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HAR - Harmony Gold Mining Company - Results for the quarter and the year ended

Release Date: 15/08/2011 08:00
Code(s): HAR
Wrap Text

HAR - Harmony Gold Mining Company - Results for the quarter and the year ended 30 June 2011 HARMONY GOLD MINING COMPANY LIMITED Incorporated in the Republic of South Africa Registration number 1950/038232/06 ("Harmony" or "Company") JSE Share code: HAR NYSE Share code: HMY ISIN: ZAE000015228 Results for the quarter and the year ended 30 June 2011 SHAREHOLDER INFORMATION Issued ordinary shares at 30 June 2011 430 084 628 Issued ordinary shares at 31 March 2011 429 807 371 Issued ordinary shares at 30 June 2010 428 654 779 Market capitalisation At 30 June 2011 (ZARm) 38 686 At 30 June 2011 (US$m) 5 724 At 31 March 2011 (ZARm) 42 676 At 31 March 2011 (US$m) 6 304 At 30 June 2010 (ZARm) 34 888 At 30 June 2010 (US$m) 4 530 Harmony ordinary share and ADR prices 12 month high (1 July 2010 to R103.25 30 June 2011) for ordinary shares 12 month low (1 July 2010 to R71.90 30 June 2011) for ordinary shares 12 month high (1 July 2010 to US$15.57 30 June 2011) for ADRs 12 month low (1 July 2010 to US$9.72 30 June 2011) for ADRs Free float Ordinary shares 100% ADR ratio 1:1 JSE Limited HAR Range for quarter (1 April to R83.29 - 30 June 2011 closing prices) R103.25 Average daily volume for the 1 546 143 quarter (1 April to 30 June 2011) shares Range for quarter (1 April to R68.65 - 30 June 2010 closing prices) R81.40 Average daily volume for the 1 918 132 quarter (1 April to 30 June 2010) shares New York Stock Exchange, Inc including other US trading HMY Range for quarter (1 April to US$12.34 - 30 June 2011 closing prices) US$15.57 Average daily volume for the 2 771 880 quarter (1 April to 30 June 2011) shares Range for quarter (1 April to US$9.04 - 30 June 2010 closing prices) US$10.57 Average daily volume for the 1 072 003 quarter (1 April to 30 June 2010) shares Key features Of the quarter... - Gold production 3% higher at 10 152 kg (326 394 ounces) - Grade remained steady - R/kg cost higher at R242 851/kg ($1 115/oz) due to increased electricity and stores costs, as well as inclusion of Target 3 - Cash operating profit 5% higher at R901m (US$133m) Of the year... - Improved safety rates - Operations in build-up showed 22% improvement in production - Improved underground grade at 4.60g/t - Net profit of R617m/US$87m (loss of R192m/US$24m in FY10) - Basic earnings per share at R1.44 (loss of 46c in FY10) - Headline earnings of R957m/US$137m (R4m in FY10) - Wafi-Golpu resource at more than 1 billion tonnes - Created financial flexibility: US$300m debt facility Financial summary for the fourth quarter and year ended 30 June 2011 Quarter Quarter Q on Q June March Variance 2011 2011 %
Gold produced (1) - kg 10 152 9 857 3 - oz 326 394 316 909 3 Cash costs - R/kg 242 851 217 802 (12) - US$/oz 1 115 970 (15)
Gold sold - kg 10 412 9 716 7 - oz 334 752 312 378 7 Gold price - R/kg 329 536 312 029 6 received - US$/oz 1 513 1 389 9 Operating - R million 901 855 5 profit - US$ million 133 122 9 Basic - SAc/s (10) 55 <(100) (loss)/earnings - USc/s (1) 8 <(100) per share* Headline profit* - Rm 130 390 (67) - US$m 19 56 (66) Headline earnings - SAc/s 30 91 (67) per share* - USc/s 4 13 (69) Exchange rate - R/US$ 6.78 6.99 (3) Year ended Year ended Y on Y June June variance
2011 2010 % Gold produced (1) - kg 40 535 44 433 (9) - oz 1 303 228 1 428 545 (9) Cash costs - R/kg 226 667 195 162 (16) - US$/oz 1 009 801 (26) Gold sold - kg 41 043 43 969 (7) - oz 1 319 563 1 413 633 (7) Gold price - R/kg 307 875 266 009 16 received - US$/oz 1 370 1 092 25 Operating - R million 3 275 2 926 12 profit - US$ million 468 386 21 Basic - SAc/s 139 (38) >100 (loss)/earnings - USc/s 20 (5) >100 per share* Headline profit* - Rm 957 4 >100 - US$m 137 1 >100
Headline earnings - SAc/s 223 1 >100 per share* - USc/s 32 - 100 Exchange rate - R/US$ 6.99 7.58 (8) * Reported amounts include continuing operations only (1) Production statistics for Steyn 2 and Target 3 have been included. Steyn 2 is currently in a build-up phase and Target 3 was in build-up phase up to the end of March 2011. Revenue and costs are capitalised for the period that these mines are in build-up phase. Revenue capitalised includes: Quarter ending June 2011 Steyn 2, 27 kg (Mar 2011 - 14 kg) and Target 3, 0 kg (Mar 2011 - 250 kg), year ended June 2011 Steyn 2, 90 kg (June 2010 - 33 kg) and Target 3, 531 kg (June 2010 - 117 kg). Harmony`s Annual Report, Notice of Annual General Meeting, its Sustainable Development Report and its annual report filed on a Form 20F with the United States` Securities and Exchange Commission for the year ended 30 June 2010 are available on our website (www.harmony.co.za). Forward-looking statements This quarterly report contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 with respect to Harmony`s financial condition, results of operations, business strategies, operating efficiencies, competitive positions, growth opportunities for existing services, plans and objectives of management, markets for stock and other matters. Statements in this quarter that are not historical facts are "forward- looking statements" for the purpose of the safe harbour provided by Section 21E of the U.S. Securities Exchange Act of 1934, as amended, and Section 27A of the U.S. Securities Act of 1933, as amended. Forward-looking statements are statements that are not historical facts. These statements include financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, products and services, and statements regarding future performance. Forward-looking statements are generally identified by the words "expect", "anticipates", "believes", "intends", "estimates" and similar expressions. These statements are only predictions. All forward-looking statements involve a number of risks, uncertainties and other factors and we cannot assure you that such statements will prove to be correct. Risks, uncertainties and other factors could cause actual events or results to differ from those expressed or implied by the forward-looking statements. These forward-looking statements, including, among others, those relating to the future business prospects, revenues and income of Harmony, wherever they may occur in this quarterly report and the exhibits to this quarterly report, are necessarily estimates reflecting the best judgment of the senior management of Harmony and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. As a consequence, these forward-looking statements should be considered in light of various important factors, including those set forth in this quarterly report. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include, without limitation: - overall economic and business conditions in the countries in which we operate; - the ability to achieve anticipated efficiencies and other cost savings in connection with past and future acquisitions; - increases or decreases in the market price of gold; - the occurrence of hazards associated with underground and surface gold mining; - the occurrence of labour disruptions; - availability, terms and deployment of capital; - changes in government regulation, particularly mining rights and environmental regulations; - fluctuations in exchange rates; - currency devaluations and other macro- economic monetary policies; and - socio-economic instability in the countries in which we operate. Chief Executive`s Review With another financial year that has drawn to a close, it is important to take stock of what we have achieved and to assess the progress made against our ambition to create a company capable of generating earnings that fund growth and dividends on a sustainable basis. During financial year 2011, we: - commissioned excellent gold mines in South Africa and Papua New Guinea (PNG); - expanded the world class Wafi-Golpu resource to 9 million tonnes (Mt) of copper and 26.6 million ounces (Moz) of gold (100%); - increased production from growth projects by 22% year on year; - tailored each mine`s business plans to its unique requirements; - pro-actively addressed industry challenges; - improved production and productivity at most of our mines, and continue to work at replicating that level of success across the board; - increased Harmony`s exploration exposure in PNG - a country with world class exploration potential - to 8000 kmSquared; - improved the quality of our asset portfolio through the disposal and closure of non-core assets; - celebrated Harmony`s 60th year in operation on 25 August 2010. We made good progress in getting the company where we want it to be - producing better quality ounces. Hidden Valley in PNG is now an operating mine, Harmony`s first greenfields offshore development, which was formally opened in September 2010; in South Africa we have Kusasalethu, Doornkop and Phakisa projects, all of which are in build-up, and Tshepong and Masimong which have been steady contributors to production. We dealt with the challenges at mines such as Evander, Target and Joel to ensure these mines are positioned to deliver on their production targets. Harmony has invested a great deal in the expansion of its production base in South Africa and PNG. The investment in exploration continues to pay dividends, with the Wafi-Golpu resource showing a phenomenal 57% increase to over 1 billion tonnes during the year. Golpu`s grade is over 1% copper, confirming it is one of the highest grade copper gold porphyry systems in South East Asia. These excellent results validate our long-held belief that PNG is a game-changing region for Harmony. On a 100% basis, Golpu alone now hosts a resource of 869Mt, containing 19.3Moz of gold and 9.0Mt of copper (62Moz on a gold equivalent (note 1) basis). This represents a significant year-on-year increase, with an additional 368Mt (73% increase), comprising 8 956kt copper (88% increase) and 10.5Moz ounces of gold (119% increase). Our resource base in PNG now represent 10% of Harmony`s total gold resources (or 21% of the resource on a gold equivalent basis), which is in line with the Company`s strategy to increase its geographic diversification. Annual production was lower than planned at 1.3Moz, largely due to safety stoppages and under-performance at some of the shafts. We continue to improve the business planning process, using benchmarks and targets we believe to be realistic. Our `life of mine` plans support our commitment to improving the grades from our underground operations, lowering our cost base and benchmarking our costing parameters internally across our operations as well as externally against other gold producers. Our focus remains on producing safe, profitable ounces and our operations in build-up will add to our production in future. Safety Tragically, three employees (South Africa) and one contractor (PNG) lost their lives during the final quarter of the financial year. The deceased were Mbuzeni Sihoyiya, a locomotive guard at Kusasalethu, Michael Sello Matea, underground assistant at Joel, Mbuyiseli Malungisa, a locomotive guard at Masimong and Kerry Kowitz, a contractor working on the Wafi-Golpu access road. I would like to extend my deepest condolences to their families, friends and colleagues. Safety is a top priority at Harmony. We have put in place a number of safety initiatives, which have resulted in excellent safety achievements. Fatalities do, however, continue to occur. As a result, we appointed Alwyn Pretorius (previously the chief operating officer: North region), who is very familiar with Harmony`s underground working environment, to assist in further improving and accelerating the execution of our safety and health strategy. Gold price Increasing global economic uncertainty is making gold an even stronger investment option than it already was. At over $1 700/oz, gold remains a currency and we believe the gold price will continue its strength. Investors in Harmony have complete exposure to the spot gold price, as the company does not hedge its gold. During the past quarter the gold price received strengthened from R312 029/kg to R329 536/kg. Operational results Quarter on quarter Gold production for the June 2011 quarter is 3% higher than the previous quarter, despite days lost to public holidays. The past quarter saw excellent improvements in development metres, mainly at the build-up operations. Build-up at Phakisa, Doornkop, Kusasalethu and Hidden Valley progressed well. Grade remained steady at 2.08g/t. Year on year Tonnes milled for the year under review increased by 7% or 1 317 000 tonnes when compared to the previous financial year. The main contributors were: - Doornkop: The build-up resulted in an additional 178 000 tonnes (33%) being milled for the year under review; - Target 3: The inclusion of its first commercial production during the June 2011 quarter (75 000 tonnes); - Free State surface operations: Tonnes increased by 1.2 million tonnes, mainly waste rock dumps; - Hidden Valley: Recorded a full year of production and tonnes milled increased by 1.4 million tonnes to 1.7 million tonnes, achieving its production guidance for the year. The operations in build-up showed an increase in gold production. Hidden Valley produced 3 118kg, an additional 1 215kg (64%) in comparison to the 1 903kg it produced in the previous financial year. Doornkop`s production increased by 562kg (29%), Phakisa`s by 391kg (29%) and Kusasalethu`s by 165kg (3%). Gold production for the year under review decreased by 9% (3 898kg), mainly as a result of the shafts that were closed in the 2011 financial year. Closed shafts accounted for a decrease in gold produced of 4 092kg year on year. Underground grade increased year-on-year to 4.60g/t. Financial overview Quarter on quarter Quarter on quarter, cash operating costs in R/kg terms were 12% higher, mainly due to higher electricity and stores costs, as well as the inclusion of Target 3 (which reached commercial production during the quarter) in our operating results. Higher stores costs are due to additional maintenance performed during public holidays. Electricity costs are higher due to a 25% increase in tariffs as from April 2011 and the inclusion of one month`s winter tariff. Operating profit at R901 million was 5% higher, mainly due to the increase in the average Rand gold price received to R329 536/kg. Year on year Cash operating costs in Rand terms increased by R686 million or 8%, mainly due to restructuring costs, the inclusion of Target 3, higher electricity costs and higher labour costs. This resulted in the cash operating cost in R/kg terms increasing by 16% from R195 162/kg in FY10 to R226 667/kg in FY11. Rand per tonne unit costs remained stable at R469/tonnes. Capital expenditure for FY11 decreased by R317 million (10%) compared to the previous financial year. This is mainly attributed to a reduction in capital spent on Hidden Valley of 47% or R252 million. Capital from the South African operations decreased by R65 million (2%), due to reduced expenditure at Phakisa (R117 million), Doornkop (R50 million) and Kusasalethu (R50 million). Reserves and resources As at 30 June 2011, Harmony`s mineral reserves amounted to 41.6Moz of gold, spread across Harmony`s assets in South Africa and PNG. The reserves of Kusasalethu, Doornkop, Tshepong and Phakisa in South Africa and Hidden Valley in PNG now constitute 45% of Harmony`s total mineral reserves. Once the pre- feasibility study of Wafi-Golpu has been completed, more ounces from PNG will be added to Harmony`s reserves. The reserve declaration excludes Rand Uranium reserves (the asset which is being held for sale), as well as some Evander projects which are no longer included in Harmony`s long term mining plans. These exclusions, together with mine depletion, resulted in a decrease of 6.5Moz year on year, allowing Harmony to refocus on growing, developing and operating