| Fri 12 Apr 2002, 0:00 | | Harmony Gold Mining Company Limited - Results For |
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2002
Harmony Gold Mining Company Limited
Harmony Gold Mining Company Limited Free Gold Joint Venture with Africa
Rainbow Minerals Limited (Armgold)
Results for the quarter ended 31 March 2002
Financial Results (rand/metric) (unaudited)
Quarter ended
31 March 2002
Ore milled - tonne '000
- underground 926
- surface 1 161
- total 2 087
Yield - g/tonne
- underground 7,70
- surface 0,70
- total 3,81
Gold produced - kg
- underground 7 127
- surface 815
- total 7 942
Gold price received - R/kg 107 631
Cash operating costs - R/kg 56 914
- R/tonne 217
R'000
Gold sales 854 803
Cash operating costs 452 010
Cash operating profit 402 793
Amortisation (26 823)
Other income - net 4 929
Interest paid (40 265)
Profit before taxation 340 634
South African normal
taxation
- Current tax -
- Deferred tax (102 197)
Net earnings 238 437
Financial Results (US$/imperial) (unaudited)
Quarter ended
31 March 2002
Ore milled - tonne '000
- underground 1 022
- surface 1 280
- total 2 302
Yield - oz/tonne
- underground 0,224
- surface 0,020
- total 0,111
Gold produced - oz
- underground 229 137
- surface 26 203
- total 255 340
Gold price received - $/oz 290
Cash operating costs - $/oz 154
- $/tonne 17
$'000
Gold sales 74 137
Cash operating costs 39 203
Cash operating profit 34 934
Amortisation (2 326)
Other income - net 427
Interest paid (3 492)
Profit before taxation 29 543
South African normal taxation
- Current tax -
- Deferred tax (8 864)
Net earnings 20 679
Prepared in accordance with International Accounting Standards.
Currency conversion rates average for the quarter: US$1=R11.53.
Free Gold Joint Venture
Safety Report
On 30 January 2002, a mudrush on 104 level at South Shaft, Joel, resulted in
the accidental loss of life of Mr Elias Tsoaela. We offer our sincere
condolences to his family, friends and colleagues.
Operational Review
As the first reporting period for the ARMgold/Harmony Joint Venture, the
operational performance from the Free Gold operations have been excellent
and have exceeded all expectations. Normally this is a period during which
the restructuring and changeover in management impacts on both employees and
the overall performance of the operations. The acquisition process has been
completed with all the remaining conditions precedent for the transaction
having been met by 10 April 2002. The JV management took operational control
on 3 January 2002, after which changes identified in the due diligence
process were initiated.
(R'million) Mar '02 Dec '01 Var (%)
Cash operating profit 402,8 261,5 54,0
Net interest charges 35,4
Amortisation charges 26,8
Profit before tax 340,6
Due to ARM 170,3
Due to Harmony 170,3
The operations generated R402,8 million in cash operating profits, an
increase of 54% over the R261,5 million reported for the December 2001
quarter.
Underground operations Mar '02 Dec '01 Var (%)
Gold price R/kg 107 657 88 530 21,6
Cash cost R/kg 57 882 61 784 (6,3)
Profit margin R/kg 49 775 26 746 86,1
The operations are operating at a 47%, or R50 717/kg, cash operating profit
margin. This is an improvement of 87% on the
27 144/kg reported previously.
This improvement does reflect the gearing present from restructuring and
successfully extracting value from mature turnaround assets. Over the
reporting period the R/Kg gold price increased by 22% from R88 530/kg to
R107 631/kg.
Total mine results Mar '02 Dec '01 Var (%)
Gold price US$/oz 290 261 11,1
Cash cost US$/oz 154 188 18,1
Profit margin US$/oz 136 73 86,3
Exchange rate
rand per US$1,00 11,53 10,30 (11,9)
When measured in US$/oz terms, the cash operating margin increased by 86%
from US$73/oz to US$136/oz quarter on quarter. This is despite only an 11,1%
increase in the gold price in US$/oz terms and a 11,9% depreciation in our
local currency.
For comparison purposes it is worth noting that production was affected by
the quarter under review being eleven days shorter than normal. During March
2002 only 58 production days were used for reporting purposes, whilst 69
days were used in December 2001. This was due to the contractual handover
date agreed to being 3 January 2002.
Tonnes milled (000's) Jan Feb Mar
Underground 291 307 328
Surface 319 426 416
Total 610 733 744
Kgs recovered
Underground 2 213 2 598 2 316
Surface 274 295 246
Total 2 487 2 893 2 562
The shorter quarter impacted on underground production results with 18% less
tonnes being available for milling. A higher underground recovery grade of
7,70 g/t however contributed to net gold recovery being lower by 16% at 7
127 kgs.
The Bambanani and Tshepong operations both returned improved results mainly
due to the higher recovery grades and the increase in gold price. Matjhabeng
which was placed in closure mode by the previous owners continued operating
and contributed to operating profit, albeit at lower production levels.
Mine results
(R'million) Mar '02 Dec '01 Var (%)
Bambanani 158,4 61,0 159,7
Tshepong 158,6 110,9 43,0
Matjhabeng 32,5 42,4 (23,3)
Joel 5,2 22,2 (76,6)
Surface 48,1 25,0 92,4
Total 402,8 261,5 54,0
The significant variance in the performance of Joel being that only
underground results have been included in the R5,2 million for the March
2002 quarter. Previously results at Joel reflected both surface and
underground operations. During the past two quarters, pre the acquisition of
Free Gold, Joel was in a clean-up and closure phase which resulted in a
disproportionate gold recovery from underground.
