| Mon 21 Oct 2002, 14:48 | | Harmony Review For The Quarter Ended 30 September |
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HARMONY REVIEW for the quarter ended 30 September 2002
Harmony Gold Mining Company Limited
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
- Mining Charter provides certainty for all stakeholders
- Groundbreaking agreement with labour union
- Robust cash operating profit of R950,2 million
- Record quarterly production of 796 497 ounces
- Australian operations contribute cash operating profit of R100,4 million
- Kalplats Platinum Project progresses well
- Acquisition of St Helena by Free Gold Joint Venture on track
- Doornkop South Reef Project - Board approval required
Financial highlights
30 September 2002 30 June 2002
Cash operating profit
- Rand 950 million 1 068 million
- US$ 91 million 102 million
Earnings
- Rand 426 million 664 million
- US$ 41 million 64 million
Earnings per share
- SA cents per share 247 402
- US cents per share 24 39
30 September 2002 30 June 2002
Gold produced
- kg 24 774 24 390
- oz 796 497 784 155
Cash costs
- R/kg 68 110 59 574
- $/oz 204 178
Chief executive`s review September 2002
`Our company continues to deliver robust returns with a cash operating profit of
R950 million for the September 2002 quarter. Harmony will always be an unhedged
gold mining company, with the bulk of its production from South Africa.
Exploring opportunities in other countries, or in other commodities like
platinum, should not be seen as an attempt to diversify, but merely as extending
our business model into other value creating opportunities.`
STRENGTHENING OUR BOARD
We are pleased to announce that Mr Simo Lushaba and Ms Nolitha Fakude have
joined our Board. They bring unique and relevant skills and experience which
will strengthen us as a company.
SAFETY REPORT
During the past quarter all Mine Managers, Engineers and Mine Overseers attended
the Harmony Risk Management System (HRMS) courses. The roll-out of the HRM
System is now complete, and is positively impacting on risk management. All six
month trends indicate that the safety awareness and performance within the
company is improving. It is with regret however, that I have to report that six
employees lost their lives during the quarter in five incidents.
With the role of the former shift bosses being changed to focus exclusively on
coaching for safe production, I believe we will now see huge strides in
improving our safety performance. This follows a groundbreaking agreement
between the company and the representative union.
Kalgold achieved 500 000 fatality free shifts on 19 July 2002.
STRATEGIC OVERVIEW
A significantly higher gold price of US$319/oz and a Rand/Dollar exchange rate
of R10,39 resulted in the company receiving R106 463/kg during the quarter. This
is 3% higher than the R103 349/kg received for the previous quarter. The company
produced a record 796 497 ounces during the quarter, and is on track to produce
an annualised 3,1 million ounces for the current financial year.
The higher gold price received was offset by higher costs on our operations.
Results have been affected by the 8,2% effective annual wage increases. Both
volume and costs were also negatively affected by the seismic events on 12 July
2002 at Evander 8 Shaft and Deelkraal mine. Whilst higher volumes on some
operations saw a proportionate increase in cost, the opposite, i.e. cost
reduction was not achieved at Elandsrand, where a significant drop in volume
occurred. This has now been rectified.
SEVEN YEARS OF VALUE CREATION
1995 2002 % growth
Production oz per annum 580 000 2,7 million 360
Cash operating profit US$ 9 million 254 million 2 500
Market cap US$ 180 million 2 290 million 1 170
Employees in service 23 000 42 600 85
Ounces produced per employee 25 63 150
Harmony, a company which has concluded 23 acquisitions to date, has, over the
past 7 years, created value through a strategy of acquiring and subsequently
turning around high cost, low margin operations. The bulk of these acquisitions
were made during a declining Dollar gold price environment. Despite these
adverse conditions, our shareholders have been rewarded with the appreciation of
their investment, both in terms of capital growth and cash dividends.
I am frequently asked whether the higher gold price environment will result in
us being unable to achieve further smart acquisitions. Let me address this with
the help of a small diagram.
The above situation, in which typically the Rand/kg price of gold increased due
to the sudden depreciation of the South African Rand, has, over the past 7
years, occurred a number of times.
This has resulted in the profit margins of the target operations increasing
significantly in the short term. However, over the longer term, the impact of
their higher cost increases will result in these assets becoming available for
sale over a 12 to 24 month period.
The difference made through the implementation of the `Harmony Way` is a
significant and sustainable reduction in the working cost structure of the
acquired mine. This immediately results in an increase in margin and operating
profits. Our challenge remains to keep working cost increases lower than that of
our peer group and below South African inflation.
I believe that conditions favourable for Harmony to achieve further acquisitions
will present themselves as the target assets experience the pressures of working
cost increases.
