion. Based on the
outcome of the scoping study, and subsequent project gate review a decision
was made to progress this project to pre-feasibility stage.
As announced recently, we also continue to drill spectacular intercepts at
this project, with the exploration target at this project upgraded to 30
million ounces of gold and 8 million tonnes of copper, 50% of which would be
attributable to Harmony.
Revisions to the Mining Charter
On 13 September 2010, the South African Minister of Mineral Resources, Susan
Shabangu, released the revised Mining Charter and the associated scorecard,
the Broad-Based Socio-Economic Empowerment (BBSEE) scorecard. Harmony has been
at the forefront in implementing various transformation initiatives in terms
of the legislated empowerment objectives, and has met most of the new 2014
targets in terms of the revised Mining Charter. The only area which requires
more attention and on which we are currently focusing, is that of enterprise
development, as the revised Mining Charter now specifically stipulates certain
requirements to be met.
Looking ahead
Our aim at Harmony is to focus on safe, profitable ounces. To do this we have
taken bold decisions in shutting unprofitable operations and focused our
attention on our longer-life, lower-cost operations that will be profitable
and sustainable for many years to come. There are many steps in this journey
and this quarter has indeed been one of them as we progress towards
consolidating our lower-cost, quality asset base. We remain focused on
increasing production to 2 million ounces of gold by FY 2013, with costs per
tonne milled in the lowest quartile of South African producers.
Graham Briggs
Chief Executive Officer
Safety and health
Safety
Harmony remains committed to its aim to achieve its production targets safely.
Every employee has the right to withdraw from an unsafe environment.
It is with deep regret that we report that six fatalities occurred in two
incidents in the South African operations during the September 2010 quarter.
Harmony achieved a single digit figure on Lost Time Injury Frequency Rate
(LTIFR) for the eighth quarter in a row. The LTIFR for this quarter is 7.98, a
regression of 4% compared to the June 2010 quarter. The Fatality Injury
Frequency Rate (FIFR) improved by 7% quarter-on- quarter. The following
operations achieved excellent safety results during the quarter:
All North operations (Kusasalethu,
Doornkop, Evander, Kalgold): 1 000 000 fatality free shifts
Bambanani total operations: 750 000 fatality free shifts
Target total operations: 500 000 fatality free shifts
Unisel: 500 000 fatality free shifts
Free State Metallurgy: 500 000 fatality free shifts
The following operations completed the September 2010 quarter
without an injury:
Kalgold
Phoenix Plant
Target Plant
Joel Plant
Free State & Randfontein Commercial Services and Transport
Evander Workshops
Evander Services
Health
Our employees` state of health is important to us and we therefore continue to
support healthcare programmes and measure any potential impact of threats.
Noise levels measured reduced with 75% of all mechanical loaders having been
equipped with silencers. Internal radiation audits are being conducted and
results reflect that all operational underground operations are well within
the limits set by the National Nuclear Regulator (the NNR). Tuberculosis in
conjunction with HIV remains a concern but is addressed through various
initiatives. See our Sustainable Development Report for more details on our
website www.harmony.co.za.
During the September 2010 quarter healthcare was brought closer to the
operations in order to speed up treatment and identify early signs of epidemic
trends. The medical station at Target was successfully completed and is now a
Health Hub, which provides a fully integrated proactive healthcare service.