Labour restructuring, following implementation of the due diligence
recommendations, was undertaken at all the shafts. A total number of 4 108
positions in mainly service or supporting departments were identified as
being in excess of the needs of the operations. A total of 1 763 employees
requested voluntary retrenchment which was accepted by the company.
Due to the lower cost structure now envisaged at these operations,
management commenced with the re-opening of West, Sable and Kudu Shafts.
These shafts will contribute approximately 184 kgs per month to overall
production. A total of R6,8 million in costs was capitalised to re-open
these shafts. Discussions are in progress with the respective unions and
associations to possibly re-open Nyala Shaft which, if operated on a
continuous operations basis (CONOPS), has the potential to alleviate the
number of remaining redundant employees.
March quarter June quarter
Actuals Forecast
Capital expenditure R'000 R'000
Bambanani Shaft 6,2 15,7
Tshepong Shaft 2,0 2,0
Kudu/Sable Shaft 3,9 1,2
West Shaft 5,0 1,3
Total 17,1 20,2
A view on the June 2002 quarter
As always the easy and first stage of addressing unnecessary overhead costs
has been completed. However the benefits from utilising centralised services
from either Harmony, ARMgold or outside contractors will only accrue to Free
Gold and become visible over the next two quarters.
The current JV Steering Committee which consists of three representatives
from ARMgold and Harmony respectively has proved very successful. Mr Peter
Steenkamp will assume overall management responsibility for the Free Gold
operations. He will however, be assisted by the necessary personnel from
both partners to ensure that the broad strategies formulated during the due
diligence process are actually converted and incorporated into the mining
and metallurgical plans.
We do however anticipate that further benefits from restructuring the
operations will be partially offset by the impact of grades slowly
recovering to the average mining grade of the orebodies. Our investment on
behalf of our shareholders has been a sound one and we look forward to
reporting back in July 2002.
PATRICE MOTSEPE
BERNARD SWANEPOEL
12 April 2002
Free Gold Joint Venture returns 54% increase in Cash Operating Profits
Johannesburg, 12 April 2002 - African Rainbow Minerals Limited (ARMgold) and
Harmony Gold Mining Company Limited today reported excellent performance by
their newly formed Free Gold Joint Venture company, and that it had exceeded
all expectations.
The company assumed operational control on 3 January 2002 with all the
remaining conditions precedent having been met by 10 April 2002.
The Free Gold operations reported a cash operating profit of R402,8 million,
an increase of 54% over the R261,5 million reported for the December 2001
quarter.
These newly acquired mines are now operating at a
R50 717/kg or a 47% cash operating profit margin. This is an improvement of
87% on the R27 144/kg margin reported during the December 2001 quarter.
Patrice Motsepe, executive chairman of ARMgold said: "The first quarter
following an acquisition, is usually a period during which the re-
structuring and changeover in management impacts on both employees and the
overall performance of the operations. This improvement in profit margin
reflects the gearing present from our restructuring process in extracting
value from mature turnaround assets."
Following the implementation of the due diligence recommendations, labour
restructuring was undertaken at all the mines. A total of 4 108 positions,
in mainly service or supporting departments, were identified as being in
excess of the needs of the operations. A total of 1 763 employees requested
voluntary retrenchment.
Although the R/Kg gold price increased by 22% from R88 530/kg to R107
657/kg, when measured in US$/oz terms, the cash operating margin increased
by 86% from US$73/oz to US$136/oz, quarter on quarter. These increases
occurred despite a mere 11,1% increase in the gold price in US$/oz terms,
and a 11,9% depreciation of our local currency.
For comparison purposes, it is worth noting that production was affected by
the period under review being seven days shorter than normal. March 2002
composed of only 58 production days compared to 69 days in December 2001.
The impact of the shorter reporting period is visible in underground
production results with 18% less tonnes available for milling. A higher
underground recovery grade of 7,70 g/t however contributed to net gold
recovered being 16% lower at 7 127 kgs.
The Bambanani and Tshepong operations both returned improved results mainly
due to the higher recovery grades and the increase in the gold price.
Matjhabeng, which was placed in closure mode by the previous owners,
continued operating and contributed to the operations' profit, albeit at
lower production levels. The significant variance in Joel's performance can
be attributed to the fact that only underground results have been included
in the R5,2 million for the March 2002 quarter, as opposed to previous
results which reflected both surface and underground operations.
As a result of the lower cost structure now envisaged at Free Gold,
management has commenced the re-opening of West, Sable and Kudu mines. It
is estimated that these mines will contribute approximately 184 kgs per
month to the overall production figure. A total of R6,8 million in costs was
capitalised to re-open these shafts.
"The current JV Steering Committee consisting of three representatives from
ARM and Harmony respectively, has proved to be very successful. Mr Peter
Steenkamp will assume overall management responsibility for the Free Gold
operations. He will be assisted by the necessary personnel, from both
partners, to ensure that the broad strategies formulated during the due
diligence process, are accurately converted and incorporated into the mining
and metallurgical plans. We anticipate that further benefits from the
restructuring of the operations will be partially offset by the impact of
grades, slowly recovering to the average mining grade of the orebodies."
commented Bernard Swanepoel chief executive of Harmony.
"Our investment on behalf of our shareholders has been a sound one and we
look forward to reporting back in July 2002", he concluded.
Ends
For further details contact:
Bernard Swanepoel on +27(0)83-303-9922
or
Ferdi Dippenaar
on +27(0)82-807-3684
or
Patrice Motsepe
on +27(0)82-560-0930
or
Mangisi Gule
on +27(0)82-805-3863
Issued by
African Rainbow Minerals Gold Limited (ARMgold) and Harmony Gold Mining
Company Limited
Contact:
Corn Bobbert
Tel +27 11 411 2036
Mobile +27(0)83-380-6
