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Harmony Gold Mining Company Limited - Quarterly Report
Harmony Gold Mining Company Limited
ISIN: ZAE000015228
Registration number: 1950/038232/06
Key indicators
Highlights for the quarter
Harmony/ARMgold merger concluded on 22 September 2003
Higher US Dollar gold price negates some impact of stronger South African Rand
Robustness of asset base delivers solid operational performance from all regions
Abelle Ltd - feasibility study on Morobe continues and further good exploration
results from Wafi
Crystallized strategic investments in Highland Gold and High River Gold
Proforma combined quarterly financial highlights
Sept 2003 June 2003 % Variance
Cash earnings per share
- SA cents per share 130 133 (2)
- US cents per share 18 17 1
Basic earnings per share
excluding mark to market of
financial instruments and
impairment charges
- SA cents per share 44 19 132
- US cents per share 6 2 200
Basic earnings per share
including mark to market of
financial instruments and
impairment charges
- SA cents per share (24) (134) 82
- US cents per share (3) (17) 82
Gold produced
- kg 30 145 29 959 1
- oz 969 179 963 200 1
Cash costs
- R/kg 75 319 73 480 (3)
- $/oz 316 296 (7)
The past quarter in review - operational improvements contribute to solid
performance
As predicted the South African Rand continued its strong trend against the US
Dollar. This company however proved its robustness by returning a solid
operational performance as well as effectively dealing with the impact of the
annual wage increases through productivity improvements.
Following the successful completion of the merger between Harmony and ARMgold on
22 September 2003, we are presenting the Q1/F2004 results in a pro-forma
combined format to allow for a quarter on quarter comparison.
The merged company reported increased cash operating profits up 1%, up from
R330,4 million to R332,9 million. This was achieved through a combination of a
1% increase in production as well as good management of working costs following
the granting of annual labour increases, in excess of 10%, in July 2003.
The performance of the company is highlighted in the following table:
Sept 2003 June 2003 % Variance
Production - kg 30 145 29 959 1
Production - oz 969 179 963 200 1
Revenue - R/kg 86 364 84 507 2
Revenue - US$/oz 362 340 6
Cash cost - R/kg 75 319 73 480 (3)
Cash cost - US$/oz 316 296 (7)
Exchange rate - R/US$ 7,42 7,73 (4)
For comparison purposes the contribution from both Harmony and ARMgold measured
quarter on quarter are best illustrated as follows:
September 2003 June 2003
Harmony ARMgold Total Harmony ARMgold Total
Production -
kg 22 725 7 420 30 145 21 992 7 967 29 959
Production -
oz 730 622 238 557 969 179 707 053 256 147 963 200
Cash
operating
profit
(R"million) 217,4 115,5 332,9 183,4 147,0 330,4
Whilst Harmony returned vastly improved operational results, ARMgold performed
in line with predictions following the expected reduction in output from its
Welkom/Orkney Operations.
On an operational level the merger has progressed well with the integration of
the various activities of the underlying companies. At the time of the merger it
was anticipated that savings of approximately R10,0 million per month would be
achieved. I anticipate that it will be achieved within the next three months.
Although we have reached an agreement with the labour unions on the introduction
of CONOPS (continuous operations) at our Free Gold operations, these benefits
are only expected to contribute to the performance of the company in six to nine
months time. Activities related to the introduction of CONOPS are underway at
the various Free Gold shafts and are progressing well.
Sept 2003 June 2003 % Variance
Cash earnings per share
- SA cents per share 130 133 (2)
- US cents per share 18 17 1
Basic earnings per share
excluding mark to market of
financial instruments and
impairment charges
- SA cents per share 44 19 132
- US cents per share 6 2 200
Basic earnings per share
including mark to market of
financial instruments and
impairment charges
- SA cents per share (24) (134) 82
- US cents per share (3) (17) 82
As a result of the increase in the US Dollar price of gold the negative mark to
market value of the hedge book, increased by R166 million quarter on quarter.
This hedgebook was inherited by Harmony through the acquisition of New Hampton
and Hill 50 in Australia.
