| Mon 5 Aug 2002, 0:00 | | Harmony Review For The Quarter And Financial Year |
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HARMONY REVIEW for the quarter and financial year ended 30 June 2002
Harmony Gold Mining Company Limited
(Incorporated in the republic of South Africa)
(Registration number 1950/038232/06
JSE code: HAR
ISIN: ZAE000015228
HARMONY REVIEW for the quarter and financial year ended 30 June 2002
This review includes certain information that is based on management`s
reasonable expectations and assumptions. These "forward-looking statements"
include, but are not limited to, statements regarding estimates, intentions and
beliefs, as well as anticipated future production, mine life, market conditions
and costs. While management has prepared this information using the best of
their experience and judgment, and in all good faith, there are risks and
uncertainties involved which could cause results to differ from projections.
Cautionary Note to US Investors - The United States Securities and Exchange
Commission (the "SEC") permits mining companies, in their filings with the SEC,
to disclose only those mineral deposits that a company can economically and
legally extract or produce. We may use certain terms in this quarterly review,
such as "resources", that the SEC guidelines strictly prohibit us from including
in our filings with the SEC.
Key indicators
* Record cash operating profit of R1 067,7 million
* Quarterly earnings per share of 402 cents
* Earnings per share of 1 094 cents for the year, up 882%
* Final dividend of 425 cents per share
* 9% reduction in cash cost from R65 392/kg to R59 574/kg
* Ore reserves increased by 51% to 49,1 million ounces
* Hill 50 incorporation completed on 22 June 2002
* Kalplats project warrants further investment
"A dividend of 425 cents per ordinary share, being the final dividend, was
declared for the financial year ended 30 June 2002. This dividend together with
the 75 cents interim dividend announced in December 2001, totals 500 cents for
the financial year."
Financial Highlights
30 June 2002 31 March 2002
Cash operating
profit
- Rand 1 068 million 851 million
- US$ 102 million 74 million
Earnings
- Rand 664 million 615 million
- US$ 64 million 53 million
Earnings per
share
- SA cents per 402 386
share
- US cents per 39 33
share
30 June 2002 31 March 2002
Gold produced
- kg 24 390 20 936
- oz 784 155 673 106
Cash costs
- R/kg 59 574 65 392
- $/oz 178 176
Chief executive`s review June 2002
"We have grown this company significantly over the past six years, applying our
value creation model to mature turnaround assets. Today we have operations in
different phases of growth, i.e. the Free State being mature, but making
significant amounts of cash and Elandskraal on the other end which is a new
quality long life mining operation in the making. We will in future deliver
value to our shareholders mainly through developing the numerous organic growth
projects in our portfolio."
SAFETY REPORT
The safety performance of the company continues to be marred by the unacceptable
number of fatalities. During the course of the past quarter, six employees lost
their lives on our mines. Two severe seismic events occured at both Evander No.
8 Shaft and Deelkraal on 12 July 2002.
Notwithstanding the above mentioned unfortunate events, it is with pride that we
report the following safety achievements:
* Masimong achieved 1 000 000 fatality free shifts on 29 April 2002
* Merriespruit 3 achieved 1 000 000 fatality free shifts on 6 June 2002
During May we appointed an executive officer to drive the transformation of
health and safety in the company. A concerted effort is being undertaken to
train line management on our new acquisitions in the safety management systems
of Harmony.
STRATEGIC OVERVIEW
Continued uncertainty in the world and the weaker dollar impacted positively on
the gold price. On average the company realised a price of US$308/oz for this
quarter compared to the US$286/oz for the March 2002 quarter. The strengthening
of the South African Rand to R10,43 compared to the R11,53 on average for the
previous reporting period eroded the benefit of the increase in US$ price for
gold. When measured in R/kg terms, the company realised R103 349/kg compared to
the R106 037/kg for the previous quarter.
We expect the South African Rand to trade in the range of R10,00 to R11,00 to
the US Dollar for the remainder of this year.
A year on year analysis of the performance of the company indicates the
following:
30 June 30 June Actual %
Year ending 2002 2001 variance variance
Production - kg 82 971 66 563 16 408 25
Production - oz 2 667 567 2 140 043 527 524 25
Revenue - R/kg 93 978 67 525 26 453 39
Revenue - US$/oz 287 276 11 4
Working cost - 62 812 57 416 (5 396) (9)
R/kg
Working cost - 192 234 42 18
US$/oz
Cash operating
profit - R`m 2 585,9 672,9 1 913,0 284
Cash operating
profit - US$`m 253,5 88,4 165,1 187
Earnings per 1 094,4 111,5 982,9 882
share
The company achieved an increase of 25% in production year on year. For the new
financial year, the company expects to produce some 3,1 million ounces from
existing operations, a further increase of 16% over the past financial year.
The company used the past three months to integrate the acquisitions of 50% of
Free Gold in South Africa and Hill 50 in Australia. The current gold price
environment has resulted in the company re-assessing the growth opportunities
available in mining areas throughout the world. We have always been of the
opinion that Harmony will only acquire companies and assets that, after the cost
of the acquisition, deliver real value to our shareholders. The higher gold
price may make this difficult as vendors` price expectations may be unrealistic.
The company has created value for its shareholders over the past five years:
June June June June June
2002 2001 2000 1999 1998
Gold produced - kg 82 971 66 563 50 572 39 997 23 853
- oz 2 667 567 2 140 043 1 625 925 1 285 931 766 890
Cash operating
profit
SA Rand - million 2 585,9 672,9 460,9 385,8 24,2
US$ - million 253,6 88,4 73,0 64,0 4,0
Cash operating cost
R/Kg 62 812 57 416 50 121 46 759 47 991
US$/oz 192 234 246 240 305
The South African business environment:
i. Passing of legislation i.e. the Mineral and Petroleum Resources Development
Bill
On 26 June 2002, the South African Government passed legislation to enable
broader participation in the local mining industry. The well-publicised Mineral
and Petroleum Resources Development Bill has the following as its principal
objectives:
* the country`s mineral resources should be developed for the benefit of all
South Africans,
* the State is the custodian of the nation`s mineral resources and should have
the right to exercise full and permanent sovereignty over these mineral
resources,
* redressing the impact of past racial discrimination,
* mining companies will contribute to the socio-economic development and social
upliftment in the regions where its mining activities are located,
* respect for and protection of the environment,
* the `use it and keep it` principle with no expropriation and guaranteed
compensation.
In respect of established operations, security of tenure will be for 30 years
renewable for 30 years thereafter subject to fulfilment of various requirements.
It is now up to the management of this company to position Harmony such that we
renew our mining licenses within the 5 years allowed.
Harmony has been pro-active and innovative in its approach towards Black
Economic Empowerment over the past 18 months:
* Simane Security Investments acquiring a 6,4% stake in the company,
* Khuma Bathong`s 10% participation in Elandskraal, and
* the Joint Venture agreement between the company and ARMgold with the
acquisition of Free Gold.
In addition the company`s downstream beneficiation activities in respect of
refining of its own bullion and production of 1st phase value added products,
positions it well in terms of complying with the new legislation. The Social
Plan requires activities such as beneficiation and procurement from local
communities.
Although there could be a cost involved in complying with the new legislation,
the company feels that it is well positioned for the new era in South African
mining. The bulk of Harmony`s business is and will be based in South Africa and
we will continue to do what it takes to create real value for our shareholders.
ii. HIV/AIDS
Much has been said to date on HIV/AIDS and the South African gold industry. The
facts however are that the infection rate of approximately 28% at the company`s
gold mines are representative of the country`s infection rate.
The industry is experiencing the impact of a high infection rate but with a
lower and lagging occurrence of full-blown AIDS. This scenario is bound to
change over the next few years as the occurrence of full-blown AIDS becomes
relevant to the company and its business environment. Activities undertaken by
the company include awareness programmes in all its operating regions, medical
assistance to repatriated employees who have decided to leave their place of
work and return home, as well as separation packages for employees who wish to
return home.
