| Mon 29 Apr 2002, 0:00 | | Harmony Gold Mining Company Limited - Report To Sh |
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Harmony Gold Mining Company limited
(Incorporated in the Republic of South Africa)
(Registration number 1950/038232/06)
JSE code: HAR NASDAQ trading code: HGMCY
ISIN: ZAE000015228
Report to shareholders for the quarter ended 31 march 2002
Key indicators
* record cash operating profit of R851 million
* 87% increase in e.p.s from 206 cents to 386 cents
* earnings per share financial year to date of 656 cents
* cost focus results in R37,4 million or 3% reduction in total working costs
* company now operates with total cash cost of US$176/oz, a cash operating
profit margin of 38%
* closure of inappropriate hedge book of Randfontein at after tax cost of
R125 million
* 5 key operations generating in excess of R100,0 million per quarter, i.e.
Free State, Evander, Randfontein, Elandskraal and Free Gold JV
Financial Highlights
31-Mar 31-Dec
2002 2001
Cash operating
profit
- Rand 851 million 455 million
- US$ 74 million 45 million
Earnings
- Rand 615 million 308 million
- US$ 53 million 31 million
Earnings per share
- SA cents per share 386 million 206
- US cents per share 33 million 20
31-Mar 31-Dec
2002 2001
Gold produced
- kg 20 936 18 484
- oz 673 106 594 272
Cash costs
- R/kg 65 392 63 863
- $/oz 176 198
"Gold remains everybody's alternative currency, but unfortunately nobody's
responsibility. Even without any central bank support it has still been the
second best performing major currency in the world, after the US Dollar,
over the past 12 months."
BERNARD's REVIEW
SAFETY REPORT
It is with regret that I have to report the loss of five employees,
following five separate mine accidents, during the past quarter. Four of the
five accidents were as the result of a fall of hanging wall in the work
places. Regrettably, one of the fatalities occurred on Brand 5 mine which
had already achieved the benchmark of 500 000 fatality free shifts. We offer
our sincere condolences to the family, friends and colleagues of these
employees.
Notwithstanding the above mentioned unfortunate events, it is with pride
that we can report that Cooke 3 mine achieved the milestone of one million
fatality free shifts on 14 March 2002.
STRATEGIC OVERVIEW
The past quarter has seen significant changes in the operating environment
in South Africa. Whilst the gold price has increased to levels of US$300/oz,
the South African Rand experienced further weakness. The depreciation of our
local currency continued with the Rand averaging R11,53 to the US Dollar for
the March 2002 quarter. This is an additional 14,7% when compared quarter on
quarter.
Events during the quarter which impacted positively on the gold price were
the increased retail purchasing of physical gold by the Japanese market and
the continued decrease in the supply of bullion which will reach the market
following the reduction of producer production and nett hedging activities.
Positive comments from large producers regarding reduced hedging
substantiated the figures supplied by GFMS.
Gold equities were a top-performing sector in 2001, significantly
outperforming the broader markets. Gold remains everybody's alternative
currency, but unfortunately nobody's responsibility. Even without any
central bank support it has still been the second best performing major
currency in the world, after the US Dollar, over the past 12 months. This
trend has continued in the past quarter with a higher level of portfolio
diversification by investors being experienced.
Although analysts have indicated that gold stocks are currently discounting
gold prices above US$300/oz, the consolidation of the gold industry has
resulted in fewer stocks being available. The outperformance of unhedged
producers over hedged producers has increased significantly following the
increase in the gold price. Harmony has and will continue to be unhedged by
choice. Other producers may correctly claim to have made money out of
hedging, but Harmony has demonstrated that being unhedged has been the smart
choice when it came to creating shareholder value. No doubt others will
continue to follow.
On 10 April 2002 the company announced that it had completely closed the
Randfontein hedge book. This hedge book, which I described as
"inappropriate" for a gold mining company at the time, came with the company
in January 2000. A total of 490 000 ounces in respect of the remaining
forward sales contracts and call options were closed. In addition, as a
result of the higher gold price, the company closed a further 220 000 ounces
of forward purchases.
The closure of the hedge book resulted in a net cost after tax of R125
million (US$ 11 million), which has been financed from existing cash
resources. The company will continue restructuring the inherited hedge books
of New Hampton and Hill 50 as and when the market conditions allow.
The further 14,7% devaluation of the South African Rand over the past
quarter has significantly impacted on the profitability of the South African
producers. At R8,05 to the US Dollar, local producers were the most
expensive producers when measured on a cash cost basis. At R11,50 to the US
Dollar, the South African industry has become the lowest cost region. This
has resulted in increased profit margins. Harmony now operates at a cash
cost of US$176/oz and a total cost of US$207/oz. With a real profit margin
of approximately US$100/oz Harmony could rightfully claim to be one of the
most profitable gold mines in the world, if not the most, and yet we have
spectacular leverage remaining in the gold price, the Rand currency and the
largest resource in the world.
The company has decided not to pursue increased production at higher working
costs with the potential of diluting profits, until we have re-established
firm control over unit costs on our South African operations. The South
African industry has in the past year seen profit erosion due to the
pressure from higher working costs due to inflation and increased demands
from various stakeholders. At Harmony we, some six months ago, embarked on a
cost reduction campaign, known as "The Cost Marathon", and although it's
early days yet, we saw a 3% or R37,4 million reduction in total working
costs during the March 2002 quarter.