When measured in cash earnings per share, earnings decreased by 2% from 133
cents per share to 130 cents per share.
RESTRUCTURING TO DEAL WITH THE STRONG SA RAND
Harmony has, over the past seven years, had to deal with the volatile cycles in
the US Dollar gold price as well as the SA Rand.
The current low R/kg gold price scenario has again presented the company with
the challenge to restructure its operations and as in the past, position itself
to deal with its changing environment. The company has demonstrated on many
occasions its ability to deal pro-actively with the adverse situations.
This restructuring exercise will see more focus being placed on the operational
and financial performance of the company without neglecting areas of growth and
marketing.
Operating and financial results (Rand/metric)
Underground production - South Africa
Free Rand- Elands-
State Evander fontein kraal
Ore milled Sep-03 1 156 538 694 491
- t"000 Jun-03 1 098 471 649 480
Gold produced Sep-03
4 850 3 015 3 391 2 641
- kg Jun-03 4 570 2 943 3 024 2 221
Yield Sep-03 4.20 5.60 4.89 5.38
- g/t Jun-03 4.16 6.25 4.66 4.63
Cash operating Sep-03 85 499 73 337 75 018 88 284
costs - R/kg Jun-03 82 587 69 873 70 037 95 752
Cash operating Sep-03 359 411 367 475
costs - R/ton Jun-03 344 437 326 443
Working revenue Sep-03 419 027 259 722 292 601 227 545
(R"000) Jun-03 380 584 243 341 249 194 182 144
Cash operating Sep-03 414 668 221 110 254 388 233 158
costs (R"000) Jun-03 377 424 205 637 211 792 212 665
Cash operating Sep-03 4 359 38 612 38 214 (5 613)
profit (R"000) Jun-03 3 160 37 704 37 402 (30 521)
Operating and financial results (Rand/metric)
Underground production - South Africa
Free ARM Sub
Gold gold Total
Ore milled Sep-03 1 254 560 4 693
- t"000 Jun-03 1 222 581 4 501
Gold produced Sep-03 7 864 3 117 24 878
- kg Jun-03 8 184 3 494 24 436
Yield Sep-03 6.27 5.56 5.30
- g/t Jun-03 6.70 6.01 5.43
Cash operating Sep-03 67 492 76 321 76 050
costs - R/kg Jun-03 64 343 73 129 73 237
Cash operating Sep-03 423 424 403
costs - R/ton Jun-03 431 440 398
Working revenue Sep-03 680 764 270 724 2 150 384
(R"000) Jun-03 707 766 302 445 2 065 474
Cash operating Sep-03 530 758 237 890 1 891 971
costs (R"000) Jun-03 526 580 255 514 1 789 612
Cash operating Sep-03 150 006 32 835 258 412
profit (R"000) Jun-03 181 186 46 931 275 862
Operating and financial results (Rand/metric)
Surface production - South Africa
Free Rand-
State Evander fontein
Ore milled Sep-03 227 47 546
- t"000 Jun-03 215 54 535
Gold produced Sep-03 133 31 141
- kg Jun-03 123 35 145
Yield Sep-03 0.59 0.66 0.26
- g/t Jun-03 0.57 0.65 0.27
Cash operating Sep-03 70 238 58 903 72 182
costs - R/kg Jun-03 76 959 59 771 65 679
Cash operating Sep-03 41 39 19
costs - R/ton Jun-03 44 39 18
Working revenue Sep-03 11 458 2 713 12 214
(R"000) Jun-03 10 254 2 905 12 118
Cash operating Sep-03 9 342 1 826 10 178
