Wrap Text
HAR - Harmony Gold Mining Company Limited - Results for the third quarter fy12
ended 31 March 2012
Harmony Gold Mining Company Limited
("Harmony" or "Company")
Incorporated in the Republic of South Africa
Registration number 1950/038232/06
JSE Share code: HAR
NYSE Share code: HMY
ISIN: ZAE000015228
RESULTS FOR THE THIRD QUARTER FY12 ENDED 31 MARCH 2012
KEY FEATURES
* Golpu pre-feasibility study on track
* Optimising of asset portfolio continued
- sale of Rand Uranium completed
- sale agreement signed for Evander
* Gold production lower than planned
* Deferred tax credit of R652 million (US$84 million)
* ESOP launched for employees
* HEPS of 234 SA cents (30 US cents)
FINANCIAL SUMMARY FOR THE THIRD QUARTER AND NINE MONTHS
ENDED 31 MARCH 2012
*Quarter *Quarter Q-on-Q
March December Variance
2012 2011 %
Gold - kg 8 753 10 718 (18)
produced - oz 281 415 344 592 (18)
Cash costs - R/kg 293 842 249 356 (18)
- US$/oz 1 182 958 (23)
Gold sold - kg 8 559 11 000 (22)
- oz 275 177 353 658 (22)
Gold price - R/kg 419 649 438 183 (4)
received - US$/oz 1 688 1 683 -
Operating - R million 1 123 2 077 (46)
profit(1) - US$ million 145 257 (43)
Basic earnings - SAc/s 235 243 (3)
per share* - USc/s 30 30 -
Headline - Rm 1 007 1 041 (3)
earnings* - US$m 130 129 1
Headline - SAc/s 234 242 (3)
earnings - USc/s 30 30 -
per share*
Exchange rate - R/US$ 7.73 8.10 (5)
*Nine *Nine
months months
ended ended
March March Variance
2012 2011 %
Gold - kg 29 678 30 383 (2)
produced - oz 954 169 976 834 (2)
Cash costs - R/kg 267 959 221 166 (21)
- US$/oz 1 089 962 (13)
Gold sold - kg 29 507 30 631 (4)
- oz 948 671 984 811 (4)
Gold price - R/kg 418 749 300 386 39
received - US$/oz 1 703 1 324 29
Operating - R million 4 507 2 374 90
profit(1) - US$ million 590 336 76
Basic earnings - SAc/s 589 154 282
per share* - USc/s 77 22 250
Headline - Rm 2 460 826 198
earnings* - US$m 322 117 175
Headline - SAc/s 571 192 198
earnings - USc/s 75 27 178
per share*
Exchange rate - R/US$ 7.65 7.06 8
* Including discontinued operations.
(1) Operating profit is comparable to the term production profit in the
segment report in the financial statements and not to the operating profit
line in the income statement.
Shareholder information
Issued ordinary
share capital at 431 471 444
31 March 2012
Issued ordinary
share capital at 431 312 677
31 December 2011
Market capitalisation
At 31 March 2012 ZARm 35 980
At 31 March 2012 US$m 4 688
Harmony ordinary share and
ADR prices
12 month high
(1 April 2011 -
31 March 2012) R115.75
for ordinary shares
12 month low
(1 April 2011 -
31 March 2012) R82.88
for ordinary shares
12 month high
(1 April 2011 -
31 March 2012) US$15.57
for ADRs
12 month low
(1 April 2011 -
31 March 2012) US$10.70
for ADRs
Free float
Ordinary shares 100%
ADR ratio 1:1
JSE Limited HAR
Range for quarter
(1 January 2012 -
31 March 2012 R82.88 - R101.75
closing prices)
Average daily volume
for the quarter
(1 January 2012 -
31 March 2012) 1 638 216 shares
New York Stock Exchange, Inc
including other HMY
US trading
Range for quarter
(1 January 2012 -
31 March 2012 US$10.70 - US$13.31
closing prices)
Average daily volume
for the quarter
(1 January 2012 -
31 March 2012) 2 115 404 shares
Harmony`s Integrated 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 2011 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 regulations, 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.
Competent person`s declaration
Harmony reports in terms of the South African Code for the Reporting of
Exploration results, Mineral Resources and Ore Reserves (SAMREC). Harmony
employs an ore reserve manager at each of its operations who takes
responsibility for reporting mineral resources and mineral reserves at his
operation.
The mineral resources and mineral reserves in this report are based on
information compiled by the following competent persons:
Reserves and resources South Africa:
Jaco Boshoff, Pri Sci Nat, who has 16 years` relevant experience and is
registered with the South African Council for Natural Scientific Professions
(SACNASP).
Reserves and resources PNG:
Stuart Hayward for the Wafi-Golpu mineral resources, Gregory Job for the Golpu
mineral reserve, James Francis for the Hidden Valley mineral resources and
Anton Kruger for the Hidden Valley mineral reserve. Messers Job, Francis and
Kruger are corporate members of the Australian Institute of Mining and
Metallurgy and Mr Hayward is a member of the Australian Institute of
Geoscientists. All have relevant experience in the type and style of
mineralisation for which they are reporting, and are competent persons as
defined by the code.
These competent persons consent to the inclusion in the report of the matters
based on the information in the form and context in which it appears. Mr
Boshoff and Mr Job are full-time employees of Harmony Gold Mining Company
Limited and Mr Hayward is a full-time employee of Wafi-Golpu Services Limited.
Mr Francis and Mr Kruger are full-time employees of Newcrest Mining Limited
(Newcrest). Newcrest is Harmony`s joint venture partner in the Morobe Mining
Joint Venture on the Hidden Valley mine and Wafi-Golpu project.