The current higher gold price levels will be used to allow the company more
flexibility in its planned mining programmes, thereby optimising operating
profit margins and increasing profits. To date, the operations have not been
starved of capital expenditure and no "catch-up" expenditure is required. At
gold price levels of R105 000/kg, Harmony has probably the most prospective
mining projects remaining in South Africa, i.e. Randfontein South Reef
Project, the Rolspruit Extension and Poplar Project at Evander. These
projects are being evaluated, but the company will only consider developing
these assets when market conditions are such that long lead time high
capital projects of this nature show better returns than acquisitions with
turnaround potential.
With gold at levels of US$300/oz, we believe that the consolidation of the
industry will continue. Lower exploration expenditure and the high cost of
replacing the ounces currently being produced are factors which will provide
continued impetus for consolidation.
The company experienced a successful quarter on both a strategic and
operational level. Harmony continued with its strategy of growth with the:
(i) Conclusion of the acquisition of Free Gold from Anglo Gold
Although the JV company, Free Gold (Pty) Limited, took operational control
of the assets on 3 January 2002, the remaining conditions precedent to the
acquisition were met on 10 April 2002. The acquisition was concluded with
the payment of R900 million by Harmony and ARMgold respectively on 23 April
2002. The outstanding amount of R400 million will be paid by Free Gold on 1
January 2005. Anglogold has decided not to appeal a ruling from the South
African Revenue Services regarding the tax relief sought in terms of Section
39, and an amount of approximately R500 million will be payable by Free Gold
in March 2003. As reported previously the JV company will be able to claim a
significant portion of the purchase price as a capital expenditure against
taxable income. Under the current gold price conditions, this option
enhanced the NPV of the project by some R200 million as compared to the
original option for which the exemption was sought.
From an operational perspective the Free Gold assets generated improved cash
operating profits of R402,8 million, significantly ahead of the conservative
estimates used for acquisition and financing purposes.
A summary of the results follows:
(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 ARMgold 170,3
Due to Harmony 170,3
* Interest was payable to AngloGold in lieu of the purchase price for 3
months.
The operational restructuring has been proceeding according to plan.
Normally, during the first quarter following the acquisition of assets of
this nature, the changeover in ownership impacts on employees and the
overall performance of the operations. The fact that the Free Gold assets
were acquired in a JV company had challenges of their own, but we are
extremely satisfied with the level of co-operation that has been established
between the two parties. This has made the task of the Steering Committee,
who took control of implementing the broad strategies identified in the due
diligence phase, easier.
Free Gold now operates at a profit margin of US$136 or 47% per ounce at a
gold price of US$290/oz. Our strategy of acquiring these operations as part
of consolidating the Free State goldfields has already delivered value to
our shareholders.
Total mine results Mar '02 Dec '01 Var (%)
Gold price US$/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$ 11,53 10,30 (11,9)
All the shafts at Free Gold were profitable despite the impact of
restructuring activities. Bambanani and Tshepong mines contributed R317,0
million or 79% of the operating profits of R402,8 million. We expect that
the contribution from Matjhabeng and Joel mines and the surface operations
will improve during the following year.
Free Gold has been successful in addressing the high overhead costs that
impacted on the short-term profitability of these operations. When measured
on the "Harmony Value Curve" these operations are on the steep upward
performance stage delivering excellent cash operating profits. Our focus
however will be on improving tonnages at slightly lower grades, but
delivering optimal gold production and cash operating profits.
We generally inherit mature mines that are in the process of being
highgraded. It is our intention to return to mining these operations at the
average mining grade of the orebodies whilst increasing expenditure on
working cost development.
(ii) Broadening our production base in Australia
Excellent progress was made with the take-over offer for Hill 50 announced
on 10 December 2001. To date Harmony has received acceptances of
approximately 99% of the shares and options. The process of the compulsory
acquisition of the remaining shares and options has commenced in accordance
with Australian law. In terms of the current timetable the process should be
completed by June 2002. The acquisition was concluded with a final offer of
A$1,45 for each ordinary share and A$0,75 per listed option in Hill 50
valuing the transaction at R1 411 million and Australian $231 million.
The acquisition of Hill 50 has increased Harmony's Australian production
base from approximately 220 000 oz/annum to a sizeable 500 000 oz/annum. The
company now has a solid production base with a package of highly prospective
exploration areas in West and eastern Australia. The company is in a
stronger position in Australia to what it had been in South Africa in 1996,
building a company from modest assets to the fifth largest producer in the
world today.
Hill 50 has increased production over the past two years to the
approximately 300 000 oz forecast for the 2001/2002 financial year.
2001/ 2000/ 1999/ 1998/
Hill 50 2002 2001 2000 1999
Gold produced (oz) 290 000 202 000 150 000 150 000
Cash cost A$/oz 322 330 358 310
Cash cost US$/oz 169 176 224 194
These producing assets and our 9,8% holding in Aurion Gold valued at R663,0
million will ensure our participation in the continued consolidation of the
Australian gold industry.
(iii) Delivery of value to Simane - Black Economic Empowerment on track
Harmony shareholders agreed, in a general meeting in May 2001, to issue 10,9
million Harmony ordinary shares for cash to the IDC and Simane, a black
economic empowerment company. The IDC subscribed for 10,7 million ordinary
shares on behalf of Simane and Simane themselves subscribed for 0,2 million
ordinary shares. In addition, the IDC, on behalf of Simane, subscribed for
10,9 million redeemable convertible preference shares, each share granting
the company the right to subscribe for a Harmony ordinary share at R41,50.
