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Harmony - Results for the year ended 30 June 2017
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
FY17 RESULTS
FOR THE YEAR ENDED 30 JUNE 2017
KEY FEATURES
- Milestone fatality free quarter achieved during the June 2017 quarter; annual fatality rates improved
- Met production guidance for a second consecutive year
- Underground grade increased for fifth consecutive year to 5.07g/t
- 35% increase in headline earnings per share (HEPS) of 298 SA cents (47% to 22 US cents)
- Continued to secure cash margins through successful hedging strategy, realising gains of R1 747 million (US$128 million)
- 18% reduction in net debt to R887 million (8% to US$68 million)
- Growing ounces - acquired full ownership of Hidden Valley - stages 5 and 6 investment on track
- Sustainable and inclusive solutions sought to address silicosis claims
- Final dividend of 35 SA cents (3 US cents) declared
Year ended Year ended %
June 2017 June 2016 Variance
Gold produced - kg 33 836 33 655 1
- oz 1 087 852 1 082 035 1
Cash operating costs - R/kg 436 917 392 026 (11)
- US$/oz 1 000 841 (19)
Gold sold - kg 34 150 33 642 2
- oz 1 097 944 1 081 615 2
Underground grade - g/t 5.07 5.02 1
Total costs and capital(1, 2) - R/kg 510 006 457 276 (12)
- US$/oz 1 167 981 (19)
All-in sustaining costs(2, 3) - R/kg 516 687 467 611 (10)
- US$/oz 1 182 1 003 (18)
Gold price received - R/kg 570 164 544 984 5
- US$/oz 1 304 1 169 12
Production profit - R million 4 452 5 084 (12)
- US$ million 327 350 (7)
Basic earnings/(loss) per share - SAc/s 83 218 (62)
- USc/s 5 15 (66)
Headline earnings - Rm 1 306 964 35
- US$m 95 67 43
Headline earnings per share - SAc/s 298 221 35
- USc/s 22 15 47
Exchange rate - R/US$ 13.60 14.50 (6)
1 Excludes investment capital for Hidden Valley
2 Figures for the year ended June 2016 restated to include capitalised stripping
3 Excludes share-based payment charge
HARMONY'S ANNUAL REPORTS
Harmony's Integrated Annual Report, the Sustainable Development Information which serves as supplemental information to the
Integrated Annual Report and its annual report filed on a Form 20F with the United States' Securities and Exchange Commission for the
financial year ended 30 June 2017 will be available on our website (www.harmony.co.za/investors) on 26 October 2017. Mineral resource
and reserve information as at 30 June 2017 is included in this report.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of the safe harbor provided
by Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the
Securities Act of 1933, as amended, with respect to our 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.
These include all statements other than statements of historical fact, including, without
limitation, any statements preceded by, followed by, or that include the words "targets",
"believes", "expects", "aims", "intends", "will", "may", "anticipates", "would", "should",
"could", "estimates", "forecast", "predict", "continue" or similar expressions or the negative
thereof.
These forward-looking statements, including, among others, those relating to our future
business prospects, revenues and income, wherever they may occur in this report and the
exhibits to this report, are essentially estimates reflecting the best judgment of our senior
management 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 presentation. 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 South Africa, Papua New
Guinea, Australia and elsewhere, estimates of future earnings, and the sensitivity of earnings
to the gold and other metals prices, estimates of future gold and other metals production
and sales, estimates of future cash costs, estimates of future cash flows, and the sensitivity of
cash flows to the gold and other metals prices, statements regarding future debt repayments,
estimates of future capital expenditures, the success of our business strategy, development
activities and other initiatives, estimates of reserves statements regarding future exploration
results and the replacement of reserves, the ability to achieve anticipated efficiencies and other
cost savings in connection with past and future acquisitions, fluctuations in the market price
of gold, the occurrence of hazards associated with underground and surface gold mining, the
occurrence of labour disruptions, power cost increases as well as power stoppages, fluctuations
and usage constraints, supply chain shortages and increases in the prices of production imports,
availability, terms and deployment of capital, changes in government regulation, particularly
mining rights and environmental regulation, fluctuations in exchange rates, the adequacy of
the Group's insurance coverage and socio-economic or political instability in South Africa and
Papua New Guinea and other countries in which we operate.