Chief executive officer`s review
We have made excellent strides in the last couple of years in achieving our
stated strategy of creating a sustainable company that generates free cash
flow that funds dividends and growth. The March 2012 quarter has been a
difficult quarter and we have to ensure we continue to improve on all fronts -
safety, production and returns.
Gold production in the March 2012 quarter was negatively impacted by a number
of factors, some unexpected. This resulted in a reduction of gold production,
the details of which are explained below in the commentary on operational
results.
It was with great excitement that we announced the launch of Harmony`s
employee share trust in March 2012, a venture that recognises the importance
of the employees who sustain our business. Our employees are our `human gold`.
A core focus for Harmony therefore continues to be the improvement in safety
and health of our employees and some good initiatives were undertaken that
will improve this substantially going forward.
Safety
Given the high-risk nature of many of our underground operations, the safety,
health and well-being of our people is our foremost priority. As part of our
efforts to continually improve our safety, a number of audits were conducted
by an external party during the quarter to identify potential areas of
improvement in our safety strategy. Following the review, an improved safety
framework for Harmony is being developed and we expect this to be rolled out
during the next 12 months.
In the short term, a high level internal safety audit team, consisting of
mining and safety experts, has been established. The main objective of this
team is to verify conditions in the risk areas at Harmony`s operations and
establish the effectiveness of the management systems that are in place to
ensure the safety of employees. The team will also review the level of
implementation of strategic health and safety programmes and standards at all
operations.
Despite our best efforts to curb fatalities, it is with deep regret that I
report that five of our colleagues died in work-related incidents during the
quarter. Those who died were: Zanekhaya Meteawdaba (belt attendant, Doornkop),
Lefy David Ntsihlele (engineering assistant, Doornkop), Johannes Leepile and
Zukisa Mentile (both winch operators at Kusasalethu) and Lisene Phidalis
Rankopane (boilermaker aide at Bambanani West). I would like to extend my
deepest condolences to their families, friends and colleagues.
Operations that showed significant improvements in safety trends during the
quarter were Tshepong, Bambanani and Evander. In addition, Target 1, Target 3,
Kalgold, Joel, Phakisa and Masimong are fatality-free for the year to date.
Other significant safety achievements during the quarter were the following:
- Kalgold operations 2 500 000 fatality-free shifts
- Harmony One Plant 1 250 000 fatality-free shifts
- Target 1 shaft 1 000 000 fatality-free shifts
- Masimong 2 237 688 fall of ground fatality-free
shifts
- Doornkop 4 897 318 fall of ground fatality-free
shifts.
Health
Our pro-active approach to the health and wellness of our employees continue
and we are continually investing in healthcare through policies, procedures
and training, to achieve the optimal consolidated health and business solution
for employees` wellness and productivity improvement.
See our 2011 Sustainable Development Report for more details on our website
www.harmony.co.za.
Gold market
Although the gold price received decreased from R438 183/ kg in the December
2011 quarter to R419 649/ kg in the March 2012 quarter, a 4% variance, the R /
kg gold price still provides us with a strong margin. The US dollar gold price
remained fairly constant at US$1 688 /oz, marginally up from the US$1 683/oz
recorded in the December 2011 quarter. We believe that the gold price will
strengthen in the long term as the same fundamentals are
still in place and the uncertainty in the world-wide markets continues to
support a higher gold price.
As we have no control over the gold price or the strength of the rand we have
to continue to focus on factors within our control, such as safety,
productivity, production and cost control.
Operational results
Gold production decreased by 18% (1 965kg) in the March 2012 quarter to 8
753kg from 10 718kg in the December 2011 quarter. The rand per kilogram unit
cost for the March 2012 quarter increased by 18% from R249 356/ kg in the
December 2011 quarter to R293 842/kg in the quarter under review. This was due
to an 18% decrease in the gold produced.
A number of factors contributed to a weaker than expected performance during
the quarter:
- The festive season and public holiday disruptions associated with the March
2012 quarter;
- Safety stoppages;
- Shifts lost due to the one day protected strike of the Congress of South
African Trade Unions (COSATU);
- High rainfall in Papua New Guinea impacted gold production at Hidden Valley
negatively;
- The upgrade of the infrastructure at Doornkop resulted in gold production at
this shaft being 44% lower quarter on quarter (as guided in February 2012);
- Lower than expected recovered grades at most of our shafts contributed to a
13% decline in underground grade. Face grades are in line with geo -
statistical models and, apart from Bambanani and Target 3, the face grades and
shaft call factors at all the shafts improved. Belt grades, across almost all
operations, were not in line with our plans - mainly as a result of the square
metres not being blasted due to safety stoppages and high grade panels
underperforming.
Disposal of interest in Rand Uranium and Evander
Investment in Rand Uranium (Pty) Limited
The sale transaction with Gold One International Limited (Gold One) was
concluded on 6 January 2012, with the first payment of US$24 million
(R193 million) being received on that day. The outstanding amount as
at 31 March 2012 was R108 million. Subsequent to the March 2012
quarter-end, additional payments were received from Gold One in
respect of the sale.
Evander Gold Mines Limited
A sale of share and claims agreement was signed on 30 January 2012 with Pan
African Resources plc and Witwatersrand Consolidated Gold Resources Limited
(the Consortium). The disposal will be for an aggregate purchase consideration
of R1.7 billion, less certain distributions made by Evander to Harmony between
1 April 2012 and the close of the transaction.
The transaction is subject to, among others, the following conditions
precedent:
- the Consortium raising the required funding comprising of debt and /or
equity;
- each of the Consortium members obtaining the requisite shareholder approval
for the acquisition; and
- obtaining all relevant regulatory approvals.