CONDENSED CONSOLIDATED INCOME STATEMENT (Rand)
Quarter ended
30 September 30 June
2010 2010
(Unaudited) (Unaudited)
Note R million R million
Continuing operations
Revenue 3 083 3 045
Cost of sales 2 (2 995) (2 649)
Production costs (2 408) (2 075)
Royalty expense (23) (28)
Amortisation and depreciation (426) (383)
Impairment of assets - (30)
Employment termination and
restructuring costs (78) (82)
Other items (60) (51)
Gross profit 88 396
Corporate, administration and other
expenditure (94) (124)
Social investment expenditure (16) (28)
Exploration expenditure (99) (60)
Profit on sale of property, plant and
equipment 16 101
Other (expenses)/income - net (54) 40
Operating (loss)/profit (159) 325
(Loss)/profit from associates (8) (7)
Loss on sale of investment in
subsidiary - -
Net gain on financial instruments 3 311 11
Investment income 14 25
Finance cost (59) (94)
Profit/(loss) before taxation 99 260
Taxation 6 (230)
Normal taxation (9) (20)
Deferred taxation 15 (210)
Net profit/(loss) from continuing
operations 105 30
Discontinued operations
(Loss)/profit from discontinued
operations 4 (3) (17)
Net profit/(loss) 102 13
Attributable to:
Owners of the parent 102 13
Non-controlling interest - -
Earnings/(loss) per ordinary share
(cents) 5
- Earnings/(loss) from continuing
operations 24 7
- (Loss)/earnings from discontinued
operations (1) (4)
Total earnings/(loss) per ordinary
share (cents) 23 3
Diluted earnings/(loss) per ordinary
share (cents) 5
- Earnings/(loss) from continuing
operations 24 7
- (Loss)/earnings from discontinued
operations (1) (4)
Total diluted earnings/(loss) per
ordinary share (cents) 23 3
Year ended
30 September 1 30 June
2009 2010
(Unaudited) (Audited)
R million R million
Continuing operations
Revenue 2 747 11 284
Cost of sales (2 600) (10 484)
Production costs (2 195) (8 325)
Royalty expense - (33)
Amortisation and depreciation (350) (1 375)
Impairment of assets - (331)
Employment termination and restructuring costs - (205)
Other items (55) (215)
Gross profit 147 800
Corporate, administration and other expenditure (79) (382)
Social investment expenditure (9) (81)
Exploration expenditure (48) (219)
Profit on sale of property, plant and equipment - 104
Other (expenses)/income - net (74) (58)
Operating (loss)/profit (63) 164
(Loss)/profit from associates 31 56
Loss on sale of investment in subsidiary - (24)
Net gain on financial instruments - 38
Investment income 71 187
Finance cost (54) (246)
Profit/(loss) before taxation (15) 175
Taxation (18) (335)
Normal taxation (28) (84)
Deferred taxation 10 (251)
Net profit/(loss) from continuing operations (33) (160)
Discontinued operations
(Loss)/profit from discontinued operations 4 (32)
Net profit/(loss) (29) (192)
Attributable to:
Owners of the parent (29) (192)
Non-controlling interest - -
Earnings/(loss) per ordinary share (cents)
- Earnings/(loss) from continuing operations (8) (38)
- (Loss)/earnings from discontinued operations 1 (8)
Total earnings/(loss) per ordinary share (cents) (7) (46)
Diluted earnings/(loss) per ordinary share (cents)
- Earnings/(loss) from continuing operations (8) (38)
- (Loss)/earnings from discontinued operations 1 (8)
Total diluted earnings/(loss) per ordinary share (cents) (7) (46)
The accompanying notes are an integral part of these condensed consolidated
financial statements.
1 The comparative figures are re-presented due to Mount Magnet being
reclassified as a discontinued operation. See note 4 in this regard.
CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME (Rand)
Quarter ended Year ended
30 September 30 June 30 September 30 June
2010 2010 2009 2010
(Unaudited) (Unaudited) (Unaudited) (Audited)
R million R million R million R million
Net profit/(loss)
for the period 102 13 (29) (192)
Other comprehensive
income/(loss) for
the period, net of
income tax 106 (166) 15 (131)
Foreign exchange
translation 106 (161) 19 (127)
Fair value movement of
available-for-sale
investments - (5) (4) (4)
Total comprehensive
income/(loss) for
the period 208 (153) (14) (323)
Attributable to:
Owners of the parent 208 (153) (14) (323)
Non-controlling
interest - - - -
CONDENSED CONSOLIDATED BALANCE SHEET (Rand)
At At At
30 September 30 June 30 September
2010 2010 2009