its portfolio of quality assets. As at 30 June 2011 Harmony`s attributable gold mineral resources were 163.9Moz. Gold resources in PNG increased 51% year on year to 16.3Moz and now comprise 10% of the group`s total resource base. Harmony`s PNG resource inventory also includes economically significant copper, molybdenum and silver that co-occur with gold. Attributable copper resources grew by 2.1Mt to 4.5Mt, up 86% year on year (and equates to 9.75Moz on a gold equivalent basis (note 1)). Molybdenum increased to 84 000 tonnes (up 50%) and silver increased to 55.16Moz (up 7.8%). These increases were driven by resource expansions at Hidden Valley and Wafi- Golpu. Creating financial flexibility Harmony has strengthened its financial flexibility through obtaining a 4 year US$300 million revolving credit facility with Nedbank Limited and FirstRand Bank Limited. The loan agreement was signed on 11 August 2011. This facility is specifically ear-marked for Harmony`s activities in PNG. Dividend We are pleased to declare a dividend of 60 SA cents per ordinary share for the year ended 30 June 2011. Looking ahead Post year-end, following a five day strike, Harmony signed a two year wage agreement with the National Union of Mineworkers (NUM), Solidarity and UASA (collectively referred to as the "Unions") on the 2nd of August 2011. The increase in wages will be off-set by improvements in productivity aimed at the more effective utilization of our mining assets. Approximately 500kg of production was lost due to the strike. The wage agreement between Harmony and the Unions also includes a profit share scheme in which all employees in the bargaining unit will share on a quarterly basis. The profit share will be based on 1% of operating profits less capital expenditure from the company`s South African assets. We look forward to having the Unions as our partners in creating a sustainable mining industry. Financial year 2011 was filled with great achievements. We have improved our safety rates, secured excellent exploration results, continue to build up our operations and future production potential and certain operations have generated free operational cash flow. Financial year 2012 promises to be equally exciting. We remain focussed on continuing to deliver on our long term targets and to maximise shareholder value. Graham Briggs Chief Executive Officer Note 1. Gold equivalent ounces are calculated assuming a US$1150/oz Au, US$2.50/lb Cu and US$13.50/oz Ag with 100% recovery for all metals Safety and health Safety The provision of safe and healthy working places remains a key priority for Harmony, as does the elimination of all workplace injuries and work-related ill health effects. This has always been an important area of focus for Harmony. Harmony will continue to implement and maintain safety initiatives and is in the process of rolling out a new improved fall of ground strategy to further reduce fall of ground incidents - one of the main contributors to fatal accidents. It is with deep regret that we report four fatalities during the June 2011 quarter, bringing total fatalities for the 2011 financial year to 16. This is an improvement on the previous financial year, which recorded 22 fatalities. However, we need to continue to work towards avoiding these incidents altogether. Harmony`s Lost Time Injury Frequency Rate (LTIFR) in South Africa remains a single digit, for the eleventh consecutive quarter. Quarter on quarter the LTIFR rate regressed from 8.65 to 9.64, whilst LTIFR also regressed with 8% to 8.32 when compared to the previous year. The Reportable Injury Frequency Rate (RIFR) (per million hours worked) in South Africa regressed by 13% when compared to the previous year (from 4.19 to 4.73) and by 17% quarter-on-quarter (from 4.62 to 5.39). The Fatal Injury Frequency Rate (FIFR) improved by 19% when compared to the previous year, but regressed by 44% quarter-on- quarter (from 0.09 to 0.13) Safety achievements for the quarter included: South African underground operations: 1 000 000 fatality free shifts Doornkop shaft operations: 1 000 000 fatality free shifts Doornkop total operations: 1 000 000 fatality free shifts Phakisa: 500 000 fatality free shifts Target: 500 000 fatality free shifts Ongoing behavioural-based safety, competency training and development and research, together with the vigilant co-operation of our stakeholders, will continue to enable Harmony to become an even safer company to work for. Health Our pro-active approach to the health and wellness of our employees continues. Various programmes and initiatives are supported and sponsored by the company to ensure the wellbeing of our employees. Our objective remains to improve health management programs and effectively utilise clinical information. This includes the review of policies, procedures, and processes, as well as training, on an ongoing basis. See our Sustainable Development Report for more details on our website www.harmony.co.za. Financial overview Quarter on quarter Cash operating profits increased by 5% quarter on quarter to R901 million, mainly due to an increase in revenue driven by the 6% increase in the R/kg gold price received. The increase in revenue was offset by an 18% increase in production cost. Earnings per share Basic earnings per share decreased from 55 SA cents to a loss of 10 SA cents per share. Headline earnings per share decreased from 91 SA cents to 30 SA cents. Headline earnings have been adjusted for the impairment of assets as well as the reversal of the impairment of investment in associate. Revenue Revenue increased from R2 949 million to R3 422 million, or 16%, mainly due to the 6% increase in the rand gold price received to R329 536/kg. The increase of gold sold by 7% or 696kg, together with the inclusion of the results of Target 3, also contributed to the higher revenue total for the June 2011 quarter. Cost of sales Cost of sales increased from R2 623 million to R3 491 million in the June 2011 quarter. The main reasons for this increase are: - higher production costs, driven by higher electricity costs which include the annual increase by Eskom as well as one month`s winter tariff (R115 million increase); increased labour costs of R67 million as a result of an increase in employees due to the build-up at certain shafts; an increase in stores cost due to higher production. Also contributing to the increase is the inclusion of costs related to Target 3, amounting to R93 million for the June 2011 quarter. - an increase in amortisation and depreciation from R431 million in the March 2011 quarter to R477 million. This increase relates primarily to an increase in tonnes mined at several shafts as well as depreciation commencing at Target 3 as it was brought into commercial production; - impairment of assets amounting to R264 million. The impairments relate to President Steyn 1 and 2 shafts (R99 million and R103 million respectively) and St Helena (R61 million of which R9 million relates to goodwill); - the annual adjustment on the rehabilitation provision amounting to R61 million; - annual assessments of gold inventory balances resulting in write downs for Steyn Plant (R41 million) and Target stockpile (R30 million) and an adjustment on the gold in lock-up (R21 million). Exploration expenditure During the June 2011 quarter, R102 million was spent on exploration. Of the amount spent during the quarter, R90 million relates to the PNG projects. The expenditure for the March 2011 quarter was R77 million, R68 million of which related to PNG. The increase quarter on quarter relates primarily to the pre-feasibility study being conducted at Wafi-Golpu. Reversal of impairment/(impairment) of investment in associate This movement relates to the limiting of costs relating to the Rand Uranium transaction as well as some foreign exchange movements. Net gain on financial instruments The movement for the June 2011 quarter comprises of the changes in fair