Wafi-Golpu
Eight drilling rigs were operating by the end of the quarter. Two of which
were engaged on geotechnical assessment for the proposed decline and mine
infrastructure locations and six were engaged on further definition of the
Golpu orebody. The initial Golpu pre-feasibility report will be subject to
various internal discussions and review between Harmony and its joint venture
partner, Newcrest Mining Limited.
The study gating process with technical experts from both companies as well as
external independent reviewers for each key discipline commenced in April
2012. The outcomes of the pre-feasibility study will be shared with investors
during the September 2012 quarter.
Environmental management
Renewable energy initiatives and carbon trading
Harmony has initiated a number of energy efficiency projects which have
resulted in emission reductions for the group. In F Y11, Harmony reduced its
electricity consumption by 48.5GWh, decreasing emissions by 48 500t CO2e
(CO2e= carbon dioxide equivalents). The Company has identified many other
projects to implement. To this end, Harmony and Nedbank are in the process of
registering three projects under the clean development mechanism for carbon
trading.
The Free State rehabilitation programme
The Free State rehabilitation programme has been geared towards reducing
environmental liability, eliminating potential safety and health exposures to
both our people and society in general, as well as assisting the Free State
Province in meeting some of its socio-economic imperatives especially job
creation.
The Free State rehabilitation programme is progressing very well.
In the year to date, rehabilitation work has been per formed at the following
sites:
- Virginia 2 Shaft, its plant and hostel;
- Brand 1, 2 and 3 shafts;
- Saaiplaas plant;
- Saint Helena 2 shaft and hostel;
- Saint Helena 4 shaft;
- Saint Helena plant;
- Steyn 1 shaft; and
- Freddies 7 shaft.
These initiatives coupled with the Masimong hostel conversion project resulted
in a total reduction in our rehabilitation liabilities of R60 million. This
represents a 3% reduction of Harmony`s overall rehabilitation liability.
Other initiatives under way that will further contribute to the reduction of
the rehabilitation liability include:
- Reclaiming of waste rock dumps;
- Slimes retreatment through Saaiplaas plant which liberates a surface
footprint and results in an improved footprint on the placement dam.
Launch of Harmony`s employees share trust:
The employee share trust was successfully launched on 15 March 2012 with a lot
of excitement from organised labour representatives and employees in general.
The trust will be known as the Tlhakanelo Employee Share Trust.
Conclusion
During the next quarter we will continue to improve our safety performances
across the company to reduce stoppages. To ensure an immediate uplift in
grade, the top 10 higher grade panels at each operation will be focused on. A
standardised short interval control monitoring initiative has also been rolled
out to all the Harmony operations at the beginning of April 2012. As a result,
production performances will be monitored on a daily basis, assisting us in
identifying potential production challenges and addressing these immediately.
In addition, we will increase the discipline on clean mining.
Graham Briggs
Chief executive officer
Financial overview
Net profit
The net profit for the March 2012 quarter was R1 014 million, 3% lower than
the previous quarter. This was due to the gross profit being 62% lower at R501
million due to the lower gold production, but was offset by a deferred tax
credit of R652 million.
The net profit for the nine months ended 31 March 2012 was R2 538 million
compared to R659 million for the corresponding nine months of the previous
year. This was as a result of the significant higher gold price received for
the period of R418 749/ kg versus R300 386/kg the previous year.
Taxation
Included in the large deferred taxation credit is an amount of R605 million
related to the change in the mining tax rate formula. Prior to the change,
some of our subsidiaries were exempt from paying Secondary Tax on Companies
(STC) when declaring a dividend, but had to pay a higher mining tax rate.
With the repeal of STC and the introduction of the Dividend Tax, the higher
gold mining tax rate formula was removed. The change in the mining tax rate
affected the calculation of deferred tax, resulting in lower deferred tax
balances.
The lower statutory tax rate would result in a lower tax liability over the
life of mine and therefore a lower average deferred tax rate. Applying these
lower rates to the temporary differences balances at the beginning of the year
will result in a change in estimate of R605 million which has been credited to
the taxation line in the income statement in the quarter ended 31 March 2012.
Discontinued operations and assets and liabilities of disposal group
classified as held for sale
Evander Gold Mines Limited has been classified as a disposal group held for
sale following the signing of a sales agreement on 30 January 2012. It has
also been classified as a discontinued operation. The comparative information
in the income statement for all periods shown has been re-presented
accordingly.
Earnings per share
Total basic earnings per share for the March 2012 quarter decreased from 243
SA cents to 235 SA cents per share. Total headline earnings per share
decreased from earnings of 242 SA cents per share to 234 SA cents per share.
For the nine month period to March 2012, total headline earnings per share
amounts to 571 SA cents per share compared to 192 SA cents per share for the
corresponding period in the previous year.
Capital
Total capital expenditure for the March 2012 quarter was R767 million, a R15
million decrease in comparison to the December 2011 quarter (R782 million).
Capital expenditure at most SA operations decreased with Bambanani and Phakisa
being the exceptions. Capital at Bambanani increased by R11 million for the
backfill plant. Total capital spent at Hidden Valley increased by R29 million
and Wafi-Golpu increased by R34 million.
Deferred tax liabilities
The change in the deferred tax rates (discussed above under Taxation) resulted
in the reduction of the deferred tax liabilities.
Cash flow
The strong cash generated by operating activities for the nine months ended
March 2012 of R3.2 billion paid for capital expenditure of R2.2 billion and
reduced the net debt significantly.