Current assessments indicate that the cost of addressing the disease at the
company`s operations are expected to build up to US$4,00 per ounce. Although
this cost estimate includes retraining of replacement workers, the assumption is
made that enough new workers are available. Ongoing evaluation of the impact of
the disease on the company`s activities will continue.
Highlights of the past quarter have been:
i. Growth in ore reserves
The weakening South African currency and the rise in gold price to levels above
US$300/oz has created a more favourable operating environment for the company
over the next twelve months.
Using a gold price of US$295/oz and exchange rate of R10,00 to US$1,00, the
company has a resource base of 295,9 million ounces of which 49,1 million ounces
is in the reserve category. This is an increase of 51% over the reserves
reported in June 2001.
A year on year comparison of reserves indicate the following:
Ore reserve statement as June 2002 June 2001
at
Gold price R95 000/kg R67 500/kg
Total resource including 295,9 223,9
project areas (ounces) million* million
Reserve base (ounces) 49,1 32,5
million* million
*Includes 50% of Free Gold ounces attributable to Harmony
The acquisition of Hill 50 and Free Gold impacted on both the quantity and
quality of the reserves. The increase in reserves due to the lower cut-offs will
allow the company flexibility in the planned exploitation of the respective
orebodies.
ii. Acquisition of the 10% participation rights of Khuma Bathong in Elandskraal
for R210 million
At the time of acquiring Elandskraal in March 2001, the company sold a 10%
participation right to Khuma Bathong, a Black Economic Empowerment company for
R105 million. The agreement enabled Khuma Bathong to participate in the
development of Elandskraal and the purchase price plus interest was payable from
profits generated by these operations.
The recent repurchase of this stake by Harmony has allowed Khuma Bathong to
realise its investment in Elandskraal, enabling the company to pursue other
opportunities in the South African mining industry. Various local community
trusts will benefit through their 40% shareholding in Khuma Bathong.
Elandskraal is a world class long life mine and Harmony has now increased its
exposure to it to 100%.
iii. Investment in Russia
During the quarter, Harmony invested US$18,9 million to acquire an interest in
an unlisted Jersey based company which holds Russian gold assets.
Russia is well endowed with good quality multi-million ounce gold deposits -
many of which have been known for many years but remain undeveloped. In 2001,
Russia was the world`s sixth largest gold producer - producing approximately 155
tons (5,0 million ounces) and representing 5,9% of world production. South
Africa, in first position, produced 394 tonnes and Australia, in the third
place, produced 285 tonnes. Russian production, which is still dominated by
alluvial mining, has increased by 11% per year since 1999.
iv. A pre-acceptance agreement between Harmony and Placer Dome on the sale of
its AurionGold shares
On 27 May 2002, the company announced that it had entered into a pre-acceptance
agreement with Placer Dome whereby it agreed to accept Placer Dome`s offer for
its interest of 9,8% in AurionGold. The company has subsequently accepted Placer
Dome`s increased, final and unconditional offer which includes a $0,35 cash
payment per AurionGold share held. Harmony held 43 350 992 shares in AurionGold
which will now convert into 7 586 422 shares in Placer Dome.
The company believes that the consolidation and further rationalisation of the
global gold industry is inevitable. The current gold price levels of US$305 per
ounce are still below the cost of replacing ounces currently being mined.
Realising our investment in AurionGold allows Harmony to continue with its
strategy of delivering value to our shareholders.
v. Acquisition of the assets of St Helena by the Free Gold Joint Venture Company
On 24 May 2002 the Free Gold Joint Venture company announced that it had reached
an agreement in principle with Gold Fields Ltd to acquire the assets of St
Helena Gold Mine for a gross sale consideration of R120 million. In addition a
1% royalty on revenue will be payable for a period of 48 months from the
effective date.
The acquisition of these assets which has an annual production of 100 000 ounces
at a cash cost of US$234/oz, continues the consolidation of the Free State
goldfields. It is anticipated that the acquisition will add 50 000 attributable
ounces to Harmony`s production base.
vi. Organic Growth Opportunities
As part of Harmony`s growth strategy a number of major capital projects have
been identified, that may have the potential for economic development. These
projects which are probably some of the most prospective gold projects remaining
in South Africa will ensure growth at the various operations. Feasibility
studies for these projects are in progress and at various levels of completion.
The Doornkop South Reef Project at Randfontein is a project that was put on hold
in May 1999. A feasibility study is in progress to determine the viability of
completing the shaft from 1 127m, where the project was stopped, to 2 033m below
surface. This will allow exploitation of a total geological resource of 9,5
million ounces. of gold. The feasibility study will be completed in the first
half of the new financial year.
The Poplar Project is a brownfields site, twenty kilometres from the existing
Evander Gold Mine operations. The total geological resource for the project area
contains 10,8 million ounces of gold. A twin shaft system from surface to 1 000m
below surface would be required to facilitate the economic mining of gold from
this area. A feasibility study for the project is in progress.
The Rolspruit Project is the contiguous resource that extents from the existing
Evander Gold Mine`s No.8 shaft operations all the way to the Poplar Project
area.
Feasibility studies for the economic extraction of the Rolspruit Project, will
be completed in the second half of the year. The first option is for a twin sub-
vertical shaft system from 1 535m to 2 515m below surface to exploit a
geological resource of 6 million ounces of gold. This option utilises the
existing No. 8 shaft infrastructure and exploits the resource up to a major
geological feature. This will extend the life of mine of No. 8 Shaft
substantially.
The second option is to develop a brownfields project to exploit the total
Rolspruit geological resource of 17,4 million oz. of gold. This will require a
twin shaft system from surface to 2 600m below surface. This option holds the
potential to expand production from Evander.
vii. Kalplats
R3,6 million was spent on this project during the quarter. Pre-feasibility
studies included the updating of orebody models, resource calculations, pit
optimizations and plant designs. The mineral resource remains at q3,8m oz at 1,5
g/t TPM (Total Precious Metals) including q1,5m oz at 3,7 g/t TPM. Metallurgical
extraction is estimated at 75% for ore with grades above 2,0 g/t TPM. The
economic viability of this project depends on selectively mining the higher
grade reef zones of 2 to 3 g/t TPM, and on sustained Platinum and Palladium
markets.
A life of mine of approximately 10 years is indicated at a mining rate of 150
000 tonnes per month with PGM production of q90 000 ounces per year. Underground
mining on high-grade portions of the reefs and new discoveries within the
project area may extend the life of mine. The company plans to proceed with an
advanced feasibility study at a cost of about R25,0 million which will include
the taking of a 500 tonne bulk sample for pilot plant scale metallurgical
testwork.
QUARTERLY OPERATIONAL REVIEW
The company reported improved record operational profits for the sixth quarter
in a row. Cash operating profit increased by 25% from R850,9 million to R1 067,7
million. Kilograms recovered was 17% higher at 24 390 kg compared to the 20 936
kg for the previous quarter. This was mainly due to improved operational
performance by the Free State, Elandskraal, and Free Gold operations and the
inclusion of Hill 50 in Australia.
Working costs were lower in both R/kg and R/tonne terms. Measured in R/kg terms,
working cost decreased by 9% from R65 392/kg to R59 574/kg, whilst in R/tonne
terms, working costs decreased from R228/tonne to R210/tonne. Both higher gold
production and a sustained effort on cost control through the Cost Marathon
contributed to these excellent results.
Profit before tax increased by 4% from R848,8 million to R881,0 million.
Taxation at R217,2 was 7% lower than the R233,8 million reported for the March
2002 quarter.
Net profit after tax was 8% higher at R663,9 million compared with the R615,1
million reported previously.