Other opportunities currently available to the company are:
- exploiting the potential of our greatest asset, the people working for the
company. Harmony has consistently achieved productivity and efficiency
improvements over the past few years. This process of empowering our people has
the potential to impact positively on our future performance. Through continued
productivity improvements, we can grant real wage increases and achieve a
reduction in the unit cost of labour in real terms,
- `sweating our assets` which includes all activities related to optimising our
current operations. Continuous Operations or CONOPS could see the capital
productivity of some of the operations increase significantly. We hope to
conclude agreements at the Free Gold Joint Venture on CONOPS before the end of
this year and are investigating its potential for other operations,
- remain `cost obsessed`. Through initiatives like the `Cost Marathon`, the
company was able to restrict its cost increases, when measured in R/kg terms, to
only 9% in the previous financial year. This was despite the impact of a high
inflation environment and the adverse effect of acquiring high cost, low margin
operations. Cost focus and cost efficiency have always been our strength,
- extending the application of the Harmony Value Creation Model. Our business
model, on which our successful acquisition strategy has been built, could be
conceivably extended into the platinum industry in South Africa. The platinum
industry in South Africa has assets which fit the profile of being `high cost -
low margin operations`. These are the type of assets on which Harmony created
shareholder value in the gold mining industry.
Highlights of the past quarter have been:
i. Release of Broad-Based Socio-Economic Development Charter
The much awaited and debated Charter for the mining industry was released on 9
October 2002 after having been ratified by the Government.
I believe that whilst the Charter prescribes some very demanding conditions, we
are well positioned to meet them well ahead of the targeted date in 5 years
time.
The Charter was finalised through a process of negotiations which include
representatives from the mining industry, government and the unions, and has
removed the uncertainty which followed after the leaking of a draft document
late in July 2002.
Harmony has demonstrated that the ownership requirements are achievable through
our involvement in three successful empowerment deals. In all the instances, the
deals did not result in a dilution of value to current shareholders, but rather
facilitated our continued growth.
All stakeholders recognise the need to:
- expand opportunities for historically disadvantaged South Africans (HDSAs) to
enter the mining and minerals industry or benefit from the exploitation of the
country`s mineral resources,
- ensure that the relevant skills which the scarcity thereof have been
identified as one of the barriers to entry into the mining sector by the HDSAs
be transferred, and
- ensure progress with employment equity in the mining industry.
It is the government`s stated objective that it does not intend nationalising
the mining industry and that participation or the transfer of ownership take
place in a transparent manner and at fair market value.
In short the Charter states the following:
- that the parties agree that approximately 15% or R100 billion (US$10 billion)
worth of assets be owned by Black companies within 5 years,
- an additional 11% be achieved in the following 5 years,
- industry has undertaken to assist HDSAs in securing finance to fund
participation, i.e. an amount of R100 billion within the first 5 years only,
- a baseline of 40% in respect of employment equity in junior and senior
management levels of the industry,
- companies undertake to offer to every employee the opportunity to become
functionally literate and numerate by 2005,
- stakeholders undertake to give HDSAs preferred supplier status, and
- mining companies agree to identify their current levels of beneficiation and
indicate to what extent they intend to grow the baseline.
Regarding the measuring of success of ownership, this would be determined by:
- attributable units of South African production controlled by HDSAs,
- an allowance be built in to allow for credit/offsets to allow for flexibility,
- previous empowerment deals be included in calculating credits, and
- government will consider special incentives to encourage HDSAs to retain newly
acquired equity for a reasonable period.
Companies undertake to report on an annual basis their progress towards
achieving their commitments through their annual reports, verified by external
auditors.
The full copy of the Charter is available at www.harmony.co.za.
ii. Section 302 of the Sarbanes-Oxley Act of 2002
Harmony`s NASDAQ listing requires us to comply with Section 302 of the Act. On
29 August 2002, the Securities and Exchange Commission issued a Release adopting
rules that implement the certification requirements of Section 302 of the
Sarbanes-Oxley Act of 2002.
The Section 302 certification rules apply to annual and quarterly reports filed
after 29 August 2002. Under the new Exchange Act Rules, the executive officer
and financial officer are each required to certify that:
- he or she has reviewed the report,
- based on his/her knowledge, the report contains no material misstatements or
omissions,
- based on his/her knowledge, the financial statements and other financial
information included in the report, fairly presents in all material respects the
financial condition, results of operations and cash flows of the issuer for the
periods presented in the report,
- that the certifying officers are responsible for establishing and maintaining
disclosure controls and procedures and have properly designed and evaluated
them,
- that the certifying officers have disclosed all significant deficiencies to
the auditors and audit committee, and
- the certifying officers have indicated any significant changes in internal
controls in the report.
Although this is a much publicised and new requirement in the USA, your company
has always subscribed to honest, transparent and timeous reporting.
iii. Kalplats Platinum Project
An amount of R15,0 million has been approved for the excavation of the Kalplats
box-cut, bulk sample collection and pilot plant flotation tests. The project
involves excavating 1,5 million tonnes of waste rock. The ore sample will be
collected at a depth of approximately 45 m below surface with sampling of the
various reefs under different weathering conditions as the pit advances. It is
anticipated that the pilot plant test results will be available by March 2003.
iv. St Helena - Free Gold Joint Venture acquisition - well on track
The only outstanding conditions precedent for the fulfilment of the sale
agreement is in respect of Ongegund 13 - St Helena No. 10 Shaft:
- the renewal of the Mining Lease by Gold Fields Limited and ceding thereof to
Free Gold with ministerial consent,
- mining authorisation for Ongegund 13 portion.