(Unaudited) (Audited) (Unaudited)
Note R million R million R million
ASSETS
Non-current assets
Property, plant and equipment 29 873 29 556 28 457
Intangible assets 2 199 2 210 2 218
Restricted cash 116 146 165
Restricted investments 1 787 1 742 1 668
Investments in
financial assets 296 12 39
Investments in associates 377 385 360
Inventories 237 214 -
Trade and other receivables 67 75 72
34 952 34 340 32 979
Current assets
Inventories 902 987 1 147
Trade and other receivables 649 932 838
Income and mining taxes 73 74 45
Cash and cash equivalents 772 770 1 094
2 396 2 763 3 124
Assets of disposal
groups classified as
held for sale 4 - 245 -
2 396 3 008 3 124
Total assets 37 348 37 348 36 103
EQUITY AND LIABILITIES
Share capital and reserves
Share capital 28 269 28 261 28 093
Other reserves 395 258 388
Retained earnings 578 690 853
29 242 29 209 29 334
Non-current liabilities
Deferred tax 3 572 3 534 3 265
Provision for
environmental
rehabilitation 1 723 1 692 1 564
Retirement benefit
obligation and other
provisions 169 169 166
Borrowings 6 970 981 108
6 434 6 376 5 103
Current liabilities
Borrowings 6 207 209 260
Income and mining taxes 13 9 21
Trade and other payables 1 452 1 410 1 385
1 672 1 628 1 666
Liabilities of disposal
groups classified as
held for sale 4 - 135 -
1 672 1 763 1 666
Total equity and liabilities 37 348 37 348 36 103
Number of ordinary
shares in issue 428 850 584 428 654 779 426 024 653
Net asset value per share (cents) 6 819 6 814 6 886
The accompanying notes are an integral part of these condensed consolidated
financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Unaudited)(Rand)
for the period ended 30 September 2010
Share Other Retained
capital reserves earnings Total
R million R million R million R million
Balance - 30 June 2010 28 261 258 690 29 209
Issue of shares 8 - - 8
Share-based payments - 31 - 31
Total comprehensive income
for the period - 106 102 208
Dividends paid - - (214) (214)
Balance as at 30 September
2010 28 269 395 578 29 242
Balance - 30 June 2009 28 091 339 1 095 29 525
Issue of shares 2 - - 2
Share-based payments - 34 - 34
Total comprehensive loss
for the period - 15 (29) (14)
Dividends paid - - (213) (213)
Balance as at 30 September
2009 28 093 388 853 29 334
CONDENSED CONSOLIDATED CASH FLOW STATEMENT (Rand)
Quarter ended Year ended
30 September 30 June 30 September 30 June
2010 2010 2009 2010
(Unaudited) (Unaudited) (Unaudited) (Audited)
R million R million R million R million
Cash flow from operating
activities
Cash generated
by operations 703 884 225 1 611
Interest and dividends
received 14 25 68 187
Interest paid (30) (38) (9) (90)
Income and mining taxes paid (4) (55) (25) (125)
Cash generated by operating
activities 683 816 259 1 583
Cash flow from investing
activities
Decrease/(increase) in
restricted cash 30 - (3) 15
Proceeds on disposal of
investment in subsidiary 229 - - 24
Proceeds on disposal of
available-for-sale
financial assets - 8 15 50
Other investing activities 10 (11) 8 (12)
Net additions to property,
plant and equipment (748) (708) (907) (3 493)
Cash utilised by investing
activities (479) (711) (887) (3 416)
Cash flow from financing
activities
Borrowings raised - 300 - 1 236
Borrowings repaid (7) (106) (7) (391)
Ordinary shares
issued - net of expenses 8 7 2 18
Dividends paid (214) - (213) (213)
Cash (utilised)/generated
by financing activities (213) 201 (218) 650
Foreign currency
translation adjustments 11 (17) (10) 3
Net increase/(decrease) in
cash and cash equivalents 2 289 (856) (1 180)
Cash and cash equivalents -
beginning of period 770 481 1 950 1 950
Cash and cash equivalents -
end of period 772 770 1 094 770
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FIRST QUARTER ENDED 30 SEPTEMBER 2010
1. Accounting policies
Basis of accounting
The condensed consolidated financial statements for the period ended 30
September 2010 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 2010. These condensed consolidated financial statements
are prepared in accordance with IAS 34, Interim Financial Reporting, and in
the manner required by the Companies Act of South Africa. They should be read
in conjunction with the annual financial statements for the year ended 30 June
2010.