Earnings per share increased by 4% to 402 cents quarter on quarter. Earnings
after write-downs for the past financial year totals 1 094 cents, an increase of
882% from the 111,5 cents reported for the financial year ending 30 June 2001.
The performance of the operations is highlighted in the following table:
June March %
2002 2002 variance
Production - kg 24 390 20 936 17
Production - oz 784 155 673 106 17
Revenue - R/kg 103 349 106 037 (3)
Cash cost - 59 574 65 392 9
R/kg
Revenue - 308 286 8
US$/oz
Cash cost - 178 176 (1)
US$/oz
Cash cost - 210 228 8
R/tonne
Exchange rate 10,43 11,53 10
R/US$
The company achieved a US$130 or 42% profit margin with cash costs of US$178/oz.
A cash operating profit margin of US$110, or 38%, was achieved during the March
2002 quarter. Working costs in R/kg has decreased by 9% from R65 392/kg to R59
574/kg. When measured in US$ terms, working costs increased by 1% from US$176/oz
to US$178/oz. This can be attributed to the 10% improvement in the exchange rate
which strengthened from R11,53/US$ to R10,43/US$ in the past quarter.
A quarter on quarter cash operating profit analysis of the various operations is
as follows:
Total cash operating profit (R`million)
June March %
Operations 2002 2002 variance
Free State 213,7 145,4 68,3
Evander 140,9 169,3 (28,4)
Randfontein 172,5 198,0 (25,5)
Elandskraal 173,6 115,2 58,4
Kalgold 11,7 8,3 3,4
Australian 70,4 13,3 57,1
Operations
Sub-total 782,8 649,5 133,3
Free Gold (50%) 284,9 201,4 83,5
Total 1 067,7 850,9 216,8
Free State Operations - excellent quarter
The Free State operations reported a 47% increase in cash operating profits from
R145,4 million to R213,7 million. Underground tonnage milled increased from 996
000 tonnes to 1 011 000 tonnes. The increased tonnage at an improved recovery
grade of 4,45 g/t compared to the 4,39 g/t reported previously resulted in a 3%
improvement in gold recovered, up from 4 370 kgs to 4 499 kgs. Gold recovered
through the clean-up of surface sources contributed 384 kgs resulting in a total
gold recovery for the region of 4 883 kgs.
Working costs remained under control with expenditure of R318,4 million compared
to R319,8 million for the March 2002 quarter. Despite the 10% improvement in the
Rand/US Dollar exchange rate, the cash cost in US Dollar terms at these
operations remained constant at US$197/oz.
The Free State operations through the Masimong Expansion Project will continue
to contribute to the profitability of the company over the next 15 years. An
aggressive redevelopment of the orebodies in the Masimong shaft area over the
past 24 months has resulted in the "Masimong Expansion Project".
Reserves have steadily increased from approximately 400 000 ounces in 1999 when
the shafts were acquired to in excess of 2 million ounces by June 2002.
The investment of R35,0 million in developing the Basal and B-Reef orebodies has
paid off handsomely as these shafts will be increasing production from 13 000 m2
per month at the time of acquisition to 40 000 m2 by June 2004.
Working costs are expected to decrease from approximately R335/tonne to
R290/tonne over the same period due to the increase in volume.
Evander Operations - satisfactory performance
Evander reported a satisfactory performance with cash operating profit
decreasing by 17% from R169,3 million to R140,9 million. Lower underground
tonnages at 510 000 tonnes at marginally lower recovery grades resulted in a 6%
decrease in gold recovered at 3 020 kgs.
Due to lower tonnage and recovery grade, working costs were higher in both R/kg
and R/tonne terms.
The company announced on 12 July 2002 that a seismic event registering a
magnitude of 3,9 on the Richter Scale occurred at its No. 8 Shaft operations.
This event which occurred at 1 700 metres below surface damaged the sub-shaft
hoist winder and estimates at that time indicated that production would be
affected for approximately 12 weeks. Currently expectations are that the repairs
will be completed within 4 weeks and that production should be back at planned
levels of 40 000 ounces per quarter soon thereafter. To alleviate the extent of
production losses, some employees have been redeployed to development sections,
targeting mainly higher grade areas which will be mined when production resumes.
The current higher gold price scenario has provided Evander with a significant
tax base which can be utilised efficiently for the planned Poplar or Rolspruit
Extension projects.
Free Gold Operations (50/50 Joint Venture with ARMgold) - as good as it gets
The Free Gold Joint Venture took operational control of the assets on 1 January
2002. All the conditions precedent were met on 10 April 2002 and the deal was
concluded on 23 April 2002, and payment to AngloGold was accordingly made.
Gold produced increased by 19%, from 7 942 to 9 419 kg, quarter on quarter. Cash
operating cost decreased by 23%, from R56 914/kg to R43 662/kg or US$130/oz.
Operational restructuring continues at these operations and are proceeding
according to plan.
The grade at Bambanani shaft is expected to decrease as more workplaces become
available, following the proposed development programme. Restarting of
operations at Kudu and Sable shafts are in progress. Start-up costs of R1,6
million were incurred during the quarter. West shaft was successfully
recommissioned, and recorded a cash operating profit of R9 million. Both Joel
and the surface operations recorded a cash operating profit of R14 million and
R74 million respectively.
Nyala shaft is in the process of being restarted, and will yield some 60 000
ounces per annum.
Negotiations with the unions, regarding continuous operations at Free Gold are
progressing. Continuous operations will create an additional 2 500 employment
opportunities and should significantly reduce the cost of production, enabling
improved utilisation of the ore body.
A summary of results are as follows:
June March %
R`million 2002 2002 variance
Cash operating 569,9 402,8 42
profit
Interest (45,4) (40,3) (13)
charges
Other income - 34,8 4,9 610
net
Amortisation (33,6) (26,8) (25)
charges
Profit before 503,6 340,6 48
tax
Due to Harmony 251,8 170,3 48
(50%)
Free Gold now operates at a profit margin of US$181/oz or 58% at a gold price of
US$311/oz. This is an improvement of US$45/oz on the US$136 margin reported for
the March 2002 quarter. The Free Gold operations currently mine some of the most
profitable ounces in the South African gold industry.
June March %
Total Mine Results 2002 2002 variance
Gold price US$/oz 311 290 7
Cash cost US$/oz 130 154 16
Profit margin US$/oz 181 136 33
Exchange rate: Rand 10,43 11,53 10
per US$
The Free Gold board has in principle approved the deepening of Tshepong North
shaft. This project will add two additional operating levels below the present
level of the shaft. Capital cost of the project is estimated at R260 million of
which R130 million is attributable to Harmony. The project could commence during
the September 2002 quarter, and estimated full production should be achieved by
December 2005. This shaft deepening project will add 75 000 ounces per annum to
Harmony`s production base.
Randfontein Operations - results affected by strike action
Cash operating profits at R172,5 million were 13% lower than the R198,0 million
reported previously.
Results were affected by a strike which lasted 11 days. The dispute on living-
out allowances was eventually settled with both the company and the unions
satisfied with progress made.
Due to the loss of production days tonnage milled decreased from 816 000 tonnes
to 714 000 tonnes. A slightly lower recovery grade of 4,98 g/t resulted in a net
lower gold recovery of 3 799 kgs compared to the 4 254 kgs recovered previously.
Surface sources contributed 241 kgs to total gold recovered, ameliarating the
effect of the strike significantly.
Working costs decreased by 10% from R252,4 million to R227,8 million. This was
mainly due to the decrease in costs related to production from underground being
interrupted for the 11 days, as well as excellent cost containment.
When measured in R/kg and R/tonne terms working costs were higher at R59 488/kg
versus R58 326/kg, and R296/tonne compared to R291/tonne for the March 2002
quarter.
Elandskraal Operations - significant improvement
The benefits of the development programme which is underway at these operations
were evident with an increase in recovery grades of 6,44 g/t compared with 5,74
g/t of March 2002 being reported. Whilst the grades have improved by a pleasing
12%, it is anticipated that some volatility will be experienced until the
development programme has been completed.