The preference shares were converted into ordinary shares and were placed in
the market from 16 January 2002 to 4 February 2002, realising an average
price of R85,46 per ordinary share. This has enabled Simane to take transfer
of the ordinary shares after the repayment of their loans. Harmony's cash
resources increased by R430 million as a result of this initiative.
Simane now hold 10,9 million unencumbered shares in Harmony, representing 7
per cent of Harmony's issued ordinary share capital, making it the company's
largest shareholder.
(iv) Granting of option to Gold Fields Limited to acquire a stake in Aurion
Gold and option by Harmony to negotiate for the acquisition of St Helena and
Oryx mines
The options granted by the respective companies expired on 15 February 2002
without any agreements being reached. Value will however be created with the
inclusion of St Helena in the continued consolidation of the Free State
Goldfields. The possible acquisition of these assets will be revisited in
future.
(v) Listing on Chicago Board Options Exchange
On 2 April 2002 the company was informed that it had been selected for
listing on the Chicago Board Options Exchange. Trading in the option was set
to start on 3 April 2002 and it is expected to impact on the tradability of
Harmony stock on the various exchanges.
The Chicago Board Options Exchange is the world's largest options market.
(vi) Listing on Berlin Stock Exchange
To enable institutional and retail shareholders to acquire and trade Harmony
stock in their domestic currency, the company was listed on the Berlin Stock
Exchange. Trading started on 20 March 2002 under the symbol HAM1.
(vii) Kalplats Project
R3,0 million was spent on this project during the quarter. Exploration
drilling has added 500 000 oz to the mineral resources which currently
stands at 3,8 million oz at 1,5 g/t TPM (Total Precious Metals) in the
indicated and inferred categories to 150m depth. Included in this resource
is 1,5 million oz of higher grade reef at 3,7 g/t TPM.
The pre-feasibility drilling and metallurgical studies are continuing. A
total of 41 infill boreholes representing 3 160m were drilled. Metallurgical
work on representative drill samples is in progress to test provisional
process flowsheets. The pre-feasibility study will be completed by June
2002.
QUARTERLY OPERATIONAL REVIEW
The company reported improved operational profits of 87%, increasing from
R455,2 million to a record R850,9 million. This was due to the inclusion of
R201,4 million in respect of the Free Gold JV and the increase in gold price
in R/kg terms following the continued depreciation of the Rand against other
major currencies. Our focus on working costs is delivering excellent results
with the operations reporting a 3% or R37,4 million reduction in working
cost expenditure. Kilograms recovered from the operations were 13% higher at
20 936 kgs mainly due to increased production from New Hampton and the
inclusion of Free Gold.
Profit before tax increased by 106% from R412,4 million to R848,9 million.
Taxation was R130 million higher at R233,8 million compared to the R104,7
million for the previous quarter.
Net profit after tax at R615,1 million was 100% more than the R307,7 million
reported for the December quarter.
Earnings per share increased by 87% from 206 cents for the December 2001
quarter to 386 cents for the past quarter. Earnings for the nine months of
the current financial year total 656 cents.
The performance of the operations are best highlighted in the following
table:
March December Variance
2002 2001 %
Production R/kg 20 936 18 484 13,3
US$/oz 673 106 594 272 13,3
Revenue R/kg 106 037 88 491 19,8
Cash cost R/kg 65 392 63 863 (2,4)
Cash cost R/tonne 228 238 4,2
Revenue US$/oz 286 274 4,4
Cash cost US$/oz 176 198 11,1
Exchange rate R/US$ 11,53 10,05 (14,7)
The company achieved a US$110 or 38% cash operating profit margin with cash
costs of US$176/oz. Working costs in R/kg terms increased marginally by 2,4%
due to lower gold production caused by the recovery grade being lower by 2%.
Cash costs in US$ terms decreased from US$198/oz to US$176/oz.
The company reverted back to a more logical work arrangement around the
Christmas break. Although tonnages for January 2002 were still affected,
there was a dramatic improvement compared to the results for January 2001.
A quarter on quarter cash operating profit analysis of the various
operations is as follows:
TOTAL CASH OPERATING PROFIT (R'million)
March December
Operations 2002 2001 Variance
Free State 145,4 87,5 57,9
Evander 169,3 111,4 57,9
Randfontein 198,0 150,3 47,7
Elandskraal 115,2 87,2 28,0
Kalgold 8,3 17,8 (9,5)
Australian Operations 13,3 1,0 12,3
Sub-total 649,5 455,2 194,3
Free Gold (50%) 201,4 - 201,4
Total 850,9 455,2 395,7
Free State Operations - continue to improve
The Free State Operations reported a 66% increase in cash operating profits
from R87,4 million to R145,4 million. These operations, although affected by
the Christmas holidays, milled 996 000 tonnes at a recovery grade of 4,4 g/t
compared to the 1 074 000 tonnes at a recovery grade of 4,6 g/t for the
previous quarter. To utilise mill capacity during the break, 96 000 tonnes
from surface sources were treated which contributed an additional 30 kgs to
gold production.
Our focus on reducing working costs resulted in a decrease of R21,4 million
or 6% quarter on quarter. This impacted on the cost/tonne decreasing from
R319 to R294. In US Dollar terms these operations are producing an
annualised 600 000 ounces at cash costs of US$197/oz.
Harmony 4 Shaft, which has been in closure mode for the past 12 months, will
close by June 2002. The shaft has had the benefit of an increased gold price
which resulted in postponement of the closure on a quarterly basis. The
excellent teams at this mine will be re-deployed to mainly the Masimong 4
Shaft complex from which additional production is planned.