These conditions are expected to be fulfilled by 31 October 2002.
v. Highland Gold Limited in Russia
Progress is being made with the allocation of the mining licences. Technical
assistance is being provided in the evaluation of new gold properties identified
by Highland Gold in far east Russia and in Mongolia.
QUARTERLY OPERATIONAL REVIEW
As expected the company reported lower operational profits of R950 million
compared to the exceptional R1 068 million achieved in the June 2002 quarter.
Kilograms recovered was 2% higher at 24 774 kg compared to the 24 390 kg for the
previous quarter. This was due to improved operational performance by the Free
State, Randfontein and Kalgold operations and Hill 50 in Australia.
Working costs however were higher in both R/kg and R/tonne terms. Measured in
R/kg terms, working cost increased by 14% from R59 574/kg to R68 110/kg. These
increases were mainly due to the effects of the annual wage increases of 8,2%,
the seismic events at our Evander No. 8 Shaft and Deelkraal operations which
were reported previously as well as decreased tonnages from Elandsrand.
Profit before tax decreased by 28% from R881,0 million to R631,8 million. The
decrease was mainly due to the lower cash operating profit (R117,5 million) and
the lower value of the Placer Dome shares (R141,9 million). Taxation at R205,6
million was 5% lower than the R217,1 million reported for the
June 2002 quarter.
Net profit after tax was 36% lower at R426,2 million compared with the R663,9
million reported previously.
Earnings per share decreased by 39% to 247 cents quarter on quarter.
The performance of the operations is highlighted in the following table:
September 2002 June 2002 % Variance
Production - kg 24 774 24 390 2
Production - oz 796 497 784 155 2
Revenue - R/kg 106 463 103 349 3
Cash cost - R/kg 68 110 59 574 (14)
Revenue - US$/oz 319 308 4
Cash cost - US$/oz 204 178 (15)
Exchange rate R/US$ 10,39 10,43 -
The company achieved a US$115 or 36% profit margin with cash costs of US$204/oz.
A cash operating profit margin of US$130, or 42%, was achieved during the June
2002 quarter.
A quarter on quarter cash operating profit analysis of the various operations is
as follows:`
Total cash operating profit (R`million)
Operation September 2002 June 2002 Variance
Free State 190,0 213,7 (23,7)
Evander 101,2 140,9 (39,7)
Randfontein 199,7 172,5 27,2
Elandskraal 104,8 173,6 (68,8)
Kalgold 25,0 11,7 13,3
Australian Operations 100,4 70,4 30,0
Sub-total 721,1 782,8 (61,7)
Free Gold (50%) 229,1 284,9 (55,8)
Total 950,2 1 067,7 (117,5)
Free State Operations - absorbing wage increases
The Free State operations reported an 11% decrease in cash operating profits
from R213,7 million to R190,0 million. Underground tonnage milled increased from
1 011 000 tonnes to 1 105 000 tonnes. The increased tonnage at a lower recovery
grade of 4,41 g/t compared to the 4,45 g/t reported previously resulted in a 5%
net improvement in overall gold recovered, up from 4 883 kgs to 5 104 kgs.
Higher volumes (10%) and the annual wage increase saw working costs increase by
20% with expenditure of R388,5 million compared to R323,1 million for the June
2002 quarter. Although unit cost increased by only 4% from R282/t to R293/t, the
lower grade resulted R/kg costs to increase by 15% to R76 107/kg.
Evander Operations - back on track following the seismic event
The seismic event (4,1 on the Richter Scale) which took place on 12 July 2002 at
No. 8 Shaft, adversely impacted on the performance of these operations. Cash
operating profits decreased by 28% from R140,9 million to R101,2 million. The
main contributing factor was a 6% decrease in underground tonnage, down from 510
000 tonnes to 477 000 tonnes for the reporting period. As 8 Shaft is the highest
grade operation at Evander, gold production was significantly affected
(-279 kg). This shaft recorded a small loss for the quarter, but is expected to
return to its previous level of profitability in the new quarter.
Although actual working costs increased by only 6% from R180,5 million to R190,4
million, the impact of lower tonnages and recovery grade impacted on working
costs in both R/kg and R/tonne terms. When measured in R/kg terms, working costs
increased by 16% from R59 155/kg to R68 714/Kg and in R/tonne terms from
R350/tonne to R395/tonne.
The Evander operation have since recovered from the impact of the seismic event
and a better overall performance is expected during the following quarter.
Randfontein - excellent performance
Randfontein continued with its excellent operational performance, returning a
cash operating profit of R199,7 million, up 16% from the R172,5 million reported
for the June 2002 quarter.
Underground tonnage milled increased by 6% from 714 000 tonnes to 758 000
tonnes. At a higher recovery grade of 5,29 g/t compared to the
4,98 g/t reported previously, the operations increased underground gold recovery
by 13% to 4 010 kgs.