value of the Nedbank Equity Linked Deposits held by the environmental trusts. Investment income Investment income for the June 2011 quarter was R24 million. This was a R40 million decrease quarter-on-quarter as the March 2011 quarter included amounts related to the successful appeal against interest levied by SARS as well as interest on outstanding diesel refunds, which were not repeated in the current quarter. Finance cost Finance cost increased by R18 million quarter-on-quarter. This was mainly due to the draw-down of additional funds from the Nedbank facility during the previous quarter. Taxation The deferred taxation credit for the June 2011 quarter of R195 million credit consists mainly of credits relating to the change in the Life-of-Mine rates, amounting to R119 million, as well as additional temporary differences. Capital expenditure Capital expenditure increased from R667 million to R788 million in the June 2011 quarter, as expected. Borrowings The long term portion of borrowings decreased from R1 487 million to R1 229 million in the June 2011 quarter as a result of the net repayment of R100 million on the Revolving Credit Facility and the instalment payments on the term facilities of R153 million. Year on year Cash operating profits increased by 12% to R3 275 million for 2011. This was mainly due to an increase in revenue driven by the 16% increase in the rand/kilogram gold price. Earnings per share Basic earnings per share increased from a loss of 46 SA cents to earnings of 144 SA cents per share. Headline earnings per share also increased from a loss of 7 SA cents to earnings of 223 SA cents. Revenue Revenue increased from R11 284 million to R12 445 million, or 10%, mainly due to the 16% increase in the rand gold price received to R307 875/kg. This increase was offset by the 7% decrease in gold sold. Cost of sales Cost of sales increased from R10 484 million to R11 615 million for 2011. This is mainly due to increases in production costs (driven by increased labour, electricity and stores costs) and amortisation and depreciation. Exploration expenditure During 2011, R353 million was spent on exploration with R296 million for PNG. The exploration expense in the income statement for 2010 was R219 million, with R165 million being spent in PNG. Net gain on financial instruments The movement in net gain on financial instruments for 2011 was R414 million, which includes R273 million recognised on the Witsgold transaction. The balance of the total relates to the changes in fair value of the Nedbank Equity Linked Deposits held by the Environmental Trusts. Taxation The deferred taxation credit for the year amounted to R492 million of which approximately R363 million relates to the change in the Freegold unredeemed capital allowance. The 2010 deferred tax charge of R251 million primarily related to increases in average deferred tax rates, notably at Evander. Notice of cash dividend Dividend No. 82 of 60 cents per ordinary share, being the dividend for the year ended 30 June 2011, has been declared payable on Monday, 19 September 2011 to those shareholders recorded in the books of the company at the close of business on Friday, 16 September 2011. The dividend is declared in the currency of the Republic of South Africa. 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 Friday, 9 September 2011. Last date to trade ordinary shares cum dividend Friday, 9 September 2011 Ordinary shares trade ex dividend Monday, 12 September 2011 Currency conversion date in respect of the UK own name shareholders Monday, 12 September 2011 Record date Friday, 16 September 2011 Payment date Monday, 19 September 2011 No dematerialisation or rematerialisation of share certificates may occur between Monday, 12 September 2011 and Friday, 16 September 2011, both dates inclusive, nor may any transfers between registers take place during this period. CONDENSED CONSOLIDATED INCOME STATEMENTS (Rand) Quarter ended
30 June 31 March 30 June 2011 2011 2010 (Unaudited) (Unaudited) (Unaudited) Note R million R million R million
Continuing operations Revenue 3 422 2 949 3 045 Cost of sales 2 (3 491) (2 623) (2 649) Production costs (2 508) (2 064) (2 075) Royalty expense (13) (30) (28) Amortisation and depreciation (477) (431) (383) Impairment of assets (264) - (30) Employment termination and restructuring costs - (26) (82) Other items (229) (72) (51) Gross (loss)/profit (69) 326 396 Corporate, administration and other expenditure (71) (93) (124) Social investment expenditure (18) (27) (28) Exploration expenditure 3 (102) (77) (60) Profit on sale of property, plant and equipment 5 8 101 Other income/(expenses) - net 33 (8) 40 Operating (loss)/profit (222) 129 325 (Loss)/profit from associates - (24) (7) Reversal of impairment/ (impairment) of investment in associate 6 18 (160) - Loss on sale of investment in subsidiary - - - Net gain on financial instruments 4 22 3 11 Investment income 24 64 25 Finance cost (89) (71) (94) (Loss)/profit before taxation (247) (59) 260 Taxation 205 297 (227) Normal taxation 10 (12) (20) Deferred taxation 5 195 309 (207) Net (loss)/profit from continuing operations (42) 238 33 Discontinued operations (Loss)/profit from discontinued operations 6 - - (20) Net (loss)/profit (42) 238 13 Attributable to: Owners of the parent (42) 238 13 Non-controlling interest - - - (Loss)/earnings per ordinary share (cents) 7 - (Loss)/earnings from continuing operations (10) 55 8 - (Loss)/earnings from discontinued operations - - (5) Total (loss)/earnings per ordinary share (cents) (10) 55 3 Diluted (loss)/earnings per ordinary share (cents) 7 - (Loss)/earnings from continuing operations (10) 55 8 - (Loss)/earnings from discontinued operations - - (5) Total diluted(loss)/earnings per ordinary share (cents) (10) 55 3 Year ended 30 June 30 June 2011 2010 (Audited)
R million R million Continuing operations Revenue 12 445 11 284 Cost of sales (11 615) (10 484) Production costs (9 074) (8 325) Royalty expense (96) (33) Amortisation and depreciation (1 776) (1 375) Impairment of assets (264) (331) Employment termination and restructuring costs (158) (205) Other items (247) (215) Gross (loss)/profit 830 800 Corporate, administration and other expenditure (354) (382) Social investment expenditure (84) (81) Exploration expenditure (353) (219) Profit on sale of property, plant and equipment 29 104 Other income/(expenses) - net (24) (58) Operating (loss)/profit 44 164 (Loss)/profit from associates (51) 56 Reversal of impairment/ (impairment) of investment in associate (142) - Loss on sale of investment in subsidiary - (24) Net gain on financial instruments 414 38 Investment income 140 187 Finance cost (288) (246) (Loss)/profit before taxation 117 175 Taxation 480 (335) Normal taxation (12) (84) Deferred taxation 492 (251) Net (loss)/profit from continuing operations 597 (160) Discontinued operations (Loss)/profit from discontinued operations 20 (32) Net (loss)/profit 617 (192) Attributable to: Owners of the parent 617 (192) Non-controlling interest - - (Loss)/earnings per ordinary share (cents) - (Loss)/earnings from continuing operations 139 (38) - (Loss)/earnings from discontinued operations 5 (8) Total (loss)/earnings per ordinary share (cents) 144 (46) Diluted (loss)/earnings per ordinary share (cents) - (Loss)/earnings from continuing operations 139 (38) - (Loss)/earnings from discontinued operations 5 (8) Total diluted(loss)/earnings per ordinary share (cents) 144 (46) The accompanying notes are an integral part of these condensed consolidated financial statements. CONDENSED CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (Rand) Quarter ended 30 June 31 March 30 June 2011 2011 2010 (Unaudited) (Unaudited) (Unaudited)
R million R million R million Net (loss)/profit for the period (42) 238 13 Other comprehensive income/(loss) for the period, net of income tax 418 6 (166) Foreign exchange translation 473 22 (161) Fair value movement of available-for-sale investments (55) (16) (5) Total comprehensive income/(loss) for the period 376 244 (153) Attributable to: Owners of the parent 376 244 (153) Non-controlling interest - - - Year ended 30 June 30 June 2011 2010