The gold price has had a positive impact on the viability of the Saaiplaas 3
Shaft complex. This mine which was purchased from AngloGold for R87 million
in 1998 was closed due to the decrease in the gold price at the time. Mining
regions which were accessible from Masimong 4 Shaft were previously included
in that shaft's mining plan.
A re-evaluation of the Shaft Pillar Extraction Project shows an NPV of
R109,1 million at a discounted rate of 17%. This project which requires
capital expenditure of only R27,5 million, will return cashflows of R152,8
million over a four year period. Work on the project will commence during
the June 2002 quarter.
Saaiplaas 3 shaft pillar extraction
Capital R27,5 million
expenditure
Tonnes milled 740 000
Total kg recovered 3 808
Total cost/tonne R270,00
Life of project 4 years
Gold price R100 000 kg
NPV@17% R109,1 million
Although the decision to shut this shaft down soon after acquisition was a
tough one, it has proved to be the right one. Instead of wasting the orebody
by mining it at a loss it was maintained for a better gold price environment
where it can now be mined at a profit.
Evander Operations - strength to strength
Evander continues to deliver excellent results with a cash operating profit
of R169,3 million. This is a 52% improvement on the R111,4 million reported
for the December quarter.
Costs in both R/tonne and R/kg decreased marginally due to a R7,1 million
lower total working cost expenditure. More scope exists for further
sustainable cost reductions. Total gold recovered was 3 230 kgs. In US$/oz
terms this operation reported the lowest cash costs in the company of
US$147/oz and was operating on a profit margin of US$139/oz at a gold price
of US$286/oz.
Although the current R/kg gold price has had a favourable impact on the life
of Evander 9 Shaft, the lack of availability of ore resources has finally
resulted in its closure. This shaft, which has been in its closure phase
with the final extraction of the shaft pillar, will cease operating at the
end of June 2002. Employees at the shaft are in the process of being
relocated to No. 2, 3 and 5 Shafts at Evander. These shafts which were re-
opened earlier in the financial year are, following a period of investment
in development programmes, contributing to cash operating profits. During
the past quarter Evander 9 Shaft produced 36 000 tonnes at a grade of 3,8
g/t. The impact of the closure on the overall results from Evander will be
negligible.
Randfontein Operations - excellent results
The Randfontein operations returned a 32% improvement in cash operating
profits, increasing from R150,3 million to R198,0 million. This improvement
was mainly due to the gold price as kilograms produced were lower due to the
impact of the public holidays on underground production. These operations
produced 816 000 tonnes from underground at a recovery grade of 4,99 g/t.
In March 2002 these operations milled 816 000 tonnes at a recovery grade of
4,99 g/t. This resulted in a lower gold recovery of 4 070 kgs compared with
4 485 kgs for the December 2001 quarter. Kilograms from surface operations
were marginally lower at 184 kgs compared to the 186 kgs reported
previously.
Randfontein reported a R14,0 million decrease in total working costs. In
R/tonne terms cost decreased from R222/tonne to R205/tonne. These operations
continue to contribute significantly to the company's cash flows with a
US$126 or 44% cash operating margin at a gold price of US$286/oz.
Results at Randfontein will be affected by the expected decline in tonnage
and grade at Cooke 1 Shaft by September 2002. Cooke 1 Shaft has over the
past few quarters focussed on the extraction of the shaft pillar which has
contributed 20 000 tonnes per month at a recovery grade of 4,7 g/t.
By December 2002 quarterly underground production at Randfontein is expected
to decrease to 800 000 tonnes at a recovery grade of 5,0 g/t.
Elandskraal Operations - tough quarter
As was the case with the majority of our previous acquisitions, Elandskraal
is now in its "restructuring for optimal returns" phase on our value curve.
The high overhead costs have been addressed and the implementation of the
"Harmony Way" is well underway. These operations however now require
flexibility in underground operations. The development at Elandsrand and
Deelkraal which were embarked on a year ago will in 9 to 12 months allow
more mining flexibility and a recovery in grades.
These operations reported cash operating profits of R115,2 million, an
increase of 32% over the R87,2 million reported previously. Tonnage
decreased marginally from 551 000 tonnes to 541 000 tonnes. The expected
lack of flexibility at Elandskraal resulted in the recovery grade decreasing
from 6,3 g/t to 5,7 g/t. This has resulted in gold recovery from underground
being 347 kgs less at 3 105 kgs compared to the 3 452 kgs for the December
2001 quarter.
The decrease in kilograms impacted adversely as the R/kg working costs
increased by R6 342/kg to R71 398/kg, but in R/tonne terms underground
working costs remained constant at R410/tonne. This is significantly higher
than what was believed to be achievable and the same effort that was put
into cost reductions at the other operations will now be focused on
Elandskraal.
The Elandskraal operations with cash costs of US$191/oz operate at a cash
operating profit margin of US$95/oz or 33% at a gold price of US$286/oz.
Kalgold Operations - can do better
Cash operating profits decreased to R8,3 million compared to the R17,8
million in the December 2001 quarter. This was mainly caused by the
previously reported mill breakdown which resulted in 26 days of production
time being lost by one of the two mills. Tonnage was lower at 218 000 tonnes
compared to 256 000 tonnes reported previously. At a lower recovery grade of
1,88 g/t gold recovery decreased by 29% to 409 kgs.
A change in the nature of the orebody resulted in a higher ratio of high-
grade refractory ore reporting to the mill. This has impacted on the
recovery grade of these operations as residual values are higher than
normal. An evaluation into improving metallurgical recovery using a
flotation process is underway.