Dividend Tax (DT)
The Minister of Finance announced in his budget speech in 2012 that DT will be
implemented effective 1 April 2012, at a rate of 15%. The dividend tax
replaces the current Secondary Tax on Companies (STC). While STC was payable
by the Company, the DT is normally levied on the shareholder, or the person
entitled to the benefit of the dividend.
According to the new legislation, regulated intermediaries (e.g. share
registrars and stockbrokers) will withhold the DT amount before the dividend
is paid out. All South African companies and several other bodies are exempt
from DT, while South African natural person shareholders will be liable for DT
at 15%.
Foreign investors may be eligible for a reduced rate or be able to claim
credit from taxes withheld depending on the relevant double tax treaty between
South Africa and the relevant country.
The legislation allows for credits accumulated under STC to be carried forward
and may be utilised within three years of the introduction of DT. Harmony had
STC credits amounting to R151 million at 31 March 2012 which will be available
for offset against future dividends. This means that no DT needs to be
withheld on the next R151 million of dividend paid out by the Company,
irrespective of the category of shareholder. If such a shareholder is a
resident company these credits can be passed on to their beneficial
shareholders.
CONDENSED CONSOLIDATED INCOME STATEMENTS (Rand)
Quarter ended
31 March 31 December(1) 31 March(1)
2012 2011 2011
Figures in million Note (Unaudited) (Unaudited) (Unaudited)
Continuing operations
Revenue 3 222 4 439 2 761
Cost of sales 2 (2 721) (3 116) (2 414)
Production costs (2 273) (2 558) (1 928)
Amortisation and
depreciation (431) (497) (392)
Impairment of assets - - -
Employment termination
and restructuring costs (19) (17) (26)
Other items 2 (44) (68)
Gross profit 501 1 323 347
Corporate,
administration
and other expenditure (96) (85) (84)
Social investment
expenditure (22) (14) (27)
Exploration expenditure (143) (99) (75)
Profit on sale of
property,
plant and equipment - 2 5
Other (expenses)/income -
net (5) 11 (7)
Operating profit 235 1 138 159
Loss from associates - - (24)
Reversal of
impairment/(impairment)
of investment in
associate 3 6 2 (160)
Net gain on financial
instruments 36 61 3
Gain on farm-in option - - -
Investment income 25 22 62
Finance cost (65) (80) (63)
Profit/(loss) before
taxation 237 1 143 (23)
Taxation 636 (256) 299
Normal taxation (16) (60) (5)
Deferred taxation 4 652 (196) 304
Net profit from
continuing operations 873 887 276
Discontinued operations
Profit/(loss) from
discontinued operations 3 141 159 (38)
Net profit for the period 1 014 1 046 238
Attributable to:
Owners of the parent 1 014 1 046 238
Earnings per ordinary
share (cents) 5
Earnings from
continuing operations 202 206 64
Earnings/(loss) from
discontinued operations 33 37 (9)
Total earnings 235 243 55
Diluted earnings per
ordinary share (cents) 5
Earnings from
continuing operations 202 205 64
Earnings/(loss) from
discontinued operations 32 37 (9)
Total diluted earnings 234 242 55
Nine months ended Year ended
31 March 31 March(1) 30 June(1)
2012 2011 2011
Figures in million (Unaudited) (Unaudited) (Audited)
Continuing operations
Revenue 11 235 8 443 11 596
Cost of sales (8 811) (7 473) (10 699)
Production costs (7 271) (6 144) (8 504)
Amortisation and depreciation (1 373) (1 172) (1 609)
Impairment of assets - - (264)
Employment termination and
restructuring costs (70) (136) (136)
Other items (97) (21) (186)
Gross profit 2 424 970 897
Corporate, administration
and other expenditure (261) (258) (322)
Social investment expenditure (50) (66) (82)
Exploration expenditure (339) (225) (324)
Profit on sale of property,
plant and equipment 28 22 27
Other (expenses)/income - net 24 (55) (21)
Operating profit 1 826 388 175
Loss from associates - (51) (51)
Reversal of impairment/(impairment)
of investment in associate 56 (160) (142)
Net gain on financial instruments 73 108 129
Gain on farm-in option - 273 273
Investment income 64 110 133
Finance cost (214) (185) (268)
Profit/(loss) before taxation 1 805 483 249
Taxation 323 250 387
Normal taxation (115) (26) (27)
Deferred taxation 438 276 414
Net profit from
continuing operations 2 128 733 636
Discontinued operations
Profit/(loss) from
discontinued operations 410 (74) (19)
Net profit for the period 2 538 659 617
Attributable to:
Owners of the parent 2 538 659 617
Earnings per ordinary share (cents)
Earnings from continuing operations 494 171 148
Earnings/(loss) from
discontinued operations 95 (17) (4)
Total earnings 589 154 144
Diluted earnings per
ordinary share (cents)
Earnings from continuing operations 492 171 148
Earnings/(loss) from
discontinued operations 95 (17) (4)
Total diluted earnings 587 154 144
(1) The comparative figures are re-presented due to Evander being reclassified
as a discontinued operation. See note 3 in this regard.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Rand)
Quarter ended
31 March 31 December 31 March
2012 2011 2011
Figures in million (Unaudited) (Unaudited) (Unaudited)
Net profit for the period 1 014 1 046 238
Other comprehensive
(loss)/income for the period,
net of income tax (153) 179 6
Foreign exchange translation (157) 212 22
Gain/(loss) on fair value
movement of available-for-sale
investments 4 (33) (16)
Total comprehensive income for
the period 861 1 225 244
Attributable to:
Owners of the parent 861 1 225 244
Nine months ended Year ended
31 March 31 March 30 June
2012 2011 2011
Figures in million (Unaudited) (Unaudited) (Audited)
Net profit for the period 2 538 659 617
Other comprehensive
(loss)/income for the period,
net of income tax 981 (50) 368
Foreign exchange translation 979 (3) 470
Gain/(loss) on fair value movement
of available-for-sale investments 2 (47) (102)
Total comprehensive income for the period 3 519 609 985
Attributable to:
Owners of the parent 3 519 609 985
The accompanying notes are an integral part of these condensed consolidated
financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Rand) (Unaudited)
for the nine months ended 31 March 2012
Share Other Retained
Figures in million capital reserves earnings Total
Balance - 30 June 2011 28 305 762 1 093 30 160
Issue of shares 24 - - 24
Share-based payments - 72 - 72
Net profit for the period - - 2 538 2 538
Other comprehensive income for
the period - 981 - 981
Dividends paid - - (431) (431)
Balance - 31 March 2012 28 329 1 815 3 200 33 344
Balance - 30 June 2010 28 261 258 690 29 209
Issue of shares 29 - - 29
Share-based payments - 91 - 91
Net profit for the period - - 659 659
Other comprehensive loss for the
period - (50) - (50)
Dividends paid - - (214) (214)
Balance - 31 March 2011 28 290 299 1 135 29 724
The accompanying notes are an integral part of these condensed consolidated
financial statements.