At similar tonnages from underground the higher recovery grade resulted in the
operations reporting a 14% increase in gold recovered, up from 3 105 kgs to 3
544 kgs quarter on quarter.
Underground working costs/kg showed the most improvement, decreasing by 12% from
R71 398/kg to R62 550/kg. Measured in cost/tonne, the operations reported costs
of R403/tonne compared to R410/tonne for the previous quarter. Good effort went
into cost containment.
Elandskraal being a mine with a significant capital expenditure programme will
have a life of mine in excess of 20 years after the completion of the capital
project. Harmony will have delivered a project which can be classified as "a new
mine" being developed through the infrastructure of the previous Elandskraal
operations.
The Elandskraal Sub Shaft Deepening Project has the following attributes:
* reserves have increased by 1,6 million ounces to 10,0 million ounces in the
last year,
* the project will ensure that Elandskraal will continue to produce
350 000 ounces per annum for the next 20 years,
* 7 million ounces at a recovery grade of 7,2 g/t will be recovered over the
life of the project,
* an amount of R137,4 million in capital is planned to be spent in the 2002/03
financial year. This project at a gold price of R95 000/kg shows a NPV of R546,5
million rand with an IRR of 33%.
Deelkraal shaft will also see the benefit of the increase in gold price and
lowering of working costs achieved through the implementation of the "Harmony
Way".
At the time of acquiring Deelkraal some 18 months ago, Life of Mine expectations
were 6 months. The current cost structure has allowed the mine to resume the
development of 35 level which will add an additional 156 000 ounces or 5 years
of production to this operation. An amount of R13,9 million will be spent in the
2002/03 financial year, resulting in a NPV at 10% of R162,6 million and an IRR
of 164%. Payback will be achieved in 28 months.
The Elandskraal complex is definitely experiencing the benefits of operating
under the Harmony Value Creation Model.
On acquisition these operations were loss-making and Elandskraal could not fund
its own capital expenditure programme. Today these operations are well
positioned to deliver real value to our shareholders.
Kalgold Operations - 21 day wage strike impacts on results
The Kalgold operations experienced a 40% increase in cash operating profits, up
from R8,3 million to R11,7 million for the June 2002 quarter. Although mining
operations continued, the impact of treating the lower grade surface stockpile
was evident as the recovery grades decreased from 1,88 g/t to 1,68 g/t quarter
on quarter.
These operations are expected to treat similar tonnages at a higher recovery
grade of 1,95 g/t during the September 2002 quarter.
Australian Operations - significant contribution from Hill 50 assets
The company`s June 2002 results for its Australian operations include the
results from Hill 50 for the first time. Cash operating profits for the
Australian operations increased from R13,3 million to R70,4 million mainly due
to the inclusion of the Hill 50 assets. The company`s Australian operations now
consist of assets with more reserves of a higher quality. Tonnage milled more
than doubled from 991 000 tonnes to 1 855 000 tonnes. At a higher average
recovery grade of 1,90 g/t, gold recovered increased to 3 518 kgs from the 1 420
kgs reported for the previous quarter.
The main features of the quarter have been:
* the completion of the takeover of 100% of the Hill 50 shares on
22 June 2002.
* the integration of all of Harmony`s operations in West Australia, including
the closing down of the New Hampton office, retrenchments of a small number of
staff and, in particular the merger of Harmony`s Jubilee operations with Hill
50`s New Celebration.
* the elimination of the Australian debt after the placement of 9 million
Harmony shares at R134/share.
* the cleaning up of the Harmony`s Australian balance sheet by taking a net
impairment of
q A$90m on the New Hampton investment
* the sale to Placer Dome of all of Harmony`s stake in AurionGold
Mount Magnet
Tonnes treated at 688 000 were in line with the budget of 706 000. However, the
average recovered grade of 2,11g/t was lower than budgeted. The main
contributors to the under performance were the underground operations, with the
main Hill 50 orebody exhibiting a greater variability of grade than originally
expected, and the Star underground mine marginally under performing on both
tonnes and grade.
The final feasibility study on the project to install a 1 000m rock hoisting
shaft at the Hill 50 mine is nearing completion.
Encouraging results were obtained from several of the exploration projects.
Big Bell
Production at Big Bell was disrupted by the bankruptcy of the main underground
contractor and the delays in signing up and installing a replacement. In
addition development was behind schedule leading to a lack of flexibility in ore
access.
However, the main issue at Big Bell is the grade of the underground mine.
Harmony, having completed the redevelopment programme for the mine in the
previous quarter, has for the first time, been producing from the "core" of the
main ore body. A study of geostatistical parameters and historic mine records
indicate an over optimistic projection of grade.
It has been deemed prudent to reduce the grade estimates for future production.
This gave rise to a severe cut in the underground reserves at this mine (and put
the gold mineralisation beneath the current development back into the "currently
uneconomic resource" category at current gold prices). This has resulted in a
significant impairment to the carrying value of this asset in Harmony`s balance
sheet.
South Kalgoorlie Mines - Jubilee and New Celebration
The merger of the Hill 50 and Harmony operations have progressed well, and more
synergies between the operations have been recognised than were originally
envisaged.
The ore reserve position has improved and it is the intention to keep both mills
operational for at least the next 2 years. It is hoped that exploration in this
area which is currently yielding some encouraging results will continue to grow
our reserve profile beyond that date.
Northern Territory Operations
Harmony together with its JV Partner Northern Gold NL has the opportunity to
take control and rationalise a large portion of the Pine Creek Gold Belt and
develop a significant (100 000 - 200 000 oz pa) production base in the region.
Activities during the quarter included exploration and evaluation programmes and
the preparation to drive a decline into the high grade Zapopan deposit.
Bendigo
The development programme at Bendigo is progressing well with Bendigo`s original
targets being exceeded on productivity and cost.
The underground development headings are expected to reach the first targeted
orebodies by the end of the September quarter. This will be the first time in
half a century that an underground blast will have been taken in ore in this
goldfield which has a historical production of
22 million ounces from the period between the 1850s and the 1950s.
Corporate Structure
The April capital raising significantly strengthened Harmony`s Australian
operations. The consolidated Harmony Australia is now debt-free, has qA$17m in
cash for its capex projects and has the opportunity to turn to account its
Aurion/Placer shares for pursuing further growth opportunities. Harmony`s budget
plans exhibit a production profile of in excess of 550 000 oz for the 2002/03
financial year.
Harmony is constantly identifying, examining and pursuing opportunities for
profitable further growth in Australia, but price expectations of potential
vendors are much higher than in 2000 and 2001.
Capital expenditure
Quarter Year Quarter
ended ended ended
June 2002 June September
2002 2002
Operations actual actual forecast
Free State 37 97 31
Evander 28 92 34
Randfontein 5 14 6
Free Gold (50%) 7 16 10
Kalgold 1 1 4
Elandskraal 43 147 42
Australian 61 69 70
Operations
Total 182 436 197
Notice of final dividend
A dividend No. 75 of 425 cents per ordinary share, being the final dividend for
the financial year ended 30 June 2002 has been declared payable on 2 September
2002 to those shareholders recorded in the register in the books of the company
at the close of business on 30 August 2002.
The dividend is declared in the currency of the Republic of South Africa.
Dividend cheques will be posted and electronic funds transferred on 2 September
2002.
Any change in address or dividend instruction to apply to this dividend must be
received by the company`s transfer secretaries or registrar not later than 23
August 2002.
This announcement will be mailed to all shareholders recorded in the register on
or about 6 August 2002.