For a more detailed discussion of such risks and other factors (such as availability of credit
or other sources of financing), see the Company's latest Integrated Annual Report and Form 20-F
which is on file with the Securities and Exchange Commission, as well as the Company's
other Securities and Exchange Commission filings. The Company undertakes no obligation to
update publicly or release any revisions to these forward-looking statements to reflect events or
circumstances after the date of this presentation or to reflect the occurrence of unanticipated
events, except as required by law.
COMPETENT PERSON'S DECLARATION
In South Africa, Harmony employs an ore reserve manager at each of its
operations who takes responsibility for the compilation and reporting of
mineral resources and mineral reserves at their operations. In Papua New
Guinea, competent persons are appointed for the mineral resources and
mineral reserves for specific projects and operations.
The mineral resources and mineral reserves in this report are based on
information compiled by the following competent persons:
Resources and reserves of South Africa:
Jaco Boshoff, BSc (Hons), MSc, MBA, Pr. Sci. Nat, MSAIMM, MGSSA, who
has 22 years' relevant experience and is registered with the South African
Council for Natural Scientific Professions (SACNASP) and a member of the
South African Institute of Mining and Metallurgy (SAIMM).
Mr Boshoff is Harmony's Lead Competent Person.
Jaco Boshoff
Physical address: Postal address:
Randfontein Office park PO Box 2
Corner of Main Reef Road and Ward Avenue Randfontein
Randfontein 1760
South Africa South Africa
Resources and reserves of Papua New Guinea:
Gregory Job, BSc, MSc, who has 29 years' relevant experience and is a
member of the Australian Institute of Mining and Metallurgy (AusIMM).
Greg Job
Physical address: Postal address:
Level 2 PO Box 1562
189 Coronation Drive Milton, Queensland
Milton, Queensland 4064 4064
Australia Australia
Both these competent persons, who are full-time employees of Harmony
Gold Mining Company Limited, consent to the inclusion in the report of
the matters based on the information in the form and context in which it
appears.
SHAREHOLDER INFORMATION
Issued ordinary share capital at 30 June 2017 439 957 199
Issued ordinary share capital at 30 June 2016 437 299 479
MARKET CAPITALISATION
At 30 June 2017 (ZARm) 9 538
At 30 June 2017 (US$m) 728
At 30 June 2016 (ZARm) 22 945
At 30 June 2016 (US$m) 1 567
HARMONY ORDINARY SHARES AND ADR PRICES
12-month high (1 July 2016 - 30 June 2017) 66.65
for ordinary shares
12-month low (1 July 2016 - 30 June 2017) 20.68
for ordinary shares
12-month high (1 July 2016 - 30 June 2017) for ADRs 4.81
12-month low (1 July 2016 - 30 June 2017) for ADRs 1.59
FREE FLOAT 100%
ADR RATIO 1:1
JSE LIMITED HAR
Range for year (1 July 2016 - 30 June 2017 closing prices) R20.68 - R66.65
Average daily volume for the year 2 023 722 shares
(1 July 2016 - 30 June 2017)
Range for the previous year R7.92 - R62.89
(1 July 2015 - 30 June 2016 closing prices)
Average daily volume for the previous year 2 441 859 shares
(1 July 2015 - 30 June 2016)
NEW YORK STOCK EXCHANGE HMY
including other US trading platforms
Range for year (1 July 2016 - 30 June 2017 closing prices) US$1.59 - US$4.81
Average daily volume for the year 5 076 621
(1 July 2016 - 30 June 2017)
Range for the previous year US$0.53 - US$4.17
(1 July 2015 - 30 June 2016 closing prices)
Average daily volume for the previous year 4 027 274
(1 July 2015 - 30 June 2016)
Investors' calendar
Release of Harmony's Integrated Annual Report 26 October 2017
of FY17
Annual General Meeting 23 November 2017