The unaudited financial statements for the nine months ended 31 March 2012
have been prepared by Harmony Gold Mining Company Limited`s corporate
reporting team headed by Mr Herman Perry. This process was supervised by the
financial director, Mr Frank Abbott and approved by the Board of Harmony Gold
Mining Company Limited. These financial statements have not been audited or
independently reviewed.
Results for the third quarter FY12
and nine months ended 31 March 2012
CONDENSED CONSOLIDATED BALANCE SHEETS (Rand)
At At
31 March 31 December
2012 2011
Figures in million Note (Unaudited)
ASSETS
Non-current assets
Property, plant and equipment 31 949 32 830
Intangible assets 2 194 2 185
Restricted cash 30 31
Restricted investments 1 808 1 929
Deferred tax assets 1 042 1 179
Investments in financial assets 187 183
Inventories 165 169
Trade and other receivables 35 28
Total non-current assets 37 410 38 534
Current assets
Inventories 1 086 990
Trade and other receivables 1 259 1 131
Income and mining taxes 142 194
Cash and cash equivalents 1 427 1 205
3 914 3 520
Assets of disposal groups classified as
held for sale 3 1 326 315
Total current assets 5 240 3 835
Total assets 42 650 42 369
EQUITY AND LIABILITIES
Share capital and reserves
Share capital 28 329 28 326
Other reserves 1 815 1 945
Retained earnings 3 200 2 359
Total equity 33 344 32 630
Non-current liabilities
Deferred tax liabilities 3 568 4 452
Provision for environmental rehabilitation 1 905 2 092
Retirement benefit obligation and other
provisions 181 177
Borrowings 6 1 277 991
Total non-current liabilities 6 931 7 712
Current liabilities
Borrowings 6 318 323
Income and mining taxes 7 3
Trade and other payables 1 543 1 684
1 868 2 010
Liabilities of disposal groups classified
as held for sale 3 507 17
Total current liabilities 2 375 2 027
Total equity and liabilities 42 650 42 369
At At
30 June 31 March
2011 2011
Figures in million (Audited) (Unaudited)
ASSETS
Non-current assets
Property, plant and equipment 31 221 30 557
Intangible assets 2 170 2 188
Restricted cash 31 27
Restricted investments 1 883 1 866
Deferred tax assets 1 149 2 310
Investments in financial assets 185 236
Inventories 172 227
Trade and other receivables 23 69
Total non-current assets 36 834 37 480
Current assets
Inventories 837 954
Trade and other receivables 1 073 1 111
Income and mining taxes 139 119
Cash and cash equivalents 693 656
2 742 2 840
Assets of disposal groups classified as held for sale 268 174
Total current assets 3 010 3 014
Total assets 39 844 40 494
EQUITY AND LIABILITIES
Share capital and reserves
Share capital 28 305 28 290
Other reserves 762 299
Retained earnings 1 093 1 135
Total equity 30 160 29 724
Non-current liabilities
Deferred tax liabilities 4 216 5 623
Provision for environmental rehabilitation 1 971 1 785
Retirement benefit obligation and other provisions 174 179
Borrowings 1 229 1 487
Total non-current liabilities 7 590 9 074
Current liabilities
Borrowings 330 336
Income and mining taxes 2 17
Trade and other payables 1 746 1 343
2 078 1 696
Liabilities of disposal groups classified as held
for sale 16 -
Total current liabilities 2 094 1 696
Total equity and liabilities 39 844 40 494
The accompanying notes are an integral part of these condensed consolidated
financial statements.