costs (R"000) Jun-03 9 466 2 092 9 524
Cash operating Sep-03 2 117 887 2 037
profit (R"000) Jun-03 788 813 2 595
Operating and financial results (Rand/metric)
Surface production - South Africa
Elands- Free Sub
kraal Gold Total
Ore milled Sep-03 296 1 102 2 218
- t"000 Jun-03 299 1 188 2 291
Gold produced Sep-03 118 742 1 165
- kg Jun-03 98 762 1 163
Yield Sep-03 0.40 0.67 0.53
- g/t Jun-03 0.33 0.64 0.51
Cash operating Sep-03 93 102 65 736 69 620
costs - R/kg Jun-03 107 224 62 094 67 847
Cash operating Sep-03 37 44 37
costs - R/ton Jun-03 35 40 34
Working revenue Sep-03 10 135 64 242 100 763
(R"000) Jun-03 8 409 66 296 99 982
Cash operating Sep-03 10 986 48 776 81 107
costs (R"000) Jun-03 10 508 47 316 78 906
Cash operating Sep-03 (851) 15 466 19 656
profit (R"000) Jun-03 (2 099) 18 980 21 077
Operating and financial results (Rand/metric)
Kalgold South
Open- Africa Australia Harmony
Cast Total Total Total
Ore milled Sep-03 367 7 278 1 316 8 594
- t"000 Jun-03 315 7 107 1 907 9 014
Gold produced Sep-03 779 26 822 3 323 30 145
- kg Jun-03 554 26 153 3 806 29 959
Yield Sep-03 2.12 3.69 2.53 3.51
- g/t Jun-03 1.76 3.68 2.00 3.32
Cash operating Sep-03 69 199 75 572 73 280 75 319
costs - R/kg Jun-03 66 711 72 859 77 747 73 480
Cash operating Sep-03 147 278 185 264
costs - R/ton Jun-03 117 268 155 244
Working Sep-03 67 227 2 318 374 285 059 2 603 433
revenue
(R"000) Jun-03 47 685 2 213 141 318 605 2 531 746
Cash operating Sep-03 53 906 2 026 985 243 511 2 270 496
costs (R"000) Jun-03 36 958 1 905 476 295 906 2 201 382
Cash operating Sep-03 13 321 291 389 41 548 332 937
profit (R"000) Jun-03 10 727 307 666 22 699 330 365
Total Operations - quarterly financial results (Rand/metric)
Quarter Quarter
ended ended
30 September 30 June
Excluding ARMgold 2003 2003
Ore milled - t"000 6 856 7 228
Gold produced - kg 22 725 21 992
Gold price received - R/kg 86 258 83 770
Cash operating costs - R/kg 76 693 75 433
R million R million
(unaudited) (reviewed)
Gold sales 1 960 1 842
Cash operating costs 1 743 1 659
Cash operating profit 217 183
Income from associates (7) 33
Amortisation (142) (140)
Impairment of mining assets - (598)
Mark to market of financial (172) 220
instruments
Rehabilitation cost (10) 30
(provision)/reversal
Employment termination costs (12) (11)
Other income - net 70 61
Interest paid (55) (86)
Corporate, marketing and new business (31) (38)
expenditure
Exploration expenditure (14) (24)
Foreign exchange losses (31) (133)
Profit before taxation (187) (503)
South African normal taxation
- Current tax (18) (28)
- Deferred tax 86 53
Net earnings (119) (478)
Earnings per share - cents *
- Basic earnings (62) (259)
- Basic earnings before impairment (62) 65
- Headline earnings (67) 44
- Fully diluted earnings ** (63) (259)
Dividends per share - cents
- Proposed final - 150
Prepared in accordance with International Financial Reporting Standards.