2. Cost of sales
Quarter ended Year ended
30 September 30 June 30 September 1 30 June
2010 2010 2009 2010
(Unaudited) (Unaudited) (Unaudited) (Audited)
R million R million R million R million
Production costs 2 408 2 075 2 195 8 325
Royalty expense 23 28 - 33
Amortisation and
depreciation 426 383 350 1 375
Impairment of assets 2 - 30 - 331
Rehabilitation
expenditure 4 14 4 29
Care and maintenance
cost of restructured
shafts 25 15 17 57
Employment termination
and restructuring costs 78 82 - 205
Share-based payments 31 41 34 148
Provision for
post-retirement
benefits - (19) - (19)
Total cost of sales 2 995 2 649 2 600 10 484
(1) The comparative figures are re-presented due to Mount Magnet being
reclassified as part of discontinued operations. See note 4 in this regard.
(2) The impairment for the year ended 30 June 2010 relates mainly to Virginia
and Evander, which was recorded as a result of shaft closures.
3. Net gain on financial instruments
On 3 September 2010, Harmony Gold Mining Company Limited (Harmony) entered
into two transactions with Witwatersrand Consolidated Gold Resources Limited
(Wits Gold), in which Wits Gold will obtain a prospecting right over Harmony`s
Merriespruit South area and the option held by ARMGold/Harmony Freegold Joint
Venture Company (Proprietary) Limited (Freegold), a wholly owned subsidiary of
Harmony. The option was to acquire a beneficial interest of up to 40% in any
future mines established by Wits Gold on certain properties in the Southern
Free State (Freegold option), which will be cancelled. Harmony will abandon a
portion of its mining right in respect of the Merriespruit South area to
enable Wits Gold to include this area in its prospecting right, which is
located immediately south of the Merriespruit South area.
The total consideration is R336 million (R61 million for the prospecting area
and R275 million for the cancellation of the option agreement), which will be
settled in cash or in a combination of cash and shares in Wits Gold, when all
remaining conditions precedent to the transaction have been fulfilled. The
group classifies the Freegold option as a financial asset at fair value
through profit and loss and has recognised a fair value movement gain in the
consolidated income statement of R273 million following the conclusion of the
agreements on 3 September 2010.
4. Disposal groups classified as held for sale and discontinued operations
The conditions precedent for the sale of Mount Magnet were fulfilled and the
transaction became effective on 20 July 2010. A total purchase consideration
of R238 million was received from Ramelius Resources Limited in exchange for
100% of the issued shares of Mount Magnet.
The group recognised a total profit of R104 million, net of tax, before the
realisation of accumulated foreign exchange losses of R107 million from other
comprehensive income to the consolidated income statement on the effective
date. The income statement and earnings per share amounts for all comparative
periods have been re-presented to disclose the operation as a discontinued
operation.
5. Earnings/(loss) per ordinary share
Earnings/(loss) per ordinary share is calculated on the weighted average
number of ordinary shares in issue for the quarter ended 30 September 2010:
428.7 million (30 June 2010: 427.6 million, 30 September 2009: 425.9 million),
and the year ended 30 June 2010: 426.4 million.
The fully diluted earnings/(loss) per ordinary share is calculated on weighted
average number of diluted ordinary shares in issue for the quarter ended 30
September 2010: 429.9 million (30 June 2010: 429.1 million, 30 September 2009:
427.2 million), and the year ended 30 June 2010: 427.8 million.