Working costs increased by 14%, mainly due to the annual wage increases and
costs associated with the increased tonnage. When measured in R/kg terms,
working costs decreased by 1% from R59 488/kg to R58 945/kg.
In R/tonne terms, working costs increased by 5% from R296/tonne to R312/tonne.
These operations have fully recovered from the adverse affect of the strikes
experienced during the June 2002 quarter.
Elandskraal - short-term operational problems
The Elandskraal operations experienced one of its toughest quarters since the
acquisition thereof some seven quarters ago. Various operational problems at
Elandsrand resulted in a 40% decrease in operating profits at R104,8 million
compared to R173,6 million achieved during the June 2002 quarter. Deelkraal
contributed some R30 million of operating profits, despite being affected
significantly by the previously reported seismic event which negatively impacted
on volume and cost.
Underground tonnage was 17% lower at 458 000 compared to 550 000 tonnes reported
previously. Despite the lower volume total working costs were only 3% lower,
down from R243,4 million to R235,4 million. As indicated before, flexibility on
the old Elandsrand mine will remain tight until the new mine is commissioned in
two years time. This operation will bounce back in the new quarter.
Although underground recovery grades were 2% higher at 6,55 g/t, gold produced
was 15% lower at 2 998 kgs compared to the 3 544 kgs for the June 2002 quarter.
The lower tonnage and annual wage increases impacted on working costs in both
R/kg and R/tonne terms. When measured in R/kg terms, working costs increased by
20% from R62 550/kg to R75 076/kg.
Elandskraal incurred R35 million in capital expenditure, as the `Shaft Deepening
Project` is progressing well on budget and on time.
Free Gold - eliminating high grading and recapitalising the orebody
As expected the Free Gold operations reported a 20% decrease in cash operating
profit, down from R284,9 million to R229,1 million. This change was mainly due
to a 4% decrease in recovery grade and a 14% increase in working costs over the
period. In line with similar previous acquisitions, these operations are now
entering the second phase of restructuring and alignment. This involves mining
the orebody to its average grade, thereby eliminating high grading and focussing
on recapitalising the orebody to allow for more mining flexibility in future.
Underground tonnage was 3% higher at 540 000 tonnes. At a 4% lower recovery
grade of 7,62 g/t compared to the 7,95 g/t for the June 2002 quarter,
attributable gold production was slightly lower at 4 113 kgs.
Underground working costs when measured in R/kg and R/tonne terms increased by
16% and 11% respectively. Working costs in R/kg increased from R44 873/kg to R51
920/kg and in R/tonne from R357/tonne to R395/tonne.
Capital expenditure of R12 million was incurred as part of the recapitalisation
phase to increase the operational flexibility at these operations.
Tonnages from surface were significantly lower in volume and recovery grade. A
total of 557 000 tonnes at a recovery grade of 0,50 g/t were treated resulting
in a gold recovery of 281 kgs. This was lower than the 542 kgs for the June 2002
quarter. The net result being that surface operations contributed only R9,5
million towards cash operating profits compared to the R37,1 million for the
previous quarter.
The Free Gold operations will remain an important portion of our company`s
future, especially in the Free State region and therefore warrant all the
operational focus and attention it receives.
If Free Gold can make R400 million per quarter (R200 million attributable)
during the next few quarters whilst re-establishing flexibility and implementing
continuous operations, it will still achieve payback quicker than any of our
other spectacular acquisitions.
Kalgold - pleasing performance
Our Kalgold operations which were affected by a 21 day strike during the
previous quarter, reported a 114% increase in cash operating profit, increasing
from R11,7 million to R25,0 million.
The increase in cash operating profit can mainly be attributed to the 9%
increase in tonnage and a 37% improvement in recovery grade. Milled tonnage of
252 000 tonnes at a recovery grade of 2,31 g/t, resulted in a 49% increase in
gold recovery at 581 kgs.
Working cost increases at Kalgold were well contained to 10%, increasing from
R132/tonne to R145/tonne. When measured in R/kg terms, working costs decreased
from R78 491/kg to R62 800/kg.
A similar performance is expected in the coming quarter.
Australian Operations - considerable improvements
The Australian operations returned a 43% improvement in cash operating profits,
increasing from R70,4 million to R100,4 million. This improvement was mainly as
a result of a higher grade of 2,39 g/t from both open pits and underground
compared to the 1,90 g/t reported for the June 2002 quarter.
An additional 25% or a total of 4 385 kgs were recovered compared to the 3 518
kgs previously. Working costs however increased substantially by 42% mainly due
to the increased stripping ratios in the high grade open pits and underground
development expenses to allow for more flexibility to the mining operations.
These operations are now operating at a cash cost of US$234/oz.
It is planned to decrease the cost as the higher cost operations, i.e. Big Bell,
are phased out.