H1 FY18 live presentation from Cape Town To be confirmed
H2 FY18 live presentation from Johannesburg To be confirmed
CONTACT DETAILS
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: www.harmony.co.za
DIRECTORS
PT Motsepe* (chairman)
FFT De Buck*^ (lead independent director)
JM Motloba*^ (deputy chairman)
PW Steenkamp (chief executive officer)
F Abbott (financial director)
JA Chissano*1^, KV Dicks*^, Dr DSS Lushaba*^
HE Mashego**, M Msimang*^, KT Nondumo*^
VP Pillay*^, JL Wetton*^, AJ Wilkens*
* Non-executive
** Executive
^ Independent
1 Mozambican
INVESTOR RELATIONS
E-mail: harmonyIR@harmony.co.za
Lauren Fourie
Investor Relations Manager
Telephone: +27 11 411 2025
Mobile: +27 71 607 1498
E-mail: lauren.fourie@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: +27 11 411 6020
Fax: +27 11 696 7934
Mobile: +27 83 629 4706
E-mail: riana.bisschoff@harmony.co.za
TRANSFER SECRETARIES
Link Market Services South Africa (Proprietary) Limited
(Registration number 2000/007239/07)
13th Floor, Rennie House, Ameshoff Street, Braamfontein
PO Box 4844, Johannesburg, 2000, South Africa
Telephone: +27 86 154 6572
E-mail: info@linkmarketservices.co.za
Fax: +27 86 674 2450
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
E-mail queries: db@amstock.com
Toll free: +1-800-937-5449
Int: +1-718-921-8137
Fax: +1-718-765-8782
*ADR: American Depositary Receipts
SPONSOR
JP Morgan Equities South Africa (Pty) Ltd
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
REGISTRATION NUMBER:
1950/038232/06
Incorporated in the Republic of South Africa
ISIN:
ZAE 000015228
MESSAGE FROM THE CHIEF EXECUTIVE OFFICER
In financial year 2017 (FY17) we delivered on our strategy to produce
safe profitable ounces and increase margins. Our strategy is supported
by the fundamental pillars of operational excellence, cash certainty and
effective capital allocation.
Operational excellence in FY17 was key in improving the safety
performance, achieving our annual production guidance for a
second consecutive year, and increasing underground grade for
a fifth consecutive year. In FY17, Harmony produced 1.09 million
ounces (Moz) of gold (exceeding production guidance of 1.05Moz)
and achieved an underground grade of 5.07g/t (FY16: 5.02g/t).
Our successful hedging strategy - which realised gains of R1.7 billion
(US$128 million) - secured cash flow margins, which enabled Harmony
to invest in Hidden Valley and reduce net debt by 18% to R887 million
(8% to US$68 million).
Harmony returned cash to shareholders by paying dividends of
R439 million (US$32 million) and positioned Hidden Valley for
growth by investing in the stage 5 and 6 cutbacks. Management is
fully committed to the success of the Hidden Valley investment,
demonstrated by the progress made since acquiring 100% ownership
of the mine, with the stage 5 and 6 project delivery on schedule.
Hidden Valley is expected to produce 180 000oz of gold and 3Moz of
silver per annum by FY19.
A final dividend of 35 SA cents (3 US cents) per share was declared in
respect of the year ended 30 June 2017 - a 70% increase in dividends
declared year-on-year. See below for the dividend notice.
Harmony has a proactive approach to safety and health, with
experienced operational and management teams, world-class assets,
and social and environmental initiatives that promote a lasting and
sustainable legacy in the communities within which we operate.
SAFETY
The safety and health of all our employees is our primary concern and
achieving zero harm is an imperative. Sadly, we had five fatalities in
FY17, evidence that we have made progress in creating a safe work
environment but highlighting that we need to do even more.