Quarter ended Year ended
30 September 30 June 30 September 1 30 June
2010 2010 2009 2010
(Unaudited) (Unaudited) (Unaudited) (Audited)
Total earnings/(loss)
per ordinary share (cents):
Basic earnings/(loss) 23 3 (7) (46)
Fully diluted earnings/(loss) 23 3 (7) (46)
Headline earnings/ (loss) 33 (10) (12) (7)
- from continuing operations 33 (6) (13) 1
- from discontinued operations - (4) 1 (8)
Diluted headline earnings/(loss) 33 (10) (12) (7)
- from continuing operations 33 (6) (13) 1
- from discontinued operations - (4) 1 (8)
R million R million R million R million
Reconciliation of headline
earnings/(loss):
Continuing operations
Net profit/(loss) 105 30 (33) (160)
Adjusted for:
Profit on sale of property,
plant and equipment (16) (101) - (104)
Taxation effect of profit on
sale of property,
plant and equipment 5 21 - 22
Net gain on financial instruments - (5) (2) (7)
Taxation effect of gain on
financial instruments - 1 1 2
Foreign exchange loss/(gain)
reclassified from
other comprehensive income 47 - (22) (22)
Taxation effect of foreign
exchange loss/(gain) reclassified
from other comprehensive income - - - -
Loss on sale of investment in
subsidiary - - - 24
Taxation effect of loss on sale
of investment in subsidiary - - - (7)
Impairment of other investments - 1 - -
Taxation effect of impairment of
other investments - - - -
Impairment of assets - 30 - 331
Taxation effect of impairment of assets - (4) - (75)
Impairment of investment in associate - - 2 -
Taxation effect of impairment
of investment in associate - - - -
Headline earnings/(loss) 141 (27) (54) 4
Discontinued operations
Net (loss)/profit (3) (17) 4 (32)
Adjusted for:
Profit on sale of investment
in subsidiary (138) - (1) (1)
Taxation effect of profit on
sale of investment in subsidiary 34 - - -
Foreign exchange loss
reclassified from other
comprehensive income 107 - - -
Taxation effect of foreign
exchange loss reclassified
from other comprehensive income - - - -
Headline (loss)/earnings - (17) 3 (33)
Total headline earnings/(loss) 141 (44) (51) (29)
(1) The comparative figures are re-presented due to Mount Magnet being
reclassified as discontinued operation. See note 4 in this regard.
6. Borrowings
30 September 30 June 30 September
2010 2010 2009
(Unaudited) (Audited) (Unaudited)
R million R million R million
Total long-term borrowings 970 981 108
Total current portion of borrowings 207 209 260
Total borrowings (1) (2) 1 177 1 190 368
(1) On 11 December 2009, the company entered into a loan facility with Nedbank
Limited, comprising of a Term Facility of R900 million and a Revolving Credit
Facility of R600 million. Interest accrues on a day-to-day basis over the term
of the loan at a variable interest rate, which is fixed for a three-month
period, equal to JIBAR plus 3.5%. Interest is repayable quarterly.
The Term Facility is repayable bi-annually in equal instalments of R90 million
over 5 years. The first instalment was paid on 30 June 2010. The Revolving
Credit Facility is repayable after 3 years.
(2) Included in the borrowings is R74 million (June 2010: R91 million;
September 2009: R104 million) owed to Westpac Bank Limited in terms of a
finance lease agreement. The future minimum lease payments are as follows:
30 September 30 June 30 September
2010 2010 2009
(Unaudited) (Audited) (Unaudited)
R million R million R million
Due within one year 30 33 31
Due between one and five years 46 60 76
76 93 107
Future finance charges (2) (2) (3)
Total future minimum lease payments 74 91 104
7. Commitments and contingencies
30 September 30 June 30 September
2010 2010 2009
(Unaudited) (Audited) (Unaudited)
R million R million R million
Capital expenditure commitments:
Contracts for capital expenditure 369 335 528
Authorised by the directors but
not contracted for 2 070 1 006 1 829
2 439 1 341 2 357
This expenditure will be financed from existing resources and borrowings where
necessary.
Contingent liability
For a detailed disclosure on contingent liabilities refer to Harmony`s annual
report for the financial year ended 30 June 2010, available on the group`s
website www.harmony.co.za. There were no significant changes in contingencies
since 30 June 2010.
8. Dividends paid
On 13 August 2010, the Board of Directors approved a final dividend for the
2010 financial year of 50 SA cents per share. The total dividend amounting to
R214 million was paid on 20 September 2010.
9. Subsequent events
Closure of Merriespruit 1
On 4 October 2010, the decision was made to finally close Merriespruit 1
shaft, under the Section 189 of the Labour Relations Act already in place. The
closure was postponed in terms of an agreement reached with organised labour
to keep the shaft open while it remained profitable.
10. Segment report
The segment report follows on page 25.
11. Reconciliation of segment information to consolidated income statements
and balance sheet
30 September 30 September 1
2010 2009
(Unaudited) (Unaudited)
R million R million
The "reconciliation of segment data to
consolidated financials" line item in the segment
report is broken down in the following elements, to
give a better understanding of the differences
between the income statement, balance sheet
and segment report.