At Bendigo, the decline reached the orebody position and the first blast in ore
was taken in late September 2002. This was ahead of the original plan which was
to get to this point in December 2002. Further development on the structure
north and south of the intersection shows significant quantities of visible
gold. However, a large volume of this nuggety orebody needs to be processed in
the bulk sampling plant before grades can be estimated. The presence of coarse
gold in the face and the initial grade results are encouraging
CAPITAL EXPENDITURE
Actual Forecast
September 2002 December 2002
Free State 32 31
Evander 24 34
Randfontein 6 6
Elandskraal 35 34
Free Gold (50%) 12 10
Australian Operations 58 60
Kalgold 8 4
Total 175 179
The Doornkop - South Reef Project
A final decision on proceeding with this project is expected within the next few
weeks.
Operating and financial results (Rand/metric)
Free Free Rand- Rand-
State State Evander Evander fontein fontein
U/g Surface U/g Surface U/g Surface
Ore Sep-02 1 105 220 477 32 758 460
milled
- t`000 Jun-02 1 011 135 510 54 714 468
Gold Sep-02 4 872 232 2 739 26 4 010 357
produced Jun-02 4 499 384 3 020 36 3 558 241
- kg
Yield - Sep-02 4,41 1,05 5,74 0,81 5,29 0,78
g/t
Jun-02 4,45 2,84 5,92 0,67 4,98 0,51
Cash
operating Sep-02 76 504 67 772 68 714 83 962 58 945 66 739
costs - Jun-02 70 775 12 273 59 155 51 694 59 488 66 934
R/kg
Cash
operating
costs Sep-02 337 71 395 68 312 52
- R/tonne Jun-02 315 35 350 34 296 34
Working
revenue Sep-02 553 968 24 505 288 766 2 767 422 508 37 345
(R`000) Jun-02 496 895 39 894 317 703 3 670 374 098 26 196
Cash
operating Sep-02 372 728 15 723 188 207 2 183 236 371 23 826
costs Jun-02 318 415 4 713 178 649 1 861 211 660 16 131
(R`000)
Cash
operating Sep-02 181 240 8 782 100 559 584 186 137 13 519
profit Jun-02 178 480 35 181 139 054 1 809 162 438 10 065
(R`000)
Elands- Elands- Kalgold Free
kraal kraal Open- Gold
U/g Surface cast U/g
Ore milled Sep-02 458 231 252 540
- t`000 Jun-02 550 236 231 524
Gold Sep-02 2 998 180 581 4 113
produced - Jun-02 3 544 492 389 4 167
kg
Yield - g/t Sep-02 6,55 0,78 2,31 7,62
Jun-02 6,44 2,08 1,68 7,95
Cash
operating Sep-02 75 076 57 583 62 800 51 920
costs - Jun-02 62 550 44 110 78 491 44 873
R/kg
Cash
operating
costs Sep-02 491 45 145 395
- R/tonne Jun-02 403 92 132 357
Working
revenue Sep-02 321 278 18 981 61 472 433 181
(R`000) Jun-02 365 564 51 414 42 212 434 854
Cash
operating Sep-02 225 078 10 365 36 487 213 545
costs Jun-02 221 678 21 702 30 533 186 986
(R`000)
Cash
operating Sep-02 96 200 8 616 24 985 219 636
profit Jun-02 143 886 29 712 11 679 247 868
(R`000)
Free Australian
Gold operations
Surface Total Total
Ore milled Sep-02 557 1 836 6 926
- t`000 Jun-02 617 1 855 6 905
Gold Sep-02 281 4 385 24 774
produced - Jun-02 542 3 518 24 390
kg
Yield - g/t Sep-02 0,50 2,39 3,58
Jun-02 0,88 1,90 3,53
Cash
operating Sep-02 71 544 78 162 68 110
costs - Jun-02 34 389 68 804 59 574
R/kg
Cash
operating
costs Sep-02 36 187 244
- R/tonne Jun-02 30 130 210
Working
revenue Sep-02 29 600 443 148 2 637 519
(R`000) Jun-02 55 716 312 466 2 520 682
Cash
operating Sep-02 20 104 342 741 1 687 358
costs Jun-02 18 639 242 053 1 453 020
(R`000)
Cash
operating Sep-02 9 496 100 407 950 161
profit Jun-02 37 077 70 413 1 067 662
(R`000)
Prepared in accordance with International Accounting Standards.