Last date to trade ordinary shares cum dividend 23 August 2002
Ordinary shares trade ex dividend 26 August 2002
Record date 30 August 2002
Payment date 2 September 2002
Share certificates may not be dematerialised or rematerialised between Monday,
26 August and Friday, 30 August 2002, both days inclusive.
By order of the Board
F W Baker
Company Secretary
Virgina
5 August 2002
Operating and Financial Results (Rand/metric)
Free Free Kalgold Rand- Rand-
State State Evander Evander Open- fontein fontein
U/g Surface U/g Surface cast U/g Surface
Ore Jun- 1 011 135 510 54 231 714 468
milled 02
- t`000 Mar- 996 96 538 60 218 816 416
02
Gold Jun- 4 499 384 3 020 36 389 3 558 241
02
produced Mar- 4 370 30 3 203 27 409 4 070 184
- kg 02
Yield - Jun- 4.45 2.84 5.92 0.67 1.68 4.98 0.51
g/t 02
Mar- 4.39 0.31 5.95 0.45 1.88 4.99 0.44
02
Cash
operating Jun- 70 775 12 273 59 155 51 694 78 491 59 488 66 934
02
costs - Mar- 73 182 47 600 54 080 85 444 86 597 58 326 81 495
R/kg 02
Cash
operating
costs Jun- 315 35 350 34 132 296 34
02
- R/tonne Mar- 321 15 322 38 162 291 36
02
Working
revenue Jun- 496 895 39 894 317 703 3 670 42 212 374 098 26 196
02
(R`000) Mar- 463 446 3 208 341 907 2 931 43 734 430 974 19 447
02
Cash
operating Jun- 318 415 4 713 178 649 1 861 30 533 211 660 16 131
02
costs Mar- 319 804 1 428 173 217 2 307 35 418 237 388 14 995
(R`000) 02
Cash
operating Jun- 178 480 35 181 139 054 1 809 11 679 162 438 10 065
02
profit Mar- 143 642 1 780 168 690 624 8 316 193 586 4 452
(R`000) 02
Elands- Elands- Free Free Australian
kraal kraal Gold Gold Opera-
U/g Surface U/g Surface tions Total
Ore Jun- 550 236 524 617 1 855 6 905
milled 02
- t`000 Mar- 541 275 464 581 991 5 992
02
Gold Jun- 3 544 492 4 167 542 3 518 24 390
02
produced Mar- 3 105 146 3 564 408 1 420 20 936
- kg 02
Yield - Jun- 6.44 2.08 7.95 0.88 1.90 3.53
g/t 02
Mar- 5.74 0.53 7.68 0.70 1.43 3.49
02
Cash
operating Jun- 62 550 44 110 44 873 34 389 68 804 59 574
02
costs - Mar- 71 398 57 692 57 874 48 390 90 404 65 392
R/kg 02
Cash
operating
costs Jun- 403 92 357 30 130 210
02
- R/tonne Mar- 410 31 445 34 130 228
02
Working
revenue Jun- 365 564 51 414 434 854 55 716 312 466 2 520 682
02
(R`000) Mar- 329 905 15 384 383 637 43 765 141 646 2 219 984
02
Cash
operating Jun- 221 678 21 702 186 986 18 639 242 053 1 453 020
02
costs Mar- 221 692 8 423 206 263 19 743 128 374 1 369 052
(R`000) 02
Cash
operating Jun- 143 886 29 712 247 868 37 077 70 413 1 067 662
02
profit Mar- 108 213 6 961 177 374 24 022 13 272 850 932
(R`000) 02
Total Operations - Annual Financial Results (Rand/metric)
Year Year
ended Ended
30 June 30 June
2002 2001
Ore milled - t`000 22 933 17 074
Gold produced - kg 82 971 66 563
Gold price received - R/kg 93 978 67 525
Cash operating costs - R/kg 62 812 57 416
R R
million million
Gold sales 7 797.4 4 494.7
Cash operating costs 5 211.5 3 821.8
Cash operating profit 2 585.9 672.9
Amortisation (305.2) (237.1)
Mark to market of financial 55.8 58.1
instruments
Rehabilitation cost (19.9) 51.9
(provision)/reversal
Employment termination and (48.4) (36.0)
restructuring costs
Net impairment of assets (355.2) (215.1)
CAWMS (provision)/reversal (1.6) 17.1
Other income - net 120.4 113.0
Interest paid (212.5) (114.2)
Corporate, marketing and new business (99.5) (57.7)
expenditure
Exploration expenditure (51.4) (26.7)
Mark to market of listed investments 595.4 -
Profit before taxation 2 263.8 226.2
South African normal taxation
- Current tax (266.2) (63.0)
- Deferred tax (317.5) (48.3)
Net earnings 1 680.1 114.9
Adjustments:
- Profit on sale of property, plant (21.2) (80.1)
and equipment
- Net impairment of assets 355.2 215.1
Headline earnings 2 014.1 249.9
Earnings per share - cents *
- Basic earnings 1 094.4 111.5
- Headline earnings 1 312.0 253.7
- Fully diluted earnings ** 1 016.9 108.0
Dividends per share - (cents)
- Declared 75 120
- Proposed final 425 -
* Calculated on weighted number of shares in issue :
June 2002: 153,5 million (June 2001: 102,9 million)
* Calculated on weighted average number of diluted shares in issue :
June 2002: 165,2 million (June 2001: 106,3 million)
Total Operations - Quarterly Financial Results (Rand/metric)
Quarter Quarter Quarter
ended Ended ended
30 June 31 March 31 June
2002 2002 2001
Ore milled - t`000 6 905 5 992 4 890
Gold produced - kg 24 390 20 936 18 380
Gold price received - R/kg 103 349 106 037 69 715
Cash operating costs - R/kg 59 574 65 392 59 350
R R R
million million million
Gold sales 2 520.7 2 220.0 1 281.4
Cash operating costs 1 453.0 1 369.1 1 090.9
Cash operating profit 1 067.7 850.9 190.5
Amortisation (128.5) (72.1) (70.9)
Mark to market of financial 192.6 - (1.9)
instruments
Rehabilitation cost provision (17.5) - -
Employment termination costs (19.8) (4.8) (3.9)
Net impairment of assets (355.2) - -
CAWMS provision (1.6) - -
Other income - net 53.6 18.1 35.6
Interest paid (71.2) (62.1) (53.2)
Corporate, marketing and new business (25.4) (15.6) (14.4)
expenditure
Exploration expenditure (14.4) (13.9) (9.0)
Mark to market of listed investments 200.7 148.3 -
Profit before taxation 881.0 848.8 72.8
South African normal taxation
- Current tax (22.3) (140.5) (24.4)
- Deferred tax (194.8) (93.3) (8.3)
Net earnings 663.9 615.0 40.1
Adjustments:
- Profit on sale of property, plant (5.0) (4.5) (41.1)
and equipment
- Net impairment of assets 355.2 - -
Headline earnings/(loss) 1 014.1 610.5 (1.0)
Earnings per share - cents *
- Basic earnings 402.2 385.6 37.2
- Headline earnings/(loss) 614.3 382.8 (0.9)
- Fully diluted earnings ** 376.8 373.6 36.1
Dividends per share - (cents)
- Proposed final 425 - 70
* Calculated on weighted number of shares in issue:
- at quarter end: June 2002: 165,1 million (March 2002: 159,5 million)
(June 2001: 107,8 million)
* Calculated on weighted average number of diluted shares in issue :
- at quarter end: June 2002: 176,2 million (March 2002: 164,7 million)
(June 2001: 111,1 million)
Abridged Balance Sheet (rand)
*At At At
30 June 31 March 30 June
2002 2002 2001
R million R million R million
Mining assets after amortisation 9 433,4 6 873,8 5 423,9
Investments 1 080,5 2 127,5 251,7
Net current (liabilities)/assets (5,2) 41,3 (129,4)
(excluding cash)
Short-term investments
- AurionGold 987,6 663,1 319,9
Cash 1 440,9 1 466,0 1 158,5
Total assets 12 937,2 11 171,7 7 024,6
Shareholders` equity 7 963,1 6 144,8 4 594,0
Free Gold Joint Venture purchase price
due
to AngloGold 515,8 1 350,0 -
Loans** 1 695,3 2 277,6 1 212,2
Preference shares - - 5,5
Long-term provisions 719,7 692,5 437,7
Unrealised hedging loss 971,3 557,3 396,9
Deferred tax 1 072,0 149,5 378,3
Total equity and liabilities 12 937,2 11 171,7 7 024,6
Basis of Accounting
The unaudited results for the quarter and the year end have been prepared on the
International Accounting Standards basis. The accounting policies are consistent
with those applied in the previous financial year.