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS (Rand)
Quarter ended
31 March 31 December 31 March
2012 2011 2011
Figures in million (Unaudited) (Unaudited) (Unaudited)
Cash flow from operating
activities
Cash generated by operations 682 1 566 213
Interest and dividends received 32 12 64
Interest paid (26) (36) (34)
Income and mining taxes
refunded/(paid) 35 (149) 8
Cash generated by operating
activities 723 1 393 251
Cash flow from investing activities
Decreased in restricted cash - - -
Proceeds on disposal of
investment in subsidiary - - -
Proceeds on disposal of
investment in associate 193 - -
Proceeds on disposal of
available-for-sale financial assets - - -
Pre-payment for Evander 6
and Twistdraai transaction - - -
Other investing activities (33) 3 16
Net additions to property,
plant and equipment (740) (779) (687)
Cash utilised by investing activities (580) (776) (671)
Cash flow from financing activities
Borrowings raised 302 - 250
Borrowings repaid (17) (718) (17)
Ordinary shares issued - net of expenses 3 11 13
Dividends paid (173) - -
Cash generated/(utilised)
by financing activities 115 (707) 246
Foreign currency translation
adjustments (36) (30) (7)
Net increase/(decrease) in cash
and cash equivalents 222 (120) (181)
Cash and cash equivalents
- beginning of period 1 205 1 325 837
Cash and cash equivalents
- end of period 1 427 1 205 656
Nine months ended Year ended
31 March 31 March 30 June
2012 2011 2011
Figures in million (Unaudited) (Unaudited) (Audited)
Cash flow from operating activities
Cash generated by operations 3 340 1 366 2 418
Interest and dividends received 60 116 140
Interest paid (103) (99) (134)
Income and mining taxes
refunded/(paid) (114) (26) (45)
Cash generated by operating activities 3 183 1 357 2 379
Cash flow from investing activities
Decreased in restricted cash - 120 116
Proceeds on disposal of investment
in subsidiary - 229 229
Proceeds on disposal of investment
in associate 193 - -
Proceeds on disposal of available-for-sale
financial assets - 1 16
Pre-payment for Evander 6
and Twistdraai transaction - - 100
Other investing activities (30) 20 (5)
Net additions to property,
plant and equipment (2 187) (2 281) (3 110)
Cash utilised by investing activities (2 024) (1 911) (2 654)
Cash flow from financing activities
Borrowings raised 1 101 775 925
Borrowings repaid (1 087) (130) (546)
Ordinary shares issued - net of expenses 23 29 44
Dividends paid (431) (214) (214)
Cash generated/(utilised)
by financing activities (394) 460 209
Foreign currency translation adjustments (31) (20) (11)
Net increase/(decrease) in cash and
cash equivalents 734 (114) (77)
Cash and cash equivalents
- beginning of period 693 770 770
Cash and cash equivalents
- end of period 1 427 656 693
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Results for the third quarter FY12
and nine months ended 31 March 2012
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the period ended 31 March 2012 (Rand)
1. Accounting policies
Basis of accounting
The condensed consolidated financial statements for the nine months ended 31
March 2012 have been prepared in accordance with IAS 34, Interim Financial
Reporting, JSE Listings 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 2011, 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
31 March 31 December(1) 31 March(1)
2012 2011 2011
Figures in million (Unaudited) (Unaudited) (Unaudited)
Production costs - excluding
royalty 2 231 2 499 1 897
Royalty expense 42 59 31
Amortisation and depreciation 431 497 392
Impairment of assets - - -
Rehabilitation expenditure(2) (43) 1 5
Care and maintenance cost
of restructured shafts 20 20 32
Employment termination and
restructuring costs(3) 19 17 26
Share-based payments 21 23 26
Other - - 5
Total cost of sales 2 721 3 116 2 414
Nine months ended Year ended
31 March 31 March(1) 30 June(1)
2012 2011 2011
Figures in million (Unaudited) (Unaudited) (Audited)
Production costs - excluding royalty 7 138 6 059 8 408
Royalty expense 133 85 96
Amortisation and depreciation 1 373 1 172 1 609
Impairment of assets - - 264
Rehabilitation expenditure(2) (37) 13 43
Care and maintenance cost
of restructured shafts 69 82 117
Employment termination and
restructuring costs(3) 70 136 136
Share-based payments 66 82 125
Other (1) (156) (99)
Total cost of sales 8 811 7 473 10 699
(1) The comparative figures are re-presented due to Evander being reclassified
as a discontinued operation. See note 3 in this regard.
(2) The credit in the current quarter relates to a change in estimate on areas
where rehabilitation work has been performed.
(3) The amounts for the 2012 financial year relates to restructuring at the
Bambanani shaft.
3. Disposal groups classified as held for sale and discontinued operations
Investment in Rand Uranium
The investment in Rand Uranium (Proprietary) Limited (Rand Uranium) was
classified as held for sale in the March 2011 quarter following a decision to
sell it. The transaction with Gold One International Limited (Gold One) was
concluded on 6 January 2012, with the first payment of US$24 million (R193
million) being received on that day. The outstanding amount as at 31 March
2012 was R108 million. Subsequent to the March 2012 quarter-end, additional
payments were received from Gold One for the sale. For further information
refer to note 8.
Evander Gold Mines Limited
The assets and liabilities related to Evander Gold Mines Limited (Evander), a
wholly-owned subsidiary of Harmony Gold Mining Company Limited (Harmony), have
been classified as held for sale following signing of the sale of share and
claims agreement on 30 January 2012 with Pan African Resources plc and
Witwatersrand Consolidated Gold Resources Limited (the Consortium). The
disposal will be for an aggregate purchase consideration of R1.7 billion,
excluding the proceeds of the Taung Gold Limited transaction and less certain
distributions made by Evander to Harmony between 1 April 2012 and the close of
the transaction.
The transaction is subject to, among others, the following conditions
precedent:
- the Consortium raising the required funding comprising of debt and/or
equity;
- each of the Consortium members obtaining the requisite shareholder approval
for the acquisition; and
- obtaining all relevant regulatory approvals.
The operation also meets the requirements to be classified as a discontinued
operation. The comparative figures in the income statement have been re-
presented as a result.