Total Operations - quarterly financial results (Unaudited) Rand/metric)
Quarter Quarter Quarter
Ended ended ended
30 Sept 30 June 30 Sept
2002 2002 2001
Ore milled - t`000 6 926 6 905 5 064
Gold produced - kg 24 774 24 390 19 161
Gold price received - R/kg 106 463 103 349 74 164
Cash operating costs - R/kg 68 110 59 574 63 097
R million R million R million
Gold sales 2 637 2 521 1 421
Cash operating costs 1 687 1 453 1 209
Cash operating profit 950 1 068 212
Amortisation (150) (129) (51)
Mark-to-market of financial 65 193 (148)
instruments
Rehabilitation cost provision (10) (18) -
Employment termination costs (12) (20) (13)
Net impairment of assets - (355) -
Other income - net 48 52 25
Interest paid (59) (71) (39)
Corporate, marketing and new (28) (25) (14)
business expenditure
Exploration expenditure (30) (15) (10)
Profit on sale of AurionGold 469 - -
shares
Reversal of mark-to-market of (611) 201 159
AurionGold
Profit before taxation 632 881 121
South African normal taxation
- Current tax (158) (22) (20)
- Deferred tax (48) (195) (8)
Net earnings 426 664 93
Adjustments:
- Profit on sale of property, (4) (5) (4)
plant and equipment
- Net impairment of assets - 355 -
Headline earnings 422 1 014 89
Earnings per share - cents *
- Basic earnings 247,0 402,2 64,0
- Headline earnings 244,2 614,3 61,1
- Fully diluted earnings ** 242,7 389,0 64,0
Dividends per share - (cents)
- Proposed final - 425 -
Prepared in accordance with International Accounting Standards.
* Calculated on weighted number of shares in issue at quarter end September
2002: 172,6 million (June 2002: 165,1 million) (September 2001: 145,1 million)
** Calculated on weighted average number of diluted shares in issue at quarter
end September 2002: 175,6 million (June 2002: 170,1 million) (September 2001:
145,1 million)
Abridged balance sheet (Unaudited) (Rand)
At At At
30 Sept 30 June 30 Sept
2002 2002 2001
R million R million R million
Employment of capital
Mining assets after amortisation 9 434 9 433 5 481
Investments 1 133 1 081 251
Net current liabilities (599) (431) (165)
(excluding cash)
Current investments
- AurionGold - 988 402
- Placer Dome 746 - -
Cash 1 626 1 441 1 229
Total assets 12 340 12 511 7 197
Capital employed
Shareholders` equity 7 848 7 963 4 621
Loans 2 095 2 086 1 235
Preference shares - - 5
Long-term provisions 725 720 439
Unrealised hedging loss 854 971 509
Deferred tax 819 771 388
Total equity and liabilities 12 340 12 511 7 197
Prepared in accordance with International Accounting Standards.
Basis of Accounting
The unaudited results for the quarter have been prepared on the International
Accounting Standards basis. The accounting policies are consistent with those
applied in the previous financial year.
Issued share capital: 174,4 million ordinary shares of 50 cents each. (June
2002: 169,2 million) (September 2001: 145,1 million)
Operating and financial results (US$/imperial)
Free Free Rand-
State State Evander Evander fontein
U/g Surface U/g Surface U/g
Ore milled Sep-02 1 219 243 526 35 836
- t`000 Jun-02 1 115 149 562 60 787
Gold
produced Sep-02 156 638 7 459 88 060 836 128 924
- oz Jun-02 144 646 12 346 97 095 1 157 114 392
Yield Sep-02 0,128 0,031 0,167 0,024 0,154
- oz/ton Jun-02 0,130 0,083 0,173 0,019 0,145
Cash
operating Sep-02 229 203 206 251 176
costs - $/oz Jun-02 211 37 176 154 177
Cash
operating Sep-02 29 6 34 6 27
costs - $/t Jun-02 27 3 30 3 26
Working
revenue Sep-02 53 317 2 359 27 793 266 40 665
($`000) Jun-02 47 641 3 825 30 460 352 35 867
Cash
operating Sep-02 35 874 1 513 18 114 210 22 750
costs ($`000) Jun-02 30 529 452 17 128 178 20 293
Cash
operating Sep-02 17 443 846 9 679 56 17 915
profit ($`000) Jun-02 17 112 3 373 13 332 174 15 574
Rand- Elands- Elands- Kalgold
fontein kraal Kraal Open-
Surface U/g Surface cast
Ore milled Sep-02 507 505 255 278
- t`000 Jun-02 516 606 260 255
Gold
produced Sep-02 11 478 96 387 5 787 18 679
- oz Jun-02 7 748 113 942 15 818 12 507
Yield Sep-02 0,023 0,191 0,023 0,067
- oz/ton Jun-02 0,015 0,188 0,061 0,049
Cash
operating Sep-02 200 225 172 188
costs - $/oz Jun-02 200 187 132 234
Cash
operating Sep-02 5 43 4 13
costs - $/t Jun-02 3 35 8 11
Working
revenue Sep-02 3 594 30 922 1 827 5 916
($`000) Jun-02 2 512 35 049 4 929 4 047
Cash
operating Sep-02 2 293 21 663 998 3 512
costs ($`000) Jun-02 1 547 21 254 2 081 2 927
Cash
operating Sep-02 1 301 9 259 829 2 404
profit ($`000) Jun-02 965 13 795 2 848 1 120
Free Free Australian
Gold Gold Operations
U/g Surface Total Total
Ore milled Sep-02 595 614 2 025 7 638
- t`000 Jun-02 578 680 2 045 7 613
Gold
produced Sep-02 132 235 9 034 140 980 796 497
- oz Jun-02 133 972 17 426 113 106 784 155
Yield Sep-02 0,222 0,015 0,070 0,104
- oz/ton Jun-02 0,232 0,026 0,055 0,103
Cash
operating Sep-02 155 214 234 204
costs - $/oz Jun-02 134 103 205 178
Cash
operating Sep-02 35 3 16 21
costs - $/t Jun-02 31 3 11 18
Working
revenue Sep-02 41 692 2 849 42 651 253 851
($`000) Jun-02 41 693 5 342 29 959 241 676
Cash
operating Sep-02 20 553 1 935 32 988 162 403
costs ($`000) Jun-02 17 928 1 787 23 207 139 311
Cash
operating Sep-02 21 139 914 9 663 91 448
profit ($`000) Jun-02 23 765 3 555 6 752 102 365
Prepared in accordance with International Accounting Standards.