(Audited) R million R million Net (loss)/profit for the period 617 (192) Other comprehensive income/(loss) for the period, net of income tax 368 (131) Foreign exchange translation 470 (127) Fair value movement of available-for-sale investments (102) (4) Total comprehensive income/(loss) for the period 985 (323) Attributable to: Owners of the parent 985 (323) Non-controlling interest - - The accompanying notes are an integral part of these condensed consolidated financial statements. CONDENSED CONSOLIDATED BALANCE SHEETS (Rand) At At At 30 June 31 March 30 June 2011 2011 2010
(Unaudited) (Audited) Note R million R million R million ASSETS Non-current assets Property, plant and equipment 8 31 221 30 557 29 556 Intangible assets 8 2 170 2 188 2 210 Restricted cash 31 27 146 Restricted investments 1 883 1 866 1 742 Investments in financial assets 185 236 12 Investments in associates - - 385 Inventories 9 172 227 214 Trade and other receivables 23 69 75 35 685 35 170 34 340 Current assets Inventories 9 837 954 987 Trade and other receivables 1 073 1 111 932 Income and mining taxes 139 119 74 Cash and cash equivalents 693 656 770 2 742 2 840 2 763
Assets of disposal groups classified as held for sale 6 268 174 245 3 010 3 014 3 008 Total assets 38 695 38 184 37 348 EQUITY AND LIABILITIES Share capital and reserves Share capital 28 305 28 290 28 261 Other reserves 762 299 258 Retained earnings 1 093 1 135 690 30 160 29 724 29 209 Non-current liabilities Deferred tax liability 3 067 3 313 3 534 Provision for environmental rehabilitation 10 1 971 1 785 1 692 Retirement benefit obligation and other provisions 174 179 169 Borrowings 11 1 229 1 487 981 6 441 6 764 6 376 Current liabilities Borrowings 11 330 336 209 Income and mining taxes 2 17 9 Trade and other payables 12 1 746 1 343 1 410 2 078 1 696 1 628 Liabilities of disposal groups classified as held for sale 6 16 - 135 2 094 1 696 1 763 Total equity and liabilities 38 695 38 184 37 348 The accompanying notes are an integral part of these condensed consolidated financial statements. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Rand) for the year ended 30 June 2011 Share Other Retained capital reserves earnings Total R million R million R million R million Balance - 30 June 2010 28 261 258 690 29 209 Issue of shares 44 - - 44 Share-based payments - 136 - 136 Total comprehensive income for the year - 368 617 985 Dividends paid - - (214) (214) Balance as at 30 June 2011 28 305 762 1 093 30 160 Balance - 30 June 2009 28 091 339 1 095 29 525 Issue of shares 175 - - 175 Share-based payments (5) 148 - 143 Repurchase of equity interest - (98) - (98) Total comprehensive loss for the year - (131) (192) (323) Dividends paid - - (213) (213) Balance as at 30 June 2010 28 261 258 690 29 209 The statement of changes in equity for the year ended 30 June 2010 has been audited. The accompanying notes are an integral part of these condensed consolidated financial statements. CONDENSED CONSOLIDATED CASH FLOW STATEMENTS (Rand) Quarter ended
30 June 31 March 30 June 2011 2011 2010 (Unaudited) (Unaudited) (Unaudited) Note R million R million R million
Cash flow from operating activities Cash generated by operations 1 052 213 877 Interest and dividends received 24 64 32 Interest paid (35) (34) (38) Income and mining taxes (paid)/refund (19) 8 (55) Cash generated by operating activities 1 022 251 816 Cash flow from investing activities (Increase)/decrease in restricted cash (4) - - Proceeds on disposal of investment in subsidiary - - - Proceeds on disposal of available-for-sale financial assets - - 8 Prepayment for Evander 6 and Twistdraai transaction 12 100 - - Other investing activities (10) 16 (11) Net additions to property, plant and equipment (829) (687) (708) Cash utilised by investing activities (743) (671) (711) Cash flow from financing activities Borrowings raised 150 250 300 Borrowings repaid (415) (17) (106) Ordinary shares issued - net of expenses 15 13 7 Dividends paid - - - Cash (utilised)/generated by financing activities (250) 246 201 Foreign currency translation adjustments 8 (7) (17) Net increase/(decrease) in cash and cash equivalents 37 (181) 289 Cash and cash equivalents - beginning of period 656 837 481 Cash and cash equivalents - end of period 693 656 770 Year ended 30 June 30 June 2011 2010 (Audited)
R million R million Cash flow from operating activities Cash generated by operations 2 418 1 611 Interest and dividends received 140 187 Interest paid (134) (90) Income and mining taxes (paid)/refund (45) (125) Cash generated by operating activities 2 379 1 583 Cash flow from investing activities (Increase)/decrease in restricted cash 116 15 Proceeds on disposal of investment in subsidiary 229 24 Proceeds on disposal of available-for-sale financial assets 1 50 Prepayment for Evander 6 and Twistdraai transaction 100 - Other investing activities 10 (12) Net additions to property, plant and equipment (3 110) (3 493) Cash utilised by investing activities (2 654) (3 416) Cash flow from financing activities Borrowings raised 925 1 236 Borrowings repaid (546) (391) Ordinary shares issued - net of expenses 44 18 Dividends paid (214) (213) Cash (utilised)/generated by financing activities 209 650 Foreign currency translation adjustments (11) 3 Net increase/(decrease) in cash and cash equivalents (77) (1 180) Cash and cash equivalents - beginning of period 770 1 950 Cash and cash equivalents - end of period 693 770 The accompanying notes are an integral part of these condensed consolidated financial statements. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE FOURTH QUARTER AND YEAR ENDED 30 JUNE 2011 1. Accounting policies Basis of accounting The condensed consolidated financial statements for the year ended 30 June 2011 have been prepared in accordance with IAS 34, Interim Financial Reporting, JSE Listing Requirements and in the manner required by the Companies Act of South Africa. They should be read in conjunction with the annual financial statements for the year ended 30 June 2010, which have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS). The accounting policies are consistent with those described in the annual financial statements, except for the adoption of applicable revised and/or new standards issued by the International Accounting Standards Board. 2. Cost of sales Quarter ended 30 June 31 March 30 June 2011 2011 2010
(Unaudited) (Unaudited) (Unaudited) R million R million R million Production costs 2 508 2 064 2 075 Royalty expense 13 30 28 Amortisation and depreciation 477 431 383 Impairment of assets(1) 264 - 30 Rehabilitation expenditure(2) 61 4 14 Care and maintenance cost of restructured shafts 37 35 15 Employment termination and restructuring costs - 26 82 Share based payments 45 28 41 Other(3) 86 5 (19) Total cost of sales 3 491 2 623 2 649 Year ended 30 June 30 June
2011 2010 (Audited) R million R million Production costs 9 074 8 325 Royalty expense 96 33 Amortisation and depreciation 1 776 1 375 Impairment of assets(1) 264 331 Rehabilitation expenditure(2) 74 29 Care and maintenance cost of restructured shafts 124 57 Employment termination and restructuring costs 158 205 Share based payments 136 148 Other(3) (87) (19) Total cost of sales 11 615 10 484 (1) During the June 2011 quarter, an impairment of R264 million relating to President Steyn 1 and 2 shafts and St Helena was recorded. The impairments for the year ended 30 June 2010 relates mainly to the Virginia and Evander operations, which was recorded as a result of shaft closures. (2) The expense for the June 2011 quarter results from the annual re-estimation of the rehabilitation obligation. (3) Included in Other for the June 2011 quarter is R41 million for the write down of the Steyn plant demolishment project. 3. Exploration expenditure Quarter ended 30 June 31 March 30 June 2011 2011 2010