AUSTRALIAN OPERATIONS - welcome improvement
This has been an extremely busy period for Harmony's Australian operations,
with the highlights being:
- The successful acquisition of 99% of Hill 50 and a subsequent move to
compulsory acquisition of the remaining minorities,
- Operating profits being reported at both operations.
- The successful completion of the redevelopment of the seismically affected
lower portions of the Big Bell underground mine, with the first stoping
production blasts taken,
- The completion of the pre-stripping of the southern portion of the Trojan
pit at Jubilee, giving us access to 8 months of higher grade material, and
Big Bell
During the quarter, Big Bell milled a total of 709 000 tonnes to produce 31
058 ounces. The operations returned an operational profit of A$1,0 million.
Big Bell continued with its good performance (albeit at marginal grades)
from the open pits. Ore is being sourced from four different pits. Lower
grade remnant mining in the upper levels of the Big Bell underground mine
ceased as these ore resources were exhausted.
The redevelopment and rehabilitation (after the seismic event of late 2000)
of the lower levels of the Big Bell underground mine progressed well and two
levels of the mine are accessible for stoping. Production is planned to
increase to 65,000tpm for this area in the June quarter.
Exploration success has resulted in two new open pits being planned at City
of Chester (15,000 oz resource to date) and Try Again (in excess 30,000 oz
resource) whilst new extensions were discovered at the Rheingold and
Chieftain pits. In the year since the acquisition of New Hampton, Harmony
has by exploration successfully replaced the open pit resources it has mined
out.
Jubilee
During the quarter Jubilee milled 282 000 tonnes to produce 14 596oz for an
operating profit of A$1,2 million. Production from Jubilee was sourced in
equal proportions from Trojan, the small Jubilee West pit and old
stockpiles.
Although Jubilee has a lack of high-grade resources, these operations should
produce steady profits from existing resources for at least 18 months and
provide opportunities for exploration success.
The prestripping of the southern part of Trojan pit to expose the main part
of the ore body was completed. At the end of March, and for the first time
since Harmony's acquisition, a large block of reserves is available for
mining.
Exploration drilling beneath the old Golden Ridge pit has demarcated the re-
establishment of at least 35 000oz of production which has been scheduled
for the March and June quarters of 2003.
Three separate grass roots exploration projects returned ore grade
intersections at good widths during the quarter. Intensive follow up is in
progress on all three projects. Whilst it is still too early to predict
whether or not these discoveries will develop into sizeable reserves, these
are the best exploration results Harmony has achieved to date in the
Kalgoorlie area. This confirms the ongoing prospectivity of the Kalgoorlie
region and bodes well for exciting exploration initiatives when we can
combine the Harmony and Hill 50 land packages from April onwards.
The operations are expected to continue to show profits and positive cash
flow after capital for the next 15 months if production targets are
achieved. Upside opportunities will come from cost initiatives, certain
synergies with Hill 50 and continuing to expose the company to the
possibility of exploration success by judicious expenditure in this area.
Bendigo - excellent progress
The advance of the decline and lateral development for ventilation at
Bendigo (of which Harmony owns 31%) has progressed well since start-up at
the end of December 2001 and is ahead of budget.
Changes to the development strategy and anticipated productivity
improvements have resulted in the proposal of a new plan that should enable
Bendigo to access and take the first development blast in the first orebody
to be tested in September 2002 instead of December 2002 as originally
envisaged.
Plans for bulk sampling, grade validation and metallurgical testwork are
progressing on schedule.
CAPITAL EXPENDITURE
March June
Quarter Quarter
Operations Actuals Forecast
Free State 28 28
Evander 26 24
Randfontein 3 2
Elandskraal 31 31
Free Gold (50%) 9 11
New Hampton 4 4
Kalgold - 5
Total 101 105
Operating and financial results (rand/metric)
Free Free Rand-
State State Evander Evander Kalgold fontein