Harmony has a comprehensive safety risk management approach that
encompasses:
- understanding behaviours and attitudes in order to drive safety
compliance;
- a proactive focus;
- the application of preventative controls; and
- creating a culture of continuous learning and genuine care.
Two of our operations recorded exceptional safety results, with
Tshepong achieving 3 million fatality-free shifts (FFS) on 31 March 2017
and Doornkop achieving 2 million FFS on 17 December 2016.
YEAR-ON-YEAR OPERATIONAL RESULTS
Harmony's total gold production for FY17 increased by 181 kilograms
(0.5%) to 33 836 kilograms, compared to 33 655 kilograms in FY16.
The following operations increased their gold production year on year:
- Hidden Valley: Gold production increased by 31% due to obtaining
full ownership of the mine at the end of October 2016. The
investment in Hidden Valley supports free cash flow generation and
is strengthened by an experienced Papua New Guinean management
team and stable workforce. The stage 5 and 6 cutbacks are on track
and the four-month plant shutdown in the first half of FY18 will
assist the ramp-up in production by the end of FY18;
- Kusasalethu: The mine showed a notable improvement in gold
produced, and delivered a turnaround performance in FY17
following the decision to shorten the life of mine and focus on
higher grade areas. Production increased by 14%, with a 25%
increase in underground recovered grade to 7.24g/t;
- Masimong: Gold production increased by 4%, due to a 6% increase
in recovered grade to 3.97g/t;
- Kalgold: Gold production increased by 9% as a result of a 7%
increase in grade to 0.80g/t and a 2% increase in tonnes milled; and
- Phoenix: A 10% increase in the recovered grade and a 4% increase
in tonnes processed resulted in a 14% increase in gold production
year on year in FY17.
The following operations reported lower gold production for the year:
- Target 1: Production was hampered by unfavourable mining
conditions in the higher grade areas, with underground recovered
grade 22% lower year on year at 3.58g/t and gold production
21% lower;
- Bambanani: Gold production decreased by 9%, as a result of an 8%
decrease in underground recovered grade to 11.90g/t;
- Tshepong: Gold production decreased by 4% due to a 6% decrease
in tonnes milled, whilst the underground recovered grade improved
by 2% to 4.69g/t; and
- Unisel: Production decreased by 6% as a result of a 7% decrease
in tonnes milled during FY17. Recovered grade remained more or
less steady. Development will focus on higher grade areas in the
shaft pillar during FY18.
Cash operating cost increased by 11% or R1.430 billion (18% or
US$166 million) in FY17, mainly due to increases in labour costs (annual
increases and bonuses), inflationary increases in consumables and
contractors for the South African operations, as well as the inclusion of
100% of Hidden Valley's costs from November 2016.
Production profit for FY17 decreased by 13% to R4.452 billion
(US$327 million) when compared to the R5.084 billion (US$350 million)
recorded in FY16. This was mainly due to an 11% increase in cash
operating cost in rand terms.
Overall, all-in sustaining costs increased by 10% in FY17 to R516 687/kg
(US$1 182/oz), compared to R467 611/kg (US$1 003/oz) in FY16.
Preventative maintenance was conducted at many of the South African
operations in order to improve asset management and performance,
which has resulted in a 36% reduction in engineering stoppages
during FY17 and will benefit production performance in the future.
Capital expenditure for FY17 increased by 68% to R3.686 billion
(79% to US$271 million), of which R1.335 billion (US$98 million)
was spent at Hidden Valley. Capital expenditure for South African
operations increased by 13% or R276 million (21% or US$30 million),
which includes R156 million (US$11 million) spent on the Central Plant
reclamation project.