4. Deferred taxation
The deferred tax for the March 2012 quarter includes a tax credit of R605
million, relating to a change in the gold mining tax rate formula in South
Africa. Previously some of our subsidiaries were exempt from paying Secondary
Tax on Companies when declaring a dividend, but had to pay a higher mining tax
rate. With the introduction of Dividend Tax, the higher gold mining tax rate
formula was repealed resulting in lower income tax and deferred tax rates. The
affected subsidiaries are Randfontein, Freegold, Evander and Kalgold.
5. Earnings and net asset value per share
Quarter ended
31 March 31 December(1) 31 March(1)
2012 2011 2011
(Unaudited) (Unaudited) (Unaudited)
Weighted average number
of shares (million) 431.3 430.5 429.5
Weighted average number
of diluted shares (million) 432.8 432.3 430.7
Total earnings per share
(cents):
Basic earnings 235 243 55
Diluted earnings 234 242 55
Headline earnings 234 242 91
- from continuing operations 201 205 100
- from discontinued operations 33 37 (9)
Diluted headline earnings 233 241 91
- from continuing operations 200 204 100
- from discontinued operations 33 37 (9)
Figures in million
Reconciliation of headline earnings:
Continuing operations
Net profit 873 887 276
Adjusted for:
(Reversal of impairment)/impairment
of investment in associate* (6) (2) 160
Foreign exchange loss reclassified
from other comprehensive income* - - -
Impairment of assets - - -
Taxation effect on impairment of assets - - -
Other adjustments - (3) (9)
Taxation effect on other adjustments (1) 1 2
Headline earnings 866 883 429
Discontinued operations
Net profit/(loss) 141 159 (38)
Adjusted for:
Profit on sale of investment
in subsidiary - - -
Taxation effect of profit on
sale of investment in subsidiary - - -
Profit on sale of property,
plant and equipment - (1) (2)
Taxation effect of profit on
sale of property, plant and equipment - - 1
Foreign exchange loss reclassified
from other comprehensive income* - - -
Headline earnings/(loss) 141 158 (39)
Total headline earnings 1 007 1 041 390
Nine months ended Year ended
31 March 31 March(1) 30 June(1)
2012 2011 2011
(Unaudited) (Unaudited) (Audited)
Weighted average number
of shares (million) 430.6 429.1 429.3
Weighted average number
of diluted shares (million) 432.2 430.2 430.4
Total earnings per share
(cents):
Basic earnings 589 154 144
Diluted earnings 587 154 144
Headline earnings 571 192 223
- from continuing operations 477 214 232
- from discontinued operations 94 (22) (9)
Diluted headline earnings 569 192 222
- from continuing operations 475 214 231
- from discontinued operations 94 (22) (9)
Figures in million
Reconciliation of headline earnings:
Continuing operations
Net profit 2 128 733 636
Adjusted for:
(Reversal of impairment)/impairment
of investment in associate* (55) 160 142
Foreign exchange loss reclassified
from other comprehensive income* - 47 47
Impairment of assets - - 264
Taxation effect on impairment of assets - - (66)
Other adjustments (28) (26) (34)
Taxation effect on other adjustments 7 7 8
Headline earnings 2 052 921 997
Discontinued operations
Net profit/(loss) 410 (74) (19)
Adjusted for:
Profit on sale of investment in subsidiary - (138) (54)
Taxation effect of profit on
sale of investment in subsidiary - 34 34
Profit on sale of property,
plant and equipment (2) (2) (2)
Taxation effect of profit on
sale of property, plant and equipment - 1 1
Foreign exchange loss reclassified
from other comprehensive income* - 84 -
Headline earnings/(loss) 408 (95) (40)
Total headline earnings 2 460 826 957
(1) The comparative figures are re-presented due to Evander being reclassified
as a discontinued operation. See note 3 in this regard.
* There is no taxation effect on these items.
Net asset value per share
At At At At
31 March 31 December 30 June 31 March
2012 2011 2011 2011
(Unaudited) (Audited) (Unaudited)
Number of shares
in issue 431 471 444 431 312 677 430 084 628 429 807 371
Net asset value
per share (cents) 7 728 7 565 7 013 6 916
6. Borrowings
The Nedbank revolving credit facility was repaid in full during the December
2011 quarter. The full R850 million facility is available until December 2013.
The balance on Nedbank term facilities at the end of March 2012 quarter is
R915 million.
In addition to the US$50 million drawn during the September 2011 quarter, a
further US$40 million of the US$300 million syndicated revolving credit
facility was drawn during the March 2012 quarter, with US$210 million still
available. The facility is repayable by August 2015 and attracts interest at
LIBOR plus 260 basis points, which is payable quarterly.
7. Commitments and contingencies
At At At At
31 March 31 December 30 June 31 March
2012 2011 2011 2011
Figures in million (Unaudited) (Audited) (Unaudited)
Capital expenditure
commitments:
Contracts for
capital expenditure 391 291 194 191
Authorised by the
directors but not
contracted for 3 032 3 373 1 504 2 175
3 423 3 664 1 698 2 366
This expenditure will be financed from existing resources and, where
appropriate, borrowings.
Contingent liability
For a detailed disclosure on contingent liabilities refer to Harmony`s annual
report for the financial year ended 30 June 2011, available on the group`s
website (www.harmony.co.za). There were no significant changes in
contingencies since 30 June 2011, except as discussed below.
Harmony reached a mutually acceptable settlement with the plaintiff class and
this settlement was found to be fair and reasonable and was approved by the
United States District Court in November 2011. A single class member has filed
an appeal of the District Court`s order approving the settlement. That appeal
is currently pending in the United States Court of Appeals for the Second
Circuit. The settlement amount has been paid into escrow by the company`s
insurers and will be distributed to the plaintiffs once the appeal has been
finalised.