Revenue from:
Discontinued operations - -
Production costs from:
Discontinued operations - -
Reconciliation of production profit to gross profit:
Total segment revenue 3 083 2 747
Total segment production costs (2 431) (2 195)
Production profit as per segment report 652 552
Less: discontinued operations - -
652 552
Cost of sales items other than production
costs and royalty expense (564) (405)
Amortisation and depreciation (426) (350)
Employment termination and restructuring costs (78) -
Share-based payments (31) (34)
Rehabilitation costs (4) (4)
Care and maintenance costs of restructured shafts (25) (17)
Gross profit as per income statements * 88 147
Reconciliation of total segment mining assets
to consolidated property, plant and equipment:
Property, plant and equipment not allocated to
a segment:
Mining assets 829 596
Undeveloped property 5 139 5 139
Other non-mining assets 67 66
6 035 5 801
1 The comparative figures are re-presented due to Mount Magnet being
reclassified as discontinued operations. See note 4 in this regard.
* The reconciliation was done up to the first recognisable line item on the
income statement. The reconciliation will follow the income statement after
that.
SEGMENT REPORT FOR THE PERIOD ENDED 30 SEPTEMBER 2010 (Rand/Metric)
(Unaudited)
Production Production Mining
Revenue costs(1) profit/(loss) assets
R million R million R million R million
Continuing operations
South Africa
Underground
Bambanani (2) 270 223 47 987
Doornkop 168 148 20 2 896
Evander 174 176 (2) 935
Joel 44 75 (31) 184
Kusasalethu 475 387 88 3 046
Masimong 374 202 172 815
Phakisa 112 111 1 4 133
Target (2) 244 189 55 2 598
Tshepong 500 294 206 3 620
Virginia 223 225 (2) 694
Surface
All other surface
operations (3) 317 238 79 145
Total South Africa 2 901 2 268 633 20 053
International
Papua New Guinea 182 163 19 3 785
Total international 182 163 19 3 785
Total continuing
operations 3 083 2 431 652 23 838
Discontinued
operations
Mount Magnet - - - -
Total discontinued
operations - - - -
Total operations 3 083 2 431 652 23 838
Reconciliation of the
segment information
to the consolidated
income statement and
balance sheet (refer
to note 11) - - 6 035
3 083 2 431 29 873
Capital Kilograms Tonnes
expenditure produced milled
R million kg t`000
Continuing operations
South Africa
Underground
Bambanani (2) 83 942 129
Doornkop 70 541 140
Evander 59 552 140
Joel 18 148 40
Kusasalethu 104 1 513 269
Masimong 41 1 263 243
Phakisa 92 377 86
Target (2) 118 947 205
Tshepong 61 1 688 338
Virginia 30 760 244
Surface
All other surface operations (3) 12 1 069 2 837
Total South Africa 688 9 800 4 671
International
Papua New Guinea 61 671 427
Total international 61 671 427
Total continuing operations 749 10 471 5 098
Discontinued operations
Mount Magnet - - -
Total discontinued operations - - -
Total operations 749 10 471 5 098
Reconciliation of the segment
information to the consolidated
income statement and
balance sheet (refer to note 11)
Notes:
(1) Production costs includes royalty expense.
(2) Production statistics for Steyn 2 and Target 3 are shown for information
purposes. These mines are in build-up phase and revenue and costs are
currently capitalised until commercial levels of production are reached.
(3) Includes Kalgold, Phoenix, Dumps and President Steyn plant clean-up.