U/g Surface U/g Surface Opencast U/g
Ore milled 2-Mar 996 96 538 60 218 816
- t'000 1-Dec 1 074 - 538 59 256 860
Gold 2-Mar 4 370 30 3 203 27 409 4 070
produced
- kg 1-Dec 4 884 - 3 296 31 575 4 485
Yield - 2-Mar 4.39 0.31 5.95 0.45 1.88 4.99
g/t
1-Dec 4.55 - 6.13 0.53 2.25 5.22
Cash 2-Mar 73 182 47 600 54 080 85 444 86 597 58 326
operating
Costs - 1-Dec 70 152 - 54 963 46 968 56 675 56 565
R/kg
Cash 2-Mar 321 15 322 38 162 291
operating
costs - 1-Dec 319 - 337 25 127 295
R/tonne
Working 2-Mar 463 3 208 341 907 2 931 43 734 430 974
revenue 446
(R'000) 1-Dec 430 - 291 084 2 946 50 342 399 847
075
Cash 2-Mar 319 1 428 173 217 2 307 35 418 237 388
operating 804
costs 1-Dec 342 - 181 159 1 456 32 588 253 692
(R'000) 620
Cash 2-Mar 143 1 780 168 690 624 8 316 193 586
operating 642
profit 1-Dec 87 455 - 109 925 1 490 17 754 146 155
(R'000)
Rand- Elands- Elands- Free Free Australian
fontein kraal kraal Gold Gold Opera-
Surface U/g Surface U/g Surface tions Total
Ore 416 541 275 464 581 991 5 992
milled
- t'000 339 551 284 - - 1 009 4 970
Gold 184 3 105 146 3 564 408 1 420 20 936
produced
- kg 186 3 452 178 - - 1 397 18 484
Yield - 0.44 5.74 0.53 7.68 0.70 1.43 3.49
g/t
0.55 6.26 0.63 - - 1.38 3.72
Cash 81 495 71 398 57 692 57 874 48 390 90 404 65 392
operating
Costs - 68 473 65 056 48 517 - - 88 034 63 863
R/kg
Cash 36 410 31 445 34 130 228
operating
costs - 38 408 30 - - 122 238
R/tonne
Working 19 447 329 905 15 384 383 637 43 765 141 646 2 219 98
revenue
(R'000) 16 927 304 032 16 429 - - 123 979 1 635 66
Cash 14 995 221 692 8 423 206 263 19 743 128 374 1 369 05
operating
costs 12 736 224 575 8 636 - - 122 983 1 180 44
(R'000)
Cash 4 452 108 213 6 961 177 374 24 022 13 272 850 932
operating
profit 4 191 79 457 7 793 - - 996 455 216
(R'000)
Financial results
total operations (rand/metric) (unaudited)
Quarter Quarter
ended ended
31-Mar 31-Dec
2002 2001
Ore milled - t'000 5 992 4 970
Gold produced - kg 20 936 18 484
Gold price received - R / kg 106 037 88 491
Cash operating costs - R / kg 65 392 63 863
R'000 R'000
Gold sales 2 219 984 1 635 661
Cash operating costs 1 369 052 1 180 445
Cash operating profit 850 932 455 216
Amortisation (72 082) (54 086)
Mark to market of financial instruments - 11 141
Employment termination costs (4 759) (10 432)
Other income/(expenditure) - net 18 119 (8 690)
Interest paid (62 143) (40 437)
Corporate expenditure (15 603) (14 302)
Exploration and new business (13 892) (12 923)
Mark to market of listed investments 148 340 86 939
Profit before taxation 848 912 412 426
South African normal taxation
- Current tax (140 469) (83 851)
- Deferred tax (93 316) (20 872)
Net earnings 615 127 307 703
Adjustments:
- Profit on sale of property plant and equipment 4 532 6 985
Headline earnings 610 595 300 718
Earnings per share - cents
- Earnings* 386 206
- Headline earnings* 383 202
- Fully diluted earnings ** 374 198
Dividends per share - (cents) - 75
* Calculated on number of shares in issue during the quarter: 159,5 million
(December: 149,1 million)
** Calculated on average number of diluted shares in issue for the quarter:
164,7 million (December: 155,1 million). Diluted earnings per share is
calculated on the listed warrants issued.
Abridged balance sheet (rand) (unaudited)
**At At
31-Mar 31-Dec
2002 2001
R'000 R'000
Employment of capital
Mining assets after amortisation 6 873 819 5 868 014
Investments* 2 127 522 694 253
Net current assets/(liabilities) 41 271 (447 079)
(excluding cash)
Short-term investments
- Aurion Gold 663 106 488 647
Cash 1 466 015 1 213 343
11 171 733 7 817 178
Capital employed
Shareholders' equity 6 144 785 4 924 354
Free Gold loan 1 350 000 -
Loans 2 277 655 1 337 570
Preference shares - 5 479
Long-term provisions 692 491 475 360
Unrealised hedging loss 557 292 663 830
Deferred tax 149 510 410 585
11 171 733 7 817 178
Accounting Policies
The financial statements are prepared on the historical cost basis and in
accordance with South African Statements of Generally Accepted Accounting
Practice (except for Cash flow Statement) and International Accounting
Standards. The accounting policies are, in all material respects, consistent
with the annual financial statements for the year ended 30 June 2001.
Issued share capital: 159,6 million ordinary shares of 50 cents each.
(December 2001: 149,1)
* Includes Hill 50 investment, which will be consolidated in results for
next quarter.
** Significant variances in balances caused by inclusion of Free Gold Joint
Venture.