Audit Review
The year end financial results have been reviewed in terms of Rule 3.23 of the
listing requirements of the JSE Securities Exchange SA by the company`s
auditors, PriceWaterhouseCoopers. This review opinion is available on request
from the Company Secretary.
Issued share capital: 169,2 million ordinary shares of 50 cents each.
(March 2002: 159,6 million)
(June 2001: 144,6 million)
*Significant variances caused by consolidation of Hill 50
** Loans
During the quarter under review the US$80 million facility used to purchase
Hill 50 was settled in full by the issue for cash of 8 million Harmony shares.
This loan bares interest at a percentage rate per annum determined according to
a contracted formula applied on the drawdown date. A R500 million facility was
utilised for the payment of the Anglo Gold loan for the Free Gold assets.
Operating and Financial Results (US$/Imperial)
Free Free Kalgold Rand- Rand-
State State Evander Evander Open- fontein fontein
U/g Surface U/g Surface Cast U/g Surface
Ore Jun- 1 115 149 562 60 255 787 516
milled 02
- t`000 Mar- 1 098 106 593 66 240 900 459
02
Gold
produced Jun- 144 646 12 346 97 095 1 157 12 507 114 392 7 748
02
- oz Mar- 140 498 965 102 978 868 13 150 130 853 5 916
02
Yield Jun- 0.130 0.083 0.173 0.019 0.049 0.145 0.015
02
- oz/ton Mar- 0.128 0.009 0.174 0.013 0.055 0.145 0.013
02
Cash
operating Jun- 211 37 176 154 234 177 200
02
costs - Mar- 197 128 146 230 234 157 220
$/oz 02
Cash
operating Jun- 27 3 30 3 11 26 3
02
costs - Mar- 25 1 25 3 13 23 3
$/t 02
Working
revenue Jun- 47 641 3 825 30 460 352 4 047 35 867 2 512
02
($`000) Mar- 40 195 278 29 654 254 3 793 37 378 1 687
02
Cash
operating Jun- 30 529 452 17 128 178 2 927 20 293 1 547
02
costs Mar- 27 737 124 15 023 200 3 072 20 589 1 301
($`000) 02
Cash
operating Jun- 17 112 3 373 13 332 174 1 120 15 574 965
02
profit Mar- 12 458 154 14 631 54 721 16 789 386
($`000) 02
Elands- Elands- Free Free Australian
kraal kraal Gold Gold Opera-
U/g Surface U/g Surface tions Total
Ore Jun- 606 260 578 680 2 045 7 613
milled 02
- t`000 Mar- 597 303 512 641 1 093 6 608
02
Gold
produced Jun- 113 942 15 818 133 972 17 426 113 106 784 155
02
- oz Mar- 99 828 4 694 114 585 13 117 45 654 673 106
02
Yield Jun- 0.188 0.061 0.232 0.026 0.055 0.103
02
- oz/ton Mar- 0.167 0.015 0.224 0.020 0.042 0.102
02
Cash
operating Jun- 187 132 134 103 205 178
02
costs - Mar- 193 156 156 131 244 176
$/oz 02
Cash
operating Jun- 35 8 31 3 11 18
02
costs - Mar- 32 2 35 3 10 18
$/t 02
Working
revenue Jun- 35 049 4 929 41 693 5 342 29 959 241 676
02
($`000) Mar- 28 613 1 334 33 273 3 796 12 285 192 540
02
Cash
operating Jun- 21 254 2 081 17 928 1 787 23 207 139 311
02
costs Mar- 19 227 731 17 889 1 712 11 134 118 739
($`000) 02
Cash
operating Jun- 13 795 2 848 23 765 3 555 6 752 102 365
02
profit Mar- 9 386 603 15 384 2 084 1 151 73 801
($`000) 02
Total Operations - Annual Financial Results (US$/Imperial)
Year Year
Ended ended
30 June 30 June
2002 2001
Ore milled - t`000 25 289 18 821
Gold produced - oz 2 667 2 140
567 043
Gold price received - $/oz 287 276
Cash operating costs - $/oz 192 234
$million
$million
Gold sales 764,5 590,6
Cash operating costs 510,9 502,2
Cash operating profit 253,6 88,4
Amortisation (29,9) (31,4)
Mark to market of financial 5,5 7,6
instruments
Rehabilitation cost provision (2,0) 6,8
Employment termination costs (4,7) (4,7)
Net impairment of assets (34,8) (28,3)
CAWMS provision (0,2) 2,2
Other income - net 11,8 16,0
Interest paid (20,8) (15,0)
Corporate, marketing and new business (9,8) (8,7)
expenditure
Exploration expenditure (5,0) (3,5)
Mark to market of listed investments 58,4 -
Profit before taxation 222,1 29,4
South African normal taxation
- Current tax (26,1) (8,3)
- Deferred tax (31,1) (6,3)
Net earnings 164,9 14,8
Adjustments:
- Profit on sale of property, plant (2,1) (10,5)
and equipment
- Net impairment of assets 34,8 28,3
Headline earnings 197,6 32,6
Earnings per share - cents *
- Earnings 107,3 14,7
- Headline earnings 128,6 33,3
- Fully diluted earnings ** 99,8 14,2
Dividends per share - (cents)
- Declared 7,4 15,8
- Prosposed final 41,7 -
Prepared in accordance with International Accounting Standards
Currency conversion rates: June 2002: US$1 = R10,20
(June 2001: US$ 1 = R7,61)
* Calculated on weighted number of shares in issue :
June 2002: 153,5 million (June 2001: 102,9 million)
** Calculated on weigthed average number of diluted shares in issue :
June 2002: 165,2 million (June 2001: 106,3 million)
Total Operations - Quarterly Financial Results (US$/Imperial)
Quarter Quarter Quarter
ended ended ended
30 June 31 March 30 June
2002 2002 2001
Ore milled - t`000 7 613 6 608 5 393
Gold produced - oz 784 155 673 106 590 927
Gold price received - $/oz 308 286 270
Cash operating costs - $/oz 178 176 230
$million $million $ million
Gold sales 241,7 192,5 159,6
Cash operating costs 139,3 118,7 135,9
Cash operating profit 102,4 73,8 23,7
Amortisation (12,3) (6,3) (8,8)
Mark to market of financial 18,5 - (0,2)
instruments
Rehabilitation cost provision (1,7) - -
Employment termination costs (1,9) (0,4) (0,5)
Net impairment of assets (34,1) - -
CAWMS provision (0,2) - -
Other income - net 5,1 1,6 4,4
Interest paid (6,8) (5,4) (6,6)
Corporate, marketing and new business (2,4) (1,4) (1,8)
expenditure
Exploration expenditure (1,4) (1,2) (1,2)
Mark to market of listed investments 19,2 12,9 -
Profit before taxation 84,4 73,6 9,0
South African normal taxation
- Current tax (2,1) (12,2) (3,0)
- Deferred tax (18,7) (8,1) (1,0)
Net earnings 63,6 53,3 5,0
Adjustments:
- Profit on sale of property, plant (0,5) (0,4) (5,1)
and equipment
- Net impairment of assets 34,1 - -
Headline earnings/(loss) 97,2 53,0 (0,1)
Earnings per share - cents *
- Earnings 38,6 33,4 4,6
- Headline earnings/(loss) 58,9 33,2 (0,1)
- Fully diluted earnings ** 36,1 32,4 4,5
Dividends per share - (cents)
- Prosposed final 40,7 - 8,7
Prepared in accordance with International Accounting Standards
Currency conversion rates average for the quarter: June 2002: US$1=R10,43
(March 2002: US$1=R11,53) (June 2001: US$1=R8,03
* Calculated on weighted number of shares in issue at quarter end June 2002:
165,1 million
(March 2002: 159,5 million) (June 2001: 107,8 million)
** Calculated on weighted average number of diluted shares in issue at quarter
end June 2002:
176,2 million (March 2002: 164,7 million) (June 2001: 111,1 million)
Abridged Balance Sheet (US$)
*At At At
30 June 31 March 30 June
2002 2002 2001
US$ US$ US$
million million million
Mining assets after amortisation 907,9 604,0 680,7
Investments 104,0 186,9 30,0
Net current (liabilities)/assets (0,5) 3,6 (16,1)
(excluding cash)
Short-term investments
- AurionGold 95,1 58,3 38,2
Cash 138,7 128,8 144,1
Total assets 1245,2 981,6 876,9
Shareholders` equity 766,4 540,0 573,9
Free Gold Joint Venture purchase price
due
to AngloGold 49,6 118,6 -
Loans** 163,2 200,1 151,5
Preference shares - - 0,7
Long-term provisions 69,3 60,9 54,4
Unrealised hedging loss 93,5 48,9 49,3
Deferred tax 103,2 13,1 47,1
Total equity and liabilities 1 245,2 981,6 876,9
Issued share capital: 169,2 million ordinary shares of 50 cents each.