Total Operations - quarterly financial results (Unaudited) (US$/imperial)
Quarter Quarter Quarter
ended ended ended
30 Sept 30 June 30 Sept
2002 2002 2001
Ore milled - t`000 7 638 7 613 5 584
Gold produced - oz 796 497 784 155 616 038
Gold price received - $/oz 319 308 274
Cash operating costs - $/oz 204 178 233
$million $million $ million
Gold sales 254 242 169
Cash operating costs 162 139 144
Cash operating profit 91 102 25
Amortisation (14) (12) (6)
Mark-to-market of financial 6 19 (18)
instruments
Rehabilitation cost provision (1) (2) -
Employment termination costs (1) (2) (2)
Net impairment of assets - (34) -
Other income - net 5 5 3
Interest paid (6) (7) (5)
Corporate, marketing and new (3) (2) (2)
business expenditure
Exploration expenditure (3) (1) (1)
Profit on sale of Aurion Gold 45 - -
shares
Reversal of mark-to-market of (59) 19 19
Aurion Gold
Profit before taxation 61 84 14
South African normal taxation
- Current tax (15) (2) (2)
- Deferred tax (5) (19) (1)
Net earnings 40 64 10
Adjustments:
- Profit on sale of property, plant (1) (1) (1)
and equipment
- Net impairment of assets - 34 -
Headline earnings 40 97 10
Earnings per share - cents *
- Earnings 23,8 38,6 8,0
- Headline earnings 23,5 58,9 7,3
- Fully diluted earnings ** 23,4 37,3 8,0
Dividends per share - (cents)
- Proposed final - 40,7 -
Prepared in accordance with International Accounting Standards
Currency conversion rates average for the quarter: September 2002: US$1=R10,39
(June 2002: US$1=R10,43) (September 2001: US$1 = R8,41)
* Calculated on weighted number of shares in issue at quarter end September
2002: 172,6 million (June 2002: 165,1 million) (September 2001: 145,1 million)
** Calculated on weighted average number of diluted shares in issue at quarter
end September 2002: 175,6 million (June 2002: 170,1 million) (September 2001:
145,1 million)
Abridged balance sheet (Unaudited) (US$)
At At At
30 Sept 30 June 30 Sept
2002 2002 2001
US$ million US$ million US$ million
Employment of capital
Mining assets after 898 908 652
amortisation
Investments 108 104 29
Net current liabilities (57) (42) (20)
(excluding cash)
Current investments
- AurionGold - 95 48
- Placer Dome 71 - -
Cash 155 139 146
Total assets 1 174 1 204 856
Capital employed
Shareholders` equity 747 766 549
Loans 199 201 147
Preference shares - - 1
Long-term provisions 69 69 52
Unrealised hedging loss 81 93 61
Deferred tax 78 74 46
Total equity and 1 174 1 204 856
liabilities
Prepared in accordance with International Accounting Standards.
Issued share capital: 174,4 million ordinary shares of 50 cents each.
(June 2002: 169,2 million) (September 2001: 145,1 million)
Currency converted at closing rate: September 2002: US$1 = R10,51
(June 2002: US$1 = R10,39) (September 2001: US$1 = R8,41).
Condensed statement of changes in shareholders` equity (Unaudited)
At At At At
30 Sept 30 Sept 30 Sept 30 Sept
2002 2001 2002 2001
R million R million US$ million US$ million
Balance as at the
beginning of the
financial year 7 963 4 594 758 546
Currency
translation
adjustment
and other (10) (80) (1) (9)
Issue of share 210 13 20 2
capital
Net earnings 426 93 41 11
Dividends paid (741) - (71) -
Balance as at the 7 848 4 621 747 549
end of September
Prepared in accordance with International Accounting Standards.