SEGMENT REPORT FOR THE PERIOD ENDED 30 SEPTEMBER 2009 (Rand/Metric)(Unaudited)
Production Production Mining
Revenue costs profit/(loss) assets
R million R million R million R million
Continuing operations
South Africa
Underground
Bambanani 234 193 41 672
Doornkop 120 101 19 2 618
Evander 290 273 17 958
Joel 128 105 23 230
Kusasalethu 350 281 69 2 797
Masimong 324 186 138 684
Phakisa 64 59 5 3 778
Target 219 160 59 2 262
Tshepong 421 294 127 3 660
Virginia 398 413 (15) 868
Surface
Other (1) 199 130 69 141
Total South Africa 2 747 2 195 552 18 668
International
Papua New Guinea - - - 3 713
Total international - - - 3 713
Total continuing
operations 2 747 2 195 552 22 381
Discontinued
operations
Mount Magnet - - - 275
Total discontinued
operations - - - 275
Total operations 2 747 2 195 552 22 656
Reconciliation of the
segment information
to the consolidated
income statement and
balance sheet (refer
to note 11) - - 5 801
2 747 2 195 28 457
Capital Kilograms Tonnes
expenditure produced milled
R million kg t`000
Continuing operations
South Africa
Underground
Bambanani 23 946 147
Doornkop 73 500 130
Evander 52 1 239 259
Joel 18 515 136
Kusasalethu 111 1 625 260
Masimong 39 1 359 234
Phakisa 128 260 71
Target 84 909 193
Tshepong 71 1 703 418
Virginia 52 1 668 544
Surface
Other (1) 15 891 2 092
Total South Africa 666 11 615 4 484
International
Papua New Guinea 249 - -
Total international 249 - -
Total continuing operations 915 11 615 4 484
Discontinued operations
Mount Magnet - - -
Total discontinued operations - - -
Total operations 915 11 615 4 484
Reconciliation of the segment
information to the consolidated
income statement and
balance sheet (refer to note 11)
Note:
(1) Includes Kalgold, Phoenix and Dumps.
CONTACT DETAILS
HARMONY GOLD MINING COMPANY LIMITED
Corporate Office
Randfontein Office Park
PO Box 2
Randfontein, 1760
South Africa
Corner Main Reef Road and Ward Avenue
Randfontein, 1759
South Africa
Telephone: +27 11 411 2000
Website: http://www.harmony.co.za
Directors
P T Motsepe (Chairman)*
G P Briggs (Chief Executive Officer)
H O Meyer (Financial Director)
H E Mashego (Executive Director: Organisational
Development and Transformation)
F F T De Buck* (Lead independent director)
F Abbott*
J A Chissano*1
Dr C Diarra*
K V Dicks*, Dr D S Lushaba*, C Markus*,
M Motloba*, C M L Savage*, A J Wilkens*
* Non-executive
1 Mozambican
US/Mali Citizen
Independent
Investor Relations Team
Marian van der Walt
Executive: Corporate and Investor Relations
Telephone: +27 11 411 2037
Fax: +27 86 614 0999
Mobile: +27 82 888 1242
E-mail: marian@harmony.co.za
Henrika Basterfield
Investor Relations Officer
Telephone: +27 11 411 2314
Fax: +27 11 692 3879
Mobile: +27 82 759 1775
E-mail: henrika@harmony.co.za
Company Secretary
Khanya Maluleke
Telephone: +27 11 411 2019
Fax: +27 11 411 2070
Mobile: +27 82 767 1082
E-mail: Khanya.maluleke@harmony.co.za
South African Share Transfer Secretaries
Link Market Services South Africa (Proprietary) Limited
(Registration number 2000/007239/07)
16th Floor, 11 Diagonal Street
Johannesburg, 2001
PO Box 4844
Johannesburg, 2000
South Africa
Telephone: +27 86 154 6572
Fax: +27 86 674 4381
United Kingdom Registrars
Capita Registrars
The Registry
34 Beckenham Road
Bechenham
Kent BR3 4TU
United Kingdom
Telephone: 0871 664 0300 (UK)
(calls cost 10p a minute plus network extras, lines are open
8:30 am to 5:30 pm Monday to Friday)
or +44 (0) 20 8639 3399 (calls from overseas)
Fax: +44 (0) 20 8639 2220
ADR Depositary
BNY Mellon
101 Barclay Street
New York, NY 10286
United States of America
Telephone: +1888-BNY-ADRS
Fax: +1 212 571 3050
Sponsor
JP Morgan Equities Limited
1 Fricker Road, corner Hurlingham Road
Illovo, Johannesburg, 2196
Private Bag X9936, Sandton, 2146
Telephone: +27 11 507 0300
Fax: +27 11 507 0503
Trading Symbols
JSE Limited: HAR
New York Stock Exchange, Inc: HMY
London Stock Exchange Plc: HRM
Euronext, Brussels: HMY
Berlin Stock Exchange: HAM1
Registration number 1950/038232/06
Incorporated in the Republic of South Africa
ISIN: ZAE000015228
Date: 01/11/2010 08:00:04 Produced by the JSE SENS Department.
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