(March 2002: 159,6 million)
(June 2001: 144,6 million)
Currency converted at closing rate: June 2002: US$1 = R10,39
(March 2002: US$1 = R11,38)
(June 2001: US$1 = R8,04)
*Significant variances caused by consolidation of Hill 50
**Loans:
During the quarter under review the US$80 million facility used to purchase Hill
50 was settled in full by the issue for cash of 8 million Harmony shares. This
loan bares interest at a percentage rate per annum determined according to a
contracted formula applied on the drawdown date. A R500 million facility was
utilised for the payment of the AngloGold loan for the Free Gold assets.
Condensed statement of changes in shareholders` equity
At At At At
30 June 30 June 30 June 30 June
2002 2001 2002 2001
R R US$ US$
million million million million
Balance as at the beginning
of the
financial year 4 594,0 2 874,7 442,1 358,2
Currency translation
adjustment and
Other (34,6) 70,2 (4,0) 10,1
Issue of share capital 1 747,8 1 729,4 168,2 215,5
Net earnings 1 655,9 (80,3) 160,1 (9,9)
Balance as at the end of 7 963,1 4 594,0 766,4 573,9
June
Abridged cashflow statement
Year Year Year Year
ended ended ended ended
30 June 30 June 30 June 30 June
2001 2002 2002 2001
US$ US$ R million R million
million million
49,1 160,8 Cash flow from operating 1 640,2 373,2
activites
(201,6) (320,3) Cash flow from investing (3 267,3) (1532,0)
activities
235,4 187,2 Cash flow from financing 1 909,5 1 789,2
activities
(16,7) (33,1) Translation adjustment - -
66,2 (5,4) Increase in cash and 282,4 630,4
equivalents
77,9 144,1 Opening cash and 1 158,5 528,1
equivalents
144,1 138,7 Closing cash and 1 440,9 1 158,5
equivalents
Operating activities translated at average rates of:
June 2002: US$1,00 = R10,20. (June 2001: R7,61)
Closing balances translated at closing rates of:
June 2002: US$1,00 = R10,39 (June 2001: R8,04)
Group commodity interest rate and currency contracts as at 30 June 2002
Commodity Contracts
AUS Dollar (A$) Gold
Maturity/
Scheduled 2003 2004 2005 2006 2007 2008 2009 Total
for
delivery
in
Normal
sales
contracts
Forward
sales
agreement
s
Ounces 415 792 229 000 205 000 187 500 125 000 100 000 100 000 1 362 29
A$/ 513 522 524 523 514 518 518 518
ounce
Variable
price
sales
contracts
(with
"caps")*1
Ounces 62 425 175 500 130 000 40 000 - - - 407 925
A$/ 545 544 512 552 - - - 535
ounce
Variable
price
sales
contracts
*2
(with
"floors")
Ounces 33 000 - - - - - - 33 000
A$/ 500 - - - - - - 500
ounce
511 217 404 500 335 000 227 500 125 000 100 000 100 000 1 808 21
*1 The Group is committed to deliver its production into these agreements
subject to the capped price indicated in the table above.
*2 The Group is committed to deliver its production into these agreements
subject to the floor price indicated in the table above.
The above contracts are treated as normal sales contracts, should they be mark-
to-market as derivatives the value would be negative R981 million (US$94
million) as at 30 June 2002. The value was based on a gold price of $316 (A$557)
per ounce, exchange rates of R/$10,39 and $/A$ 0,57 and the prevailing market
interest rates and volatilities at the time.
Currency
The Group has US$90 million forward sale agreements at an average of R/$11,21
maturing over the remaining portion of the calendar year.
The marked-to-market value of the transactions making up the positions in the
above was a positive R46,5 million (US$4,5 million) as at 30 June 2002. The
value was based on an exchange rate of R/$10,42 and the prevailing interest
rates and volatilities at the time.
Interest rate swaps
The Group has interest rate swap agreements to convert R600 million fixed rate
debt to rates linked to Jibar with a spread ranging from 1,8% to 2,2%.
The marked-to-market value of the transactions making up the positions in the
above was a negative R20,8 million (US$2 million) as at 30 June 2002. The value
was based on an exchange rate of R/$10,39 and the prevailing 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 705 570 105 34,45 3 617
UE1A 2 761 2 526 95 11,41 1 084
E8 Reef 144 102 124 6,65 824
Kimberley 616 610 197 3,47 683
Reef
All Reefs 4 226 3 808 114 12,25 1 392
Free State
Basal 6 865 5 441 104 8,39 873
Leader 3 681 3 296 167 7,07 1 181
A Reef 2 556 2 290 149 4,01 597
Middle 1 100 752 228 6,57 1 497
B Reef 1 648 1 545 59 20,02 1 181
All Reefs 15 849 13 324 129 7,53 973
Evander
Kimberley 2 117 2 250 66 14,85 980
Reef
Elandskraal
VCR Reef 1 173 992 90 29,10 2 619
Free Gold
(50%)
Basal 1 723 1 411 54 30,50 1 647
Development results (Imperial)
Channel Channel
Reef Sampled width value Gold
feet feet (inches) (oz/t) (in.ozt)
Randfontein
VCR Reef 2 313 1 870 41 1,013 42
UE1A 9 058 8 287 37 0,324 12
E8 Reef 472 335 49 0,184 9
Kimberley 2 021 2 001 78 0,103 8
Reef
All Reefs 13 865 12 493 45 0,356 16
Free State
Basal 22 523 17 851 41 0,244 10
Leader 12 075 10 814 66 0,205 14
A Reef 8 386 7 513 59 0,116 7
Middle 3 610 2 467 90 0,191 17
B Reef 5 405 5 069 23 0,590 14
All Reefs 51 999 43 714 51 0,219 11
Evander
Kimberley 6 946 7 382 26 0,433 11
Reef
Elandskraal
VCR Reef 3 848 3 255 35 0,859 30
Free Gold
(50%)
Basal 5 653 4 629 21 0,900 19
Investor relations
Business address
Harmony Gold Mining Company Limited
Suite No. 1
Private Bag X1
Melrose Arch, 2076
Telephone: +27 (11) 684 0140
Telefax: +27 (11) 684 0188
E-mail: corporate@harmony.co.za
Investor relations contacts
Corn Bobbert
Telephone: +27 (11) 684 0146
Telefax: +27 (11) 684 0188
E-mail: cbobbert@harmony.co.za
Ferdi Dippenaar
Telephone: +27 (11) 684 0147
Telefax: +27 (11) 684 0188
E-mail: fdippenaar@harmony.co.za
Share transfer secretaries
Ultra Registrars (Pty) Ltd
Contact: Polly Pollard
Telephone: +27 (11) 832 2652
Telefax: +27 (11) 834 4398
E-mail: ultra@registrars.co.za
11 Diagonal Street
Johannesburg 2001
(PO Box 4844, Johannesburg, 2000)
United States ADR Depositary
The Bank of New York
Telephone: +1888-BNY ADRS
Telefax: +1 (212) 815 3050
Shareholder Relations Department
101 Barclay Street
22nd Floor, New York, NY 10286
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
Visit our web site at www.harmony.co.za which includes an updated company
profile. For the 2001 annual report, go to www.har.co.za, and for general
gold and investor information, go to www.harmonyedugold.co.za.