8. Subsequent events
During April 2012, an amount of R86 million was received from Gold One
relating to the sale of shares in Rand Uranium. An additional R25 million is
being held in an escrow account for a period of 12 months.
9. Segment report
The segment report follows after note 10.
10. Reconciliation of segment information to consolidated income statements
Nine months ended
31 March 31 March(1)
2012 2011
Figures in million (Unaudited) (Unaudited)
The "Reconciliation of segment information to
consolidated income statement" 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
and segment report:
Reconciliation of production profit to gross profit
Total segment revenue 12 341 9 023
Total segment production costs (7 834) (6 649)
Production profit per segment report 4 507 2 374
Discontinued operations (543) (75)
Production profit from continuing operations 3 964 2 299
Cost of sales items, other than production costs
and royalty expense (1 540) (1 329)
Gross profit as per income statements * 2 424 970
(1) The comparative figures are re-presented due to Evander being reclassified
as a discontinued operation. See note 3 in this regard.
* The reconciliation was done up to the first recognisable line item on the
income statement. The reconciliation will follow the income statement after
that.
SEGMENT REPORT (Rand/Metric) (Unaudited)
for the nine months ended 31 March 2012
Production Production
Revenue cost profit/(loss)
31 March 31 March 31 March
2012 2011 2012 2011 2012 2011
R million R million R million
Continuing operations
South Africa
Underground
Bambanani 421 671 480 603 (59) 68
Doornkop 939 530 626 418 313 112
Joel 773 295 406 293 367 2
Kusasalethu 1 678 1 252 1 072 976 606 276
Masimong 1 032 1 045 635 571 397 474
Phakisa 753 390 585 337 168 53
Target 1 497 732 916 520 581 212
Tshepong 1 694 1 508 935 852 759 656
Virginia 479 539 366 451 113 88
Surface
All other surface
operations 1 074 763 678 606 396 157
Total South Africa 10 340 7 725 6 699 5 627 3 641 2 098
International
Hidden Valley 895 718 572 517 323 201
Other - - - - - -
Total international 895 718 572 517 323 201
Total continuing
operations 11 235 8 443 7 271 6 144 3 964 2 299
Discontinued
operations
Evander 1 106 580 563 505 543 75
Total discontinued
operations 1 106 580 563 505 543 75
Total operations 12 341 9 023 7 834 6 649 4 507 2 374
Reconciliation of
the segment information
to the consolidated
income statement
(refer to note 10) (1 106) (580) (563) (505)
11 235 8 443 7 271 6 144
Capital Kilograms Tonnes
expenditure produced milled
31 March 31 March 31 March
2012 2011 2012 2011 2012 2011
R million kg t`000
Continuing operations
South Africa
Underground
Bambanani 212 231 1 068 2 289 163 314
Doornkop 201 221 2 263 1 755 667 484
Joel 42 55 1 873 1 001 410 286
Kusasalethu 312 274 4 043 4 023 860 794
Masimong 166 129 2 466 3 453 702 678
Phakisa 227 276 1 800 1 290 368 281
Target 245 348 3 655 3 017 844 562
Tshepong 199 201 4 035 4 995 916 1 016
Virginia 51 63 1 134 1 793 282 470
Surface
All other surface
operations 96 93 2 569 2 581 6 997 7 640
Total South Africa 1 751 1 891 24 906 26 197 12 209 12 525
International
Hidden Valley 175 212 2 098 2 292 1 307 1 259
Other 192 - - - - -
Total international 367 212 2 098 2 292 1 307 1 259
Total continuing
operations 2 118 2 103 27 004 28 489 13 516 13 784
Discontinued
operations
Evander 131 146 2 674 1 894 491 635
Total discontinued
operations 131 146 2 674 1 894 491 635
Total operations 2 249 2 249 29 678 30 383 14 007 14 419
Reconciliation of the segment information to
the consolidated income statement (refer to note 10)
CONTACT DETAILS
Corporate Office
Randfontein Office Park
PO Box 2, Randfontein, 1760, South Africa
Corner Main Reef Road/Ward Avenue, Randfontein, 1759, South Africa
Telephone: +27 11 411 2000
Website: www.harmony.co.za
Directors
P T Motsepe* Chairman
D Noko* Deputy Chairman
G P Briggs Chief Executive Officer
F Abbott Financial Director
H E Mashego Executive Director
F F T De Buck* Lead independent director
J A Chissano*1, K V Dicks*, Dr D S Lushaba*, C Markus*,
M Motloba*, M Msimang*, J Wetton*, A J Wilkens*
* 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
Riana Bisschoff
Telephone: 011 411 2127
Mobile: +27 83 629 4706
E-mail: riana.bisschoff@harmony.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, Beckenham
Kent BR3 4TU, United Kingdom
Telephone: 0871 664 0300 (UK) (calls cost 10p a minute plus network
extras, lines are open 8:30am - 5:30pm, Monday to Friday)
or +44 (0) 20 8639 3399 (calls from overseas)
Fax: +44 (0) 20 8639 2220
ADR Depositary
Deutsche Bank Trust Company Americas
c/o American Stock Transfer and Trust Company, Peck Slip Station
PO Box 2050, New York, NY 10272-2050
Email Queries: adr@db.com
Toll Free: +1-866-243-9656
Intl: +1-718-921-8200
Fax: +1-718-921-8334
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
Euronext, Brussels: HMY
Berlin Stock Exchange: HAM1
Registration number
1950/038232/06
Incorporated in the Republic of South Africa
ISIN
ZAE000015228
Date: 09/05/2012 07:05:07 Supplied by www.sharenet.co.za
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