* Calculated on weighted number of shares in issue at
quarter end September 2003: 192.3 million
(June 2003: 184.3 million)
** Calculated on weighted average number of diluted shares in issue
at quarter end September 2003: 190.9 million
(June 2003: 184.3 million)
Reconciliation of headline earnings
Net earnings (119) (478)
Adjustments:
- Profit on sale of assets (9) (38)
- Impairment of mining assets - 598
Headline earnings (128) 82
Total Operations - proforma quarterly financial results
(Rand/metric) (unaudited)
Quarter Quarter
ended ended
30 September 30 June
Including ARMgold 2003 2003
Ore milled - t"000 8 594 9 014
Gold produced - kg 30 145 29 959
Gold price received - R/kg 86 364 84 507
Cash operating costs - R/kg 75 319 73 480
R million R million
Gold sales 2 603 2 531
Cash operating costs 2 270 2 201
Cash operating profit 333 330
Income from associates (11) 29
Amortisation (166) (140)
Impairment of mining assets - (598)
Mark to market of financial (172) 221
instruments
Rehabilitation cost (17) 30
(provision)/reversal
Employment termination costs (20) (11)
Other income - net 121 65
Interest paid (83) (86)
Corporate, marketing and new (42) (38)
business expenditure
Exploration expenditure (14) (25)
Foreign exchange losses (31) (133)
Profit before taxation (102) (356)
South African normal taxation
- Current tax (35) (28)
- Deferred tax 76 53
Net earnings (61) (331)
Earnings per share - cents *
- Basic earnings (24) (134)
- Basic earnings before impairment (24) 108
- Headline earnings (28) 92
- Fully diluted earnings ** (24) (134)
The proforma quarterly financial results are for information purposes only.
* Calculated on weighted number of shares in issue at quarter end
September 2003: 256.0 million (June 2003: 248.0 million)
** Calculated on weighted average number of diluted shares in issue
at quarter end September 2003: 254.6 million
(June 2003: 246.6 million)
Reconciliation of headline earnings
Net earnings (61) (331)
Adjustments:
- Profit on sale of assets (11) (38)
- Impairment of mining assets - 598
Headline earnings (72) 229
Abridged balance sheet (Rand)
At* At
30 September 2003 30 June 2003
R million R million
(unaudited) (audited)
Employment of capital
Mining assets after amortisation 14 729 9 969
Intangible assets 2 843 -
Investments 1 260 868
Investments in associates 2 896 1 398
Net current liabilities
(excluding cash) (1 300) (309)
Cash 2 561 1 687
Total assets 22 989 13 613
Capital employed
Shareholders" equity 15 937 8 628
Loans 2 881 2 415
Long-term provisions 840 632
Minority interest 139 120
Unrealised hedging loss 450 284
Deferred tax 2 742 1 534
Total equity and liabilities 22 989 13 613
Basis of accounting
The unaudited results for the quarter have been prepared on the International
Financial Reporting Standards (IFRS) basis. These consolidated quarterly
statements are prepared in accordance with IFRS 34, Interim Financial Reporting.
The accounting policies are consistent with those applied in the previous
financial year.
Issued share capital: 257.9 million ordinary shares of 50 cents each. (June
2003: 184.9 million shares)
* The amounts in the balance sheet have changed significantly as a result of
the inclusion of ARMgold.
Condensed statement of changes in shareholders" equity (unaudited)
At At At At
30 Sept. 30 Sept. 30 Sept. 30 Sept.
2003 2002 2003 2002
R R US$ US$
million million million million
Balance as at the beginning of the
financial year 8 628 7 963 1 240 758
Currency translation adjustment and
other (104) (10) (15) (1)
Issue of share capital 7 823 210 1 124 20
Net earnings (119) 426 (17) 41
Dividends paid (291) (741) (42) (71)
Balance as at the end of September
15 937 7 848 2 290 747
Prepared in accordance with International Financial Reporting Standards.
Abridged cashflow statements (unaudited)
3 Months 3 Months 3 Months 3 Months
ended ended ended ended
30 Sept. 30 Sept. 30 Sept. 30 Sept.
2002 2003 2003 2002
US$ million US$ million R million R million
Cash flow from
operating
84 76 activites 565 869
Cash utilised
in investing
(11) 68 activities 505 (114)
Cash utilised
in financing
(55) (26) activities (196) (570)
Translation
(2) (25) adjustment - -
Increase in
cash and
16 143 equivalents 874 185
Opening cash
139 225 and 1 687 1 441
equivalents
Closing cash
155 368 and 2 561 1 626
equivalents
Prepared in accordance with International Financial Reporting Standards.
Operating activities translated September 2003: US$1 = R7.42
at average rates of:
(September 2002: US$1 = R10.39)
Closing balances translated at September 2003: US$1 = R6.96
closing rates of :
(September 2002: US$1 = R10.51)
Date: 27/10/2003 08:00:28 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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