(Unaudited) (Unaudited) (Unaudited) R million R million R million Total exploration expenditure 111 87 60 Less: expenditure capitalised(1) (9) (10) - Exploration expenditure per income statement 102 77 60 Year ended 30 June 30 June
2011 2010 (Audited) R million R million Total exploration expenditure 398 219 Less: expenditure capitalised(1) (45) - Exploration expenditure per income statement 353 219 (1) Relates to Brownfields exploration at Hidden Valley 4. Net gain on financial instruments During the September 2010 quarter, a gain of R273 million was recognised on the Freegold option. This was following Harmony Gold Mining Company Limited (Harmony) entering into two transactions with Witwatersrand Consolidated Gold Resources Limited (Wits Gold), whereby Wits Gold obtains a prospecting right over Harmony`s Merriespruit South area and the option held by ARMgold/Harmony Freegold Joint Venture Company (Proprietary) Limited (Freegold), a wholly owned subsidiary of Harmony, is cancelled. The remainder of the total relates primarily to the increase in the fair value of the Nedbank Equity Linked Deposits held by the Environmental Trusts. 5. Deferred taxation The deferred taxation credit of R195 million includes credits of R119 million related to the annual re-assessment of the deferred tax rates. The deferred taxation credit of R309 million in the March 2011 quarter includes a deferred tax credit of R333 million relating to Freegold. South African Revenue Service (SARS) previously disallowed Freegold`s "post 1973 gold mine" additional capital allowance claim, and also disallowed Freegold`s application of mining ringfencing. The disputed matters were setdown to be heard in the Income Tax Court of Johannesburg on 14 March 2011, but SARS withdrew the additional capital allowance claim on 10 March 2011, conceding that the Freegold operations are entitled to claim this capital allowance. The inclusion of the capital allowance caused an increase in the deferred tax asset on the balance sheet and the resulting credit in the income statement. For additional disclosure on the mining ringfencing application refer to note 13. 6. Disposal groups classified as held for sale and discontinued operations Mount Magnet The conditions precedent for the sale of Mount Magnet were fulfilled and the transaction became effective on 20 July 2010. A total purchase consideration of R238 million was received from Ramelius Resources Limited in exchange for 100% of the issued shares of Mount Magnet. The group recognised a total profit of R104 million net of tax, before the realisation of accumulated foreign exchange losses of R84 million from other comprehensive income to the consolidated income statement. The income statement and earnings per share amounts for all comparative periods have been re-presented to disclose the operation as a discontinued operation. Investment in associate The investment in Rand Uranium has been classified as held for sale following the decision by the shareholders to sell the business. In terms of the binding offer accepted by the shareholders on 21 April 2011, the capital portion of the subordinated shareholder`s loan of R61 million due to the group will be repaid out of the sale proceeds. Where the carrying value of the investment exceeds the expected proceeds, an impairment is recognised in the income statement. An impairment of R142 million has been recognised for the 2011 year. Evander 6 and Twistdraai On 10 September 2010, Harmony concluded a sale of assets agreement with Taung Gold Limited (Taung), in which Taung acquired the Evander 6 Shaft, the related infrastructure and surface rights permits as well as a mining right over the Evander 6 and Twistdraai areas. The total purchase consideration is R225 million, which will be settled in cash when all remaining conditions precedent to the transaction have been fulfilled. In terms of an amended agreement Taung paid an amount of R100 million in April 2011. Refer to note 12 for additional disclosure. 7. (Loss)/earnings and net asset value per share (Loss)/earnings per share is calculated on the weighted average number of shares in issue for the quarter ended 30 June 2011: 430.0 million (31 March 2011: 429.5 million, 30 June 2010: 427.6 million), and the year ended 30 June 2011: 429.3 million (30 June 2010: 426.4 million). The diluted (loss)/earnings per share is calculated on weighted average number of diluted shares in issue for the quarter ended 30 June 2011: 431.4 million (31 March 2011: 430.7 million, 30 June 2010: 429.1 million), and the year ended 30 June 2011: 430.4 million (30 June 2010: 427.8 million). Quarter ended 30 June 31 March 30 June 2011 2011 2010 (Unaudited) (Unaudited) (Unaudited)
Total (loss)/earnings per share (cents): Basic (loss)/earnings (10) 55 3 Diluted (loss)/earnings (10) 55 3 Headline earnings/(loss) 30 91 (10) - from continuing operations 30 91 (6) - from discontinued operations - - (4) Diluted headline earnings/(loss) 30 91 (10) - from continuing operations 30 91 (6) - from discontinued operations - - (4) R million R million R million Reconciliation of headline earnings/(loss): Continuing operations Net (loss)/profit (42) 238 33 Adjusted for (net of tax): Profit on sale of property, plant and equipment (5) (8) (101) Taxation effect of profit on sale of property, plant and equipment 1 2 21 Net gain on financial instruments (6) (3) (4) Taxation effect of net gain on financial instruments 2 1 1 (Reversal of impairment)/impairment of investment in associate* (18) 160 - Foreign exchange loss/(gain) reclassified from other comprehensive income* - - - Loss on sale of investment in subsidiary - - - Taxation effect of loss on sale of investment in subsidiary - - - Impairment of assets 264 - 30 Taxation effect of impairment of assets (66) - (4) Headline earnings/(loss) 130 390 (24) Discontinued operations Net (loss)/profit - - (20) Adjusted for (net of tax): Profit on sale of investment in subsidiary - - - Taxation effect of profit on sale of investment in subsidiary - - - Foreign exchange loss reclassified from other comprehensive income* - - - Headline loss - - (20) Total headline earnings/(loss) 130 390 (44) Year ended 30 June 30 June 2011 2010
(Audited) Total (loss)/earnings per share (cents): Basic (loss)/earnings 144 (46) Diluted (loss)/earnings 144 (46) Headline earnings/(loss) 223 (7) - from continuing operations 223 1 - from discontinued operations - (8) Diluted headline earnings/(loss) 222 (7) - from continuing operations 222 1 - from discontinued operations - (8) R million R million
Reconciliation of headline earnings/(loss): Continuing operations Net (loss)/profit 597 (160) Adjusted for (net of tax): Profit on sale of property, plant and equipment (30) (104) Taxation effect of profit on sale of property, plant and equipment 8 22 Net gain on financial instruments (7) (7) Taxation effect of net gain on financial instruments 2 2 (Reversal of impairment)/impairment of investment in associate* 142 - Foreign exchange loss/(gain) reclassified from other comprehensive income* 47 (22) Loss on sale of investment in subsidiary - 24 Taxation effect of loss on sale of investment in subsidiary - (7) Impairment of assets 264 331 Taxation effect of impairment of assets (66) (75) Headline earnings/(loss) 957 4 Discontinued operations Net (loss)/profit 20 (32) Adjusted for (net of tax): Profit on sale of investment in subsidiary (138) (1) Taxation effect of profit on sale of investment in subsidiary 34 - Foreign exchange loss reclassified from other comprehensive income* 84 - Headline loss - (33) Total headline earnings/(loss) 957 (29) *There is no taxation effect on these items. Net asset value per share (cents) At At At