To purchase Harmony gold products, visit www.harmonygold-direct.com.
Harmony`s 2002 Annual Report will be available on 1 October 2002
For a hard copy please contact
Corne Bobbert on
tel +27 11 684-0146 or e-mail
cbobbert@harmony.co.za.
Date: 05/08/2002 12:00:00 PM Produced by the JSE SENS Department
Harmony Gold Mining Company Limited - Press Release
Harmony Gold Mining Company Limited - Press Release
HARMONY DECLARES TOTAL DIVIDEND OF 500 CENTS (UP 317% YEAR ON YEAR) ON THE BACK
OF EXCELLENT QUARTERLY PERFORMANCE
ISIN code.: ZAE000015228
JSE : HAR
NASDAQ : HGMCY
Johannesburg, 5 August 2002 - Harmony Gold Mining
Company Limited today reported improved record operational profits for the fifth
quarter in a row. Earnings per share increased by 4% to 402 cents. Earnings
after write-downs for the past financial year totals 1 094 cents, an increase of
882% from the 111,5 cents reported for the previous financial year.
A dividend of 425 cents per ordinary share, being the final dividend, was
declared. This dividend together with the 75 cents interim dividend announced in
December 2001, totals 500 cents for the financial year.
Harmony increased production to 2,7 million ounces, an increase of 25% year on
year. For the new financial year, the company expects to produce some 3,1
million ounces, a further increase of 16%.
Quarter on quarter, the company`s cash operating profit increased by 25% from
R850.9 million to R1 067,7 million. Kilograms recovered was 17% higher at 24 390
kg compared to the 20 936 kg for the previous quarter. This was mainly
due to improved operational performance by the Free State, Elandskraal and Free
Gold operations and the inclusion of Hill 50 in Australia.
Measured in R/kg terms, working cost decreased by 9% from R65 392/kg to R59
574/kg, whilst in R/tonne terms, working costs decreased from R228/tonne to
R210/tonne.
The company achieved a US$130 or 42% profit margin with cash costs of US$178/oz.
When measured in US$ terms, working
costs increased by 1% from US$176/oz to US$178/oz. This can mainly be attributed
to the 10% improvement in the exchange rate which strengthened from R11,53 / US$
to R10,43 / US$ in the past quarter.
The company used the past three months to integrate the acquisitions of 50% of
Free Gold in South Africa and Hill 50 in Australia. The current gold price
environment has resulted in Harmony re-assessing the growth opportunities
available in other mining areas throughout the world, as well as the various
prospective organic growth opportunities at its current operations.
The Free State operations reported a 47% increase in cash operating profits from
R145,4 million to R213,7 million. Working costs remained under control with
expenditure of R318,4 million compared to R319,8 million for the March 2002
quarter.
Evander reported a satisfactory performance with cash operating profit
decreasing by 17% from R169,3 million to R140,9 million. This reduction can be
attributed to higher working costs in both R/kg and R/tonne terms, due to lower
tonnage and recovery grade
Gold produced at the Free Gold Joint Venture operations increased by 19%, from 7
942 to 9 419 kg. Cash operating cost decreased by 23%, from R56 914/kg to R43
662/kg or US$130/oz. The 50% profit after tax due to Harmony amounts to R251,8
million, compared to R170.3 million for the March 2002. Free Gold now operates
at a profit margin of US$181/oz or 58% at a gold price of US$311/oz.
The Randfontein operations reported cash operating profits of R172,5 million, a
13% decrease compared to the R198,0 million reported previously. Working costs
decreased by 10% from R252,4 million to R227,8 million. These operations`
results were affected by a strike which lasted 11 days. The dispute on living-
out allowances was eventually settled with both the company and the unions
satisfied with progress made.
Elandskraal reported a R173,6 million cash operating profit, up 51% from the
March 2002. The benefits of the development programme that is underway at the
Elandskraal operations were evident with an increase in recovery grades of 6,44
g/t compared with 5,74 g/t of March 2002. Whilst the grades have improved by
12%, it is anticipated that some volatility will be experienced until the
development programme has been completed. Underground working costs/kg showed
the most improvement, decreasing by 12% from R71 398/kg to R62 550/kg. Measured
in cost/tonne, the operations reported costs of R403/tonne compared to
R410/tonne for the previous quarter.
The Kalgold operations experienced a 40% increase in cash operating profits, up
from R8,3 million to R11,7 million for the June 2002 quarter, despite employees
associated with the NUM embarking on a wage related strike for 21 days.
Cash operating profits for the Australian operationsincreased from R13,3 million
to R70,4 million and is mainly due to the inclusion of the Hill 50 assets. The
company`s Australian operations now consist of assets with more reserves of a
higher quality. The quarter includes the cleaning up of the Harmony`s
Australian balance sheet by taking an impairment of q A$90m on the New Hampton
investment and Harmony`s sale of its stake in AurionGold to Placer Dome. The
April capital raising significantly strengthened our Australian balance sheet.
The consolidated Harmony Australia is now debt-free, has qA$17m in cash for its
capex projects and has the opportunity to pursue further growth opportunities in
that region. The company`s budget plans exhibit a production profile of in
excess of 550 000 ounces for the 2002/3 financial year.
R3,6 million was spent on the Kalplats project during the quarter. Pre-
feasibility studies included the updating of orebody models, resource
calculations, pit optimizations and plant designs. The mineral resource is at
q3.8m oz at 1.5 g/t TPM (Total Precious Metals) including q1,5m oz at 3,7 g/t
TPM. Metallurgical extraction is estimated at about 75% for ore with grades
above 2,0 g/t TPM. The company will proceed with expenditure totalling R25,0
million on mainly a 500 ton bulk sampling pit and additional drilling activities
in prospective areas.
"We have grown this company significantly over the past six years, applying our
value creation model to mature turnaround assets. Today we have operations in
various phases of growth, i.e. the Free State being mature, but delivering
significant amounts of cash and Elandsrand on the other end which is a new
quality long life mining operation in the making. We will continue to deliver
value to our shareholders through smart acquisitions and further developing the
numerous organic growth projects in our portfolio," concluded Bernard.
Ends
For further details contact:
Bernard Swanepoel
on +27(0)83 303 9922
or
Ferdi Dippenaar
on +27(0)82 807 3684
Issued by Harmony Gold Mining Company Limited
Contact:
Corn Bobbert
Tel +27 11 684 0146
Fax +27 11 684 0188 Mobile +27(0)83 380 6614
E-mail: cbobbert@harmony.co.za
Web site:
www.harmony.co.za
Date: 05/08/2002 12:03:52 PM Produced by the JSE SENS Department