Operating and financial results(US$/imperial)
Free Free Rand-
State State Evander Evander Kalgold fontein
U/g Surfac U/g Surface Opencast U/g
e
Ore 2-Mar 1 098 106 593 66 240 900
milled
- t'000 1-Dec 1 184 - 593 65 282 948
Gold 2-Mar 140 498 965 102 978 868 13 150 130 853
produced
- oz 1-Dec 157 024 - 105 968 997 18 487 144 195
Yield - 2-Mar 0.128 0.009 0.174 0.013 0.055 0.145
oz/ton
1-Dec 0.133 - 0.179 0.015 0.066 0.152
Cash 2-Mar 197 128 146 230 234 157
operating
costs - 1-Dec 217 - 170 145 175 175
$/oz
Cash 2-Mar 25 1 25 3 13 23
operating
costs - 1-Dec 29 - 30 2 12 27
$/t
Working 2-Mar 40 195 278 29 654 254 3 793 37 378
revenue
($'000) 1-Dec 42 794 - 28 964 293 5 009 39 786
Cash 2-Mar 27 737 124 15 023 200 3 072 20 589
operating
costs 1-Dec 34 092 - 18 026 145 3 243 25 243
($'000)
Cash 2-Mar 12 458 154 14 631 54 721 16 789
operating
profit 1-Dec 8 702 - 10 938 148 1 766 14 543
($'000)
Rand- Elands- Elands- Free Free Australian
fontein kraal kraal Gold Gold Opera-
Surface U/g Surface U/g Surface tions Total
Ore 459 597 303 512 641 1 093 6 608
milled
- t'000 374 608 313 - - 1 113 5 480
Gold 5 916 99 828 4 694 114 585 13 117 45 654 673 106
produced
- oz 5 980 110 984 5 723 - - 44 914 594 272
Yield - 0.013 0.167 0.015 0.224 0.020 0.042 0.102
oz/ton
0.016 0.183 0.018 - - 0.040 0.108
Cash 220 193 156 156 131 244 176
operating
costs - 212 201 150 - - 272 198
$/oz
Cash 3 32 2 35 3 10 18
operating
costs - 3 37 3 - - 11 21
$/t
Working 1 687 28 613 1 334 33 273 3 796 12 285 192 540
revenue
($'000) 1 684 30 252 1 635 - - 12 336 162 753
Cash 1 301 19 227 731 17 889 1 712 11 134 118 739
operating
costs 1 267 22 346 859 - - 12 237 117 458
($'000)
Cash 386 9 386 603 15 384 2 084 1 151 73 801
operating
profit 417 7 906 776 - - 99 45 295
($'000)
Prepared in accordance with International Accounting Standards
Financial results
total operations (US$/imperial) (unaudited)
Quarter Quarter
ended ended
31-Mar 31-Dec
2002 2001
Ore milled - t'000 6 608 5 480
Gold produced - oz 673 106 594 272
Gold price received - $ / oz 286 274
Cash operating costs - $ / oz 176 198
$'000 $'000
Gold sales 192 540 162 753
Cash operating costs 118 739 117 458
Cash operating profit 73 801 45 295
Amortisation (6 252) (5 382)
Mark to market of financial instruments - 1 109
Employment termination costs -413 (1 038)
Other income/(expenditure) - net 1 571 -865
Interest paid (5 390) (4 024)
Corporate expenditure (1 353) (1 423)
Exploration and new business (1 205) (1 286)
Mark to market of listed investments 12 866 8 651
Profit before taxation 73 625 41 037
South African normal taxation
- Current tax (12 183) (8 343)
- Deferred tax (8 093) (2 077)
Net earnings 53 349 30 617
Adjustments:
- Profit on sale of property, plant and equipment 393 695
Headline earnings 52 956 29 922
Earnings per share - cents
- Earnings* 33 20
- Headline earnings* 33 20
- Fully diluted earnings ** 32 20
Dividends per share - (cents) - 7
Prepared in accordance with International Accounting Standards
Currency conversion rates: average for the quarter: March: US$1 = R11,53
(December: US$1 = R10,05)
* Calculated on number of shares in issue during the quarter: 159,5 million
(December: 149,1 million)
** Calculated on average number of diluted shares in issue for the quarter:
164,7 million (December: 155,1 million). Diluted earnings per share is
calculated on the listed warrants issued.
Abridged balance sheet (US$) (unaudited)
**At At
31-Mar 31-Dec
2002 2001
US$'000 US$'000
Employment of Capital
Mining assets after amortisation 604 026 471 326
Investments* 186 953 55 763
Net current assets/(liabilities) 3 627 (35 909)
(excluding cash)
Short-term investments
- Aurion Gold 58 269 39 249
Cash 128 824 97 457
981 699 627 886
Capital Employed
Shareholders' equity 539 964 395 530
Free Gold loan 118 629 -
Loans 200 145 107 435
Preference shares - 440
Long-term provisions 60 852 38 182
Unrealised hedging loss 48 971 53 320
Deferred tax 13 138 32 979
981 699 627 886
Prepared in accordance with International Accounting Standards.
Issued share capital: 159,6 million ordinary shares of 50 cents each.
(December 2001: 149,1 million)
Currency converted at closing rate: March 2002: US$1 = R11,38
(December 2001: R12,45)
* Includes Hill 50 investment, which will be consolidated in results for
next quarter.
** Significant variances in balances caused by inclusion of Free Gold Joint
Venture.
Condensed statement of changes in shareholders' equity (unaudited)
At At At At
31-Mar 31-Mar 31-Mar 31-Mar
2002 2001 2002 2001
R'000 R'000 US$'000 US$'000
Balance as at the
beginning of the
financial year 4 593 699 2 874 718 403 664 358 220
Currency translation
adjustment and
other 56 965 6 877 5 006 857
Issue of share
capital 589 696 192 936 51 819 24 042
Net earnings 904 425 192 139 79 475 23 943
Balance as at the
end of March 6 144 785 3 266 670 539 964 407 062
Prepared in accordance with International Accounting Standards.
Commodity contractsas at 31 March 2002
F 2002 F 2003 F 2004 Total
Randfontein
Forward
purchases 130,000 - - 130,000
$ / ounce 329 - - 329
Note: All Forwards and Calls were closed in early April 2002
F 2002 F 2003 F 2004 Total
New Hampton
Forward
Sales
Ounces 34,871 190,000 9,000 233,871
A$ / ounce 414 515 539 501
Calls Sold
Ounces 10,000 90,425 175,500 275,925
A$ / ounce 505 521 526 523
Total 44,871 280,425 184,500 509,796
Currency
Forward
Sales
Dollar
amount
(million) 45 90 - 135
Avg Rand /
Dollar rate 11.20
The mark-to-market value of all currency and commodity contracts in the
above Randfontein and New Hampton tables was a negative R388 million (US$34
million) as at 31 March 2002. The value was based on a gold price of $303.15
per ounce, exchange rates of R/$11.44 and $/A$ 0.53 and the prevailing
market interest rates and volatilities at the time.