Group commodity, currency, interest and lease rate contracts at 30 September
2002
Normal sale contracts Maturity schedule for the years
AUS Dollar (A$) Gold 2003 2004 2005 2006
Forward sales
agreements
Ounces*1 327 648 229 000 225 000 145 500
A$/ounce 515 522 523 525
Variable price sales
contracts
(with `caps`)*2
Ounces 45 307 175 500 130 000 40 000
A$/ounce 551 544 512 552
Variable price sales
contracts with
(`floors`)*3
Ounces 24 750 - - -
A$/ounce 500 - - -
Total 397 705 404 500 355 000 185 500
AUS Dollar (A$) Gold 2007 2008 2009 Total
Forward sales agreements
Ounces*1 147 000 100 000 100 000 1 27
4 148
A$/ounce 515 518 518 519
Variable price sales
contracts
(with `caps`)*2
Ounces - - - 390 807
A$/ounce - - - 535
Variable price sales
contracts with
(`floors`)*3
Ounces - - - 24 750
A$/ounce - - - 500
Total 147 000 100 000 100 000 1 689 705
*1 The Group must deliver into these agreements at the prices indicated.
*2 The Group must deliver its production into these agreements subject to the
capped price indicated in the table above.
*3 The Group must deliver its production into these agreements subject to the
floor price indicated in the table above.
These contracts are treated as normal purchase, normal sale contracts. The mark-
to-market of these contracts was a negative R1,156 million (US$106 million) as
at 30 September 2002, based on the independent valuations. The value was based
on a gold price of US$322 (A$593) per ounce, exchange rates of US$/R10,58 and
A$/US$0,54 and prevailing market interest rates.
Foreign currency
The Group has a US$45 million forward sales agreements at an average of
US$/R11,20 maturing over the remaining portion of the calendar year.
The mark-to-market value of the transaction making up the positions was a
positive R35 million (US$3 million) as at 30 September 2002, the value was based
on an exchange rate of US$/R10,58 and the prevailing interest rates and
volatilities at the time.
Interest rate swaps
The Group has interest rate swap agreements to convert R600 million of its R1,2
billion fixed rate bond to variable rate debt. The interest rate swap runs over
the term of the bond, interest is received at a fixed rate of 13% and the
company pays a floating rate based on JIBAR plus a spread ranging from 1,8% to
2,2%.
The mark-to-market value of the transaction making up the positions was a
negative R15 million (US$1 million) as at 30 September 2002, the value was based
on an exchange rate of US$/R10,58 and the prevailing interest rates and
volatilities at the time.
Gold lease rates
The Group holds certain gold lease rate swaps, of which the mark-to-market of
these contracts was a negative R19 million (US$2 million) as at 30 September
2002, based on valuations provided by independent treasury and risk management
experts.
Z B Swanepoel Virginia
Chief executive 18 October 2002
Development results (metric)
Channel Channel
Reef Sampled width value Gold
meters meters (cm`s) (g/t) (cmg/t)
Randfontein
VCR Reef 889 732 90 21,86 1 967
UE1A 3 140 3 023 105 9,80 1 029
E8 Reef 184 149 165 5,19 856
Kimberley Reef 689 479 195 3,59 700
All Reefs 4 902 4 383 114 10,00 1 144
Free State
Basal 2 645 2 030 84 11,10 932
Leader 854 682 184 5,58 1 027
A Reef 523 516 182 4,76 866
Middle 95 72 232 2,19 507
B Reef 539 464 47 26,89 1 264
All Reefs 4 655 3 764 114 8,55 973
Evander
Kimberley Reef 2 131 2 187 74 13,73 1 016
Elandskraal
VCR Reef 934,2 997 108 10,14 1 095
Free Gold (50%)
Basal 2 395,8 2 349 43 42,40 1 823
Beatrix 317,4 276 200 7,81 1 561
All Reefs 2 713,2 2 625 60 30,17 1 795
Development results (imperial)
Channel Channel
Reef Sampled width value Gold
feet feet (inches) (oz/t) (in.ozt)
Randfontein
VCR Reef 2 917 2 402 35 0,645 23
UE1A 10 302 9 918 41 0,293 12
E8 Reef 604 489 65 0,154 10
Kimberley Reef 2 261 1 572 77 0,104 8
All Reefs 16 083 14 380 45 0,289 13
Free State
Basal 8 678 6 660 33 0,324 11
Leader 2 802 2 238 72 0,164 12
A Reef 1 715 1 693 72 0,138 10
Middle 311 236 91 0,064 6
B Reef 1 768 1 522 19 0,764 15
All Reefs 15 272 12 349 45 0,248 11
Evander
Kimberley Reef 6 991 7 175 29 0,402 12
Elandskraal
VCR Reef 3 065 3 271 43 0,292 21
Free Gold (50%)
Basal 7 745 7 657 17 1,231 21
Beatrix 1 041 906 79 0,227 18
All Reefs 8 786 8 563 24 0,858 21
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: Melvyn Leigh
Telephone: +44 (208) 639 1001
Telefax: +44 (208) 478 2876
E-mail: mleigh@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*, S Lushaba, N Fakude
*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 QHG
ISIN
ZAE000015228
Registration number
1950/038232/06
Harmony`s 2002 Annual Report is available on our website at www.harmony.co.za
For a hard copy please contact
Corn Bobbert on
tel +27 11 684-0146 or e-mail
cbobbert@harmony.co.za.
Date: 21/10/2002 12:00:00 PM Produced by the JSE SENS Department