30 June 31 March 30 June 2011 2011 2010 Number of shares in issue 430 084 628 429 807 371 428 654 779 Net asset value per share (cents) 7 013 6 916 6 814 8. Property, plant and equipment and intangible assets An impairment of R264 million has been recognised at 30 June 2011 for the President Steyn 1 and 2 shafts and St Helena. R9 million of the impairment relates to goodwill, which is included in intangible assets. 9. Inventories A write down of R41 million was recorded for the Steyn plant demolishment project as well as R21 million for the net realisable value adjustment for other gold in lock-up. In addition, a write down of R30 million was recorded for certain stockpiles. 10. Provision for environmental rehabilitation An adjustment of R157 million was made to the liability following the annual re- estimation of the rehabilitation obligation. 11. Borrowings 30 June 31 March 30 June 2011 2011 2010 (Unaudited) (Audited)
R million R million R million Total long-term borrowings 1 229 1 487 981 Total current portion of borrowings 330 336 209 Total borrowings(1)(2) 1 559 1 823 1 190 (1) In December 2009, the Company entered into a loan facility with Nedbank Limited, comprising of a Term Facility of R900 million and a Revolving Credit Facility of R600 million. Interest accrues on a day to day basis over the term of the loan at a variable interest rate, which is fixed for a three month period, equal to JIBAR plus 3.5%. Interest is repayable quarterly. The Term Facility is repayable bi-annually in equal instalments of R90 million over five years. The first instalment was paid on 30 June 2010. In December 2010, the Company entered into an additional loan facility with Nedbank Limited, comprising of a Term Facility of R500 million and a Revolving Credit Facility of R250 million. Interest terms are identical to the original facility. The Term Facility is repayable bi-annually in equal instalments of R62.5 million over four years. The first instalment was paid on 30 June 2011. The terms of the original Revolving Credit Facility were amended to coincide with the repayment terms of the new Revolving Credit Facility, being payable after three years from December 2010. At 30 June 2011, R400 million (31 March 2011: R300 million, 30 June 2010: R300 million) of these facilities had not been drawn down. (2) Included in the borrowings is R51 million (31 March 2011: R58 million; June 2010: R91 million) owed to Westpac Bank Limited in terms of a finance lease agreement. The future minimum lease payments are as follows: 30 June 31 March 30 June 2011 2011 2010 (Unaudited) (Audited) R million R million R million
Due within one year 29 29 33 Due between one and five years 22 30 60 51 59 93 Future finance charges (1) (1) (2) Total future minimum lease payments 50 58 91 12. Trade and other payables Included in the balance at 30 June 2011 is an amount of R100 million paid by Taung to Harmony in terms of the amended agreement for the purchase of the Evander 6 shaft and Twistdraai areas. In terms of the amended agreement, the amount is repayable to Taung should the outstanding conditions for the transactions not be fulfilled. 13. Commitments and contingencies 30 June 31 March 30 June 2011 2011 2010 (Unaudited) (Audited) R million R million R million
Capital expenditure commitments: Contracts for capital expenditure 194 191 335 Authorised by the directors but not contracted for 1 504 2 175 1 006 1 698 2 366 1 341 This expenditure will be financed from existing resources and borrowings where necessary. Contingent liability For a detailed disclosure on contingent liabilities refer to Harmony`s annual report for the financial year ended 30 June 2010, available on the group`s website at www.harmony.co.za. In addition the following contingencies have been added or amended: (a) During March 2011, the Constitutional Court handed down judgement in the case of Mr Thembekile Mankayi v AngloGold Ashanti Limited (AGA) regarding litigation in terms of the Occupational Diseases in Mines and Works Act (ODIMWA). The judgement allows Mr Mankayi`s executor to proceed with the case in the High Court of South Africa. Harmony was named as a second defendant in the original case. Should anyone bring similar claims against Harmony in future, those claimants would need to provide evidence proving that silicosis was contracted while in the employment of the Company and that it was contracted due to negligence on the Company`s part. The link between the cause (negligence by the Company while in its employ) and the effect (the silicosis) will be an essential part of any case. It is therefore uncertain as to whether the Company will incur any costs related to silicosis claims in the future and due to the limited information available on any potential claims and the uncertainty of the outcome of these claims, no estimation can be made for the possible obligation. (b) The Court`s decision on Freegold`s appeal regarding the South African Revenue Service`s (SARS) application of mining tax ring-fencing was received on 1 August 2011 and the Court found in favour of SARS. The case was concluded in March 2011, but judgement was reserved at that time. The Company has decided to appeal the finding by the Court. Any additional income taxes payable are expected to be offset by additional deferred tax credits due to the impact this application will have on unredeemed capital. (c) On 18 April 2008, Harmony Gold Mining Company Limited was made aware that it had been named or might be named as a defendant in a lawsuit filed in the U.S. District Court in the Southern District of New York on behalf of certain purchasers and sellers of Harmony`s American Depository Receipts (ADRs) and options with regard to certain of its business practices. Harmony has retained legal counsel. During January 2009, the plaintiff filed an Amended Complaint with the United States District Court (Court). Subsequently, the Company filed a Motion to Dismiss all claims asserted in the Class Action Case. On 19 March 2010, the Court denied the Company`s application for dismissal and subsequently the Company filed a Motion for Reconsideration in which it requested the Court to reconsider its judgement. This matter was heard on 27 April 2010 and the Company`s request for reconsideration of judgement was denied. The Company has subsequent to 30 June 2011 reached a mutually acceptable settlement with the lead plaintiff. The settlement requires final approval from the Court and no assurance can be given that the settlement will ultimately be approved. 14. Subsequent events (a) Refer to note 13(b) for details on the post balance sheet date event relating to the Freegold court case. (b) On 11 August 2011, the group entered into a US$300 million Revolving Credit Facility. The facility has a term of four years and attracts interest at LIBOR plus 260 basis points. This arrangement is subject to certain conditions precedent being satisfied. The facility was jointly arranged by Nedbank Limited and Firstrand Bank Limited (acting through its Rand Merchant Bank division). (c) On 12 August 2011 the board approved a payment of dividend of 60 SA cents per share for the year ended 30 June 2011. 15. Segment report The segment report follows on page 28 and 29. 16. Reconciliation of segment information to consolidated income statements and balance sheets 30 June 30 June 2011 2010