F 2002 F 2003 F 2004 F 2005 F 2006 F 2007 F 2008 F Tota
2009
Hill 50
Forward
Sales
Ounces 68,250 210,500 220,000 167,50 150,00 125,00 100,00 100,0 1,14
0 0 0 0 00 0
A$ / ounce 508 512 521 515 511 514 518 518 515
Calls Sold
Ounces 12,750 55,000 20,000 50,000 - - - - 137,
A$ / ounce 524 549 518 448 - - - - 505
Convertible Puts
Ounces - - - 37,500 37,500 - - - 75,0
A$ / ounce - - - 560 567 - - - 564
Total 81,000 265,500 240,000 255,00 187,50 125,00 100,00 100,0 1,35
0 0 0 0 00 0
The mark-to-market value of all commodity contracts in the above Hill 50
table was negative R880 million (US$77 million) as at 31 March 2002. The
value was based on a gold price of $303.15 (A$569.62) per ounce, exchange
rates of R/$11.44 and $/A$ 0.53 and the prevailing market interest rates and
volatilities at the time.
Development results - (Metric)
Channel Channel
Reef Sampled Width Value Gold
Meters Meters (Cm's) (g/t) (Cmg/t)
RANDFONTEIN
VCR REEF 522 390 94 16.87 1 586
UE1A 3 400 3 137 92 12.22 1 124
E8 REEF 204 154 107 8.51 911
KIMBERLEY REEF 705 705 242 4.55 1 101
ALL REEFS 4 831 4 386 117 9.88 1 154
FREE STATE
BASAL 1 818 1 563 91 8.47 771
LEADER 850 780 155 8.81 1 366
A REEF 418 384 234 2.53 592
MIDDLE 460 414 192 6.78 1 301
B REEF 474 462 50 24.66 1 233
ALL REEFS 4 020 3 603 126 7.92 1 001
EVANDER
KIMBERLEY REEF 2 350 2 430 67 15.84 1 061
ELANDSKRAAL
VCR REEF 867 738 104 5.80 603
Development results - (imperial)
Channel Channel
Reef Sampled Width Value Gold
Feet Feet (inches) (oz/t) (in.ozt)
RANDFONTEIN
VCR REEF 1 713 1 280 37 0.492 18
UE1A 11 155 10 292 36 0.361 13
E8 REEF 669 505 42 0.238 10
KIMBERLEY REEF 2 313 2 313 95 0.137 13
ALL REEFS 15 850 14 390 46 0.283 13
FREE STATE
BASAL 5 965 5 128 36 0.246 9
LEADER 2 789 2 559 61 0.257 16
A REEF 1 371 1 260 92 0.074 7
MIDDLE 1 509 1 358 76 0.197 15
B REEF 1 555 1 516 20 0.708 14
ALL REEFS 13 189 11 821 50 0.230 11
EVANDER
KIMBERLEY REEF 7 710 7 972 26 0.468 12
ELANDSKRAAL
VCR REEF 2 844 2 421 41 0.169 7
Z B Swanepoel
Chief Executive
26 April 2002
Investor relations
Business address
Harmony Gold Mining
Company Limited
Randfontein Office Park
C/o Main Reef Road and
Ward Avenue
Randfontein, PO Box 2,
Randfontein, 1760
Telephone: +27 (11) 411-2011
Telefax: +27 (11) 692-3879
E-mail: corporate@harmony.co.za
Investor relations contacts
Corn Bobbert
Telephone: +27 (11) 411-2036
Telefax: +27 (11) 411-2169
E-mail: cbobbert@harmony.co.za
Ferdi Dippenaar
Telephone: +27 (11) 411-2011
Telefax: +27 (11) 692 3693
E-mail: fdippenaar@harmony.co.za
Share transfer secretaries
Ultra Registrars (Pty) Ltd
Contact: Polly Pollard
Telephone: +27 (11) 370-5775
Telefax: +27 (11) 370-5780
E-mail: ultra@registrars.co.za
11 Diagonal Street
Johannesburg 2001
(PO Box 4844, Johannesburg, 2000)
United States Depositary
American Depositary Receipts,
The Bank of New York
Contact: Figen Inal
Telephone: +1 (646) 885-3294
Telefax: +1 (646) 885-3043
E-mail: final@bankofny.com
Shareholder Relations Department
620 Avenue of the Americas
New York, NY10011
United States of America
United Kingdom Registrars
Capita IRG Plc
Contact(s): Melvyn Leigh/
Therese Hodgin
Telephone: +44 (208) 639-1001
Telefax: +44 (208) 478-2876
E-mail: mleigh@capita-irg.com/
thodgin@capita-irg.com
Balfour House 390-398
High Road, Ilford
Essex IG1 1NQ, United Kingdom
Directors
A R Fleming*+ (Chairman),
Z B Swanepoel (Chief executive),
F Abbott, F Dippenaar,
T S A Grobicki, T A Mokhobo*,
M F Pleming*, Lord Renwick of
Clifton KCMG*+,
J G Smithies*
*Non executive directors +British
Trading Symbols
Ordinary Shares
JSE Securities Exchange : HAR
Nasdaq : HGMCY
London Stock Exchange : HRM
Euronext Paris : HG
Euronext Brussels : HMY
Berlin Stock Exchange : HAM1
Warrants
JSE Securities Exchange : HARW
Nasdaq : HGMCW
Options
Chicago Board Options
Exchange
ISIN : ZAE000015228