(Audited) R million R million The "Reconciliation of segment information to consolidated income statement and balance sheet" line item in the segment report is broken down in the following elements, to give a better understanding of the differences between the income statement, balance sheet and segment report: Revenue from: Discontinued operations - - Production costs from: Discontinued operations - - Reconciliation of production profit to gross profit: Total segment revenue 12 445 11 284 Total segment production costs and royalty expense (9 170) (8 358) Production profit as per segment report 3 275 2 926 Less: discontinued operations - - 3 275 2 926 Cost of sales items other than production costs and royalty expense (2 445) (2 126) Amortisation and depreciation (1 776) (1 375) Impairment of assets (264) (331) Employment termination and restructuring costs (158) (205) Share-based payments (136) (148) Rehabilitation costs (74) (29) Care and maintenance costs of restructured shafts (124) (57) Other 87 19 Gross profit as per income statements * 830 800 Reconciliation of total segment mining assets to consolidated property, plant and equipment: Property, plant and equipment not allocated to a segment: Mining assets 871 786 Undeveloped property 5 139 5 139 Other non-mining assets 70 72 Less: Non-current assets classified as held for sale - (226) 6 080 5 771 * The reconciliation was done up to the first recognisable line item on the income statement. The reconciliation will follow the income statement after that. 17. Audit review The condensed consolidated financial statements for the year ended 30 June 2011 on pages 18 to 29 have been reviewed in accordance with the International Standards on Review Engagements 2410 - "Review of interim financial information performed by the independent Auditors of the entity" by PricewaterhouseCoopers Inc. Their unqualified review opinion is available for inspection at the company`s registered office. SEGMENT REPORT FOR THE YEAR ENDED 30 JUNE 2011 (Rand/Metric) Production Production Mining Revenue cost(1) profit assets R million R million R million R million
Continuing operations South Africa Underground Bambanani(2) 921 828 93 965 Doornkop 781 601 180 3 085 Evander 717 622 95 946 Joel 454 417 37 183 Kusasalethu 1 774 1 321 453 3 220 Masimong 1 326 756 570 899 Phakisa 551 473 78 4 317 Target(2) 1 080 815 265 2 729 Tshepong 2 007 1 172 835 3 589 Virginia 682 562 120 672 Surface All other surface operations(3) 1 176 888 288 155 Total South Africa 11 469 8 455 3 014 20 760 International Papua New Guinea 976 715 261 4 381 Total international 976 715 261 4 381 Total operations 12 445 9 170 3 275 25 141 Reconciliation of the segment information to the consolidated income statements and balance sheets (refer to note 16) - - 6 080
12 445 9 170 31 221 Capital Kilograms Tonnes expenditure(4) produced milled R million kg* t`000*
Continuing operations South Africa Underground Bambanani(2) 321 3 051 426 Doornkop 292 2 512 718 Evander 196 2 302 541 Joel 73 1 449 407 Kusasalethu 380 5 609 1 099 Masimong 178 4 280 868 Phakisa 369 1 762 387 Target(2) 439 3 981 805 Tshepong 273 6 468 1 343 Virginia 79 2 213 576 Surface All other surface operations(3) 147 3 790 10 431 Total South Africa 2 747 37 417 17 601 International Papua New Guinea 289 3 118 1 679 Total international 289 3 118 1 679 Total operations 3 036 40 535 19 280 (1) Production costs includes royalty expense. (2) Production statistics for Steyn 2 and up to March 2011 for Target 3 are included for information purposes. Steyn 2 is in build-up phase and revenue and costs are currently capitalised until commercial levels of production are reached. Target 3 had reached commercial production levels in April 2011. (3) Includes Kalgold, Phoenix, Dumps and President Steyn plant clean-up. (4) The total excludes non-operational capital expenditure of R67 million relating to Papua New Guinea. * Production statistics are not reviewed SEGMENT REPORT FOR THE YEAR ENDED 30 JUNE 2010 (Rand/Metric) Production Operating Mining Revenue cost profit assets
R million R million R million R million Continuing operations South Africa Underground Bambanani(2) 1 114 745 369 954 Doornkop 517 410 107 2 837 Evander 910 859 51 922 Joel 524 379 145 175 Kusasalethu 1 392 1 091 301 2 974 Masimong 1 277 702 575 799 Phakisa 375 326 49 4 065 Target(2) 878 664 214 2 537 Tshepong 1 823 1 147 676 3 645 Virginia 1 415 1 340 75 682 Surface All other surface operations(1) 980 632 348 127 Total South Africa 11 205 8 295 2 910 19 717 International Papua New Guinea(3) 79 63 16 3 771 Total international 79 63 16 3 771 Total continuing operations 11 284 8 358 2 926 23 488 Discontinued operations Mount Magnet - - - 226 Total discontinued operations - - - 226 Total operations 11 284 8 358 2 926 23 714 Reconciliation of the segment information to the consolidated income statement and balance sheet (refer to note 16) - - 5 771
11 284 8 358 29 485 Capital Kilograms Tonnes expenditure produced milled R million kg* t`000*
Continuing operations South Africa Underground Bambanani(2) 207 4 137 528 Doornkop 342 1 950 540 Evander 175 3 475 788 Joel 88 2 006 439 Kusasalethu 430 5 444 1 035 Masimong 177 4 840 899 Phakisa 486 1 371 339 Target(2) 382 3 539 777 Tshepong 261 6 749 1 518 Virginia 180 5 288 1 656 Surface All other surface operations(1) 84 3 731 9 140 Total South Africa 2 812 42 530 17 659 International Papua New Guinea(3) 541 1 903 304 Total international 541 1 903 304 Total continuing operations 3 353 44 433 17 963 Discontinued operations Mount Magnet - - - Total discontinued operations - - - Total operations 3 353 44 433 17 963 Notes: (1) Includes Kalgold, Phoenix, Dumps and President Steyn plant clean-up (2) Production statistics for President Steyn and Target 3 are included for information purposes. These mines are in build-up phase and revenue and costs are currently capitalised until commercial levels of production are reached. (3) Production statistics for Papua New Guinea are included for the full year for information purposes. The mine was in build-up phase until the end of April 2010, when commercial levels of production were reached. Revenue and costs up to this date were capitalised. * Production statistics are not reviewed CONTACT DETAILS HARMONY GOLD MINING COMPANY LIMITED Corporate Office Randfontein Office Park PO Box 2 Randfontein, 1760 South Africa Corner Main Reef Road and Ward Avenue Randfontein, 1759 South Africa Telephone: +27 11 411 2000 Website: http://www.harmony.co.za Directors P T Motsepe (Chairman)* G P Briggs (Chief Executive Officer) H O Meyer (Financial Director) H E Mashego (Executive Director) F F T De Buck* (Lead independent director) F Abbott*, J A Chissano*1, K V Dicks* Dr D S Lushaba*, C Markus*, M Motloba*, M Msimang*, D Noko*, C M L Savage*, A J Wilkens*, J Wetton* * Non-executive Independent 1 Mozambican Investor Relations Team Henrika Basterfield Investor Relations Officer Telephone: +27 11 411 2314 Fax: +27 11 692 3879 Mobile: +27 82 759 1775 E-mail: henrika@harmony.co.za Marian van der Walt Executive: Corporate and Investor Relations Telephone: +27 11 411 2037 Fax: +27 86 614 0999 Mobile: +27 82 888 1242 E-mail: marian@harmony.co.za Company Secretary iThemba Governance and Statutory Solutions (Pty) Ltd Annamarie van der Merwe Telephone: +27 86 111 1010 Fax: +27 86 504 1315 Mobile: +27 83 264 0328 E-mail: avdm@ithemba.co.za South African Share Transfer Secretaries Link Market Services South Africa (Proprietary) Limited (Registration number 2000/007239/07) 13th Floor, Rennie House 19 Ameshoff Street Braamfontein, 2001 PO Box 4844 Johannesburg, 2000 South Africa Telephone: +27 86 154 6572 Fax: +27 86 674 4381 United Kingdom Registrars Capita Registrars The Registry 34 Beckenham Road Bechenham Kent BR3 4TU United Kingdom Telephone: 0871 664 0300 (UK) (calls cost 10p a minute plus network extras, lines are open 8:30 am to 5:30 pm (Monday to Friday) or +44 (0) 20 8639 3399 (calls from overseas) Fax: +44 (0) 20 8639 2220 ADR Depositary BNY Mellon 101 Barclay Street New York, NY 10286 United States of America Telephone: +1888-BNY-ADRS Fax: +1 212 571 3050 Sponsor JP Morgan Equities Limited 1 Fricker Road, corner Hurlingham Road Illovo, Johannesburg, 2196 Private Bag X9936, Sandton, 2146 Telephone: +27 11 507 0300 Fax: +27 11 507 0503 Trading Symbols JSE Limited: HAR New York Stock Exchange, Inc: HMY London Stock Exchange Plc: HRM Euronext, Brussels: HMY Berlin Stock Exchange: HAM1 Registration number 1950/038232/06 Incorporated in the Republic of South Africa ISIN: ZAE000015228 Date: 15/08/2011 08:00:24 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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