YEAR-ON-YEAR FINANCIAL RESULTS
Revenue
Revenue increased by 5% in FY17 to R19.3 billion (12% to
US$1.42 billion) mainly as a result of year-on-year production
remaining stable and the inclusion of the realised gains on the rand
gold hedges of R728 million (US$54 million) as part of revenue. This
inclusion resulted in the average gold price received being R570 164/kg
(US$1 304/oz), compared with R544 984/kg (US$1 169/oz) in FY16,
despite the rand gold price being flat year on year.
Impairments
The annual impairment assessment of assets resulted in the following
impairments being recorded in FY17: Kusasalethu R677 million
(US$52 million); Target 1 R786 million (US$60 million) and Tshepong
Operations R255 million (US$19 million). Refer to note 8
for a detailed discussion on the reasons for the impairments.
Silicosis class action
As a consequence of the progress in the negotiations to settle the
silicosis and tuberculosis class action and the ability to determine a
possible settlement amount for the industry working group, a provision
has been raised at 30 June 2017. The provision of R917 million
(US$70 million) before tax is Harmony's best estimate of its portion of
the potential contribution to the Legacy Fund. This is charged to other
operating expenses and reduced headline earnings. Refer to note 11
for further details.
Net profit
In FY17 a net profit of R362 million (US$20 million) was recorded
compared to a net profit of R949 million (US$64 million) in FY16.
Headline earnings amounted to 298 SA cents per share (22 US cents
per share) compared to headline earnings of 221 SA cents per share
(15 US cents per share) for FY16.
Hedging activity
The hedging programmes realised gains of R1 747 million
(US$128 million) for FY17. Management continues to top-up these
programmes as and when opportunities arise to lock in attractive
margins for the business.
Currency hedging
The foreign currency hedging is in the form of zero cost collars,
which establish a minimum (floor) and maximum (cap) rand/US Dollar
exchange rate at which to convert US dollars to rands. The nominal
value of the hedging contracts as at 30 June 2017 is US$422 million.
The realised gain from contracts maturing in FY17 amounted to
R1 003 million (US$74 million).
Commodity hedging
Gold hedging is in the form of short-term gold forward sale contracts
with a maximum term of 24 months. US$ gold forward sale contracts
were entered into for Hidden Valley during May 2017. The nominal
value hedged at 30 June 2017 was 388 000 ounces.
During May 2017 Harmony entered into silver zero cost collars for the
silver from Hidden Valley. The nominal value hedged at 30 June 2017
was 970 000 ounces.
A gain of R728 million (US$54 million) was realised on the contracts
that matured and is included in revenue. Cash flow hedge accounting
is applied to the rand gold forward contracts.
Refer to note 3 and 10 for further details.
A summary of all the open hedging contracts as at 30 June 2017 is as follows:
FY18 FY19
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Total
US$m 111 132 120 59 422
US$/ZAR Floor 15.00 14.40 14.00 14.00
Cap 16.30 15.50 15.00 15.00
'000 oz 54 54 54 54 54 27 27 324
R/gold R'000/kg 686 700 713 728 697 630 643
'000 oz 4 3 12 15 15 15 64
US$/gold US$/oz 1 265 1 270 1 272 1 275 1 278 1 281
Total gold '000 oz 58 57 66 69 69 42 27 388
'000 oz 40 60 180 210 240 240 970
US$/silver Floor 17.10 17.10 17.10 17.10 17.10 17.10
Cap 18.10 18.10 18.10 18.10 18.10 18.10
SUMMARY UPDATE OF HARMONY'S MINERAL
RESOURCES AND MINERAL RESERVES AS AT
30 JUNE 2017
Harmony owns significant gold ore deposits in South Africa and
gold-copper deposits in Papua New Guinea (PNG). Attributable gold
equivalent mineral resources as declared at 30 June 2017, were
104.3Moz, a 0.9% decrease year on year. The total gold contained
in the mineral resources at the South African operations represents
53.2% of the company's total, with the Papua New Guinea (PNG)
operations representing 46.8% of Harmony's total gold and gold
equivalent mineral resources.
Our attributable gold and gold equivalent mineral reserves amounted to
36.7Moz of gold, only a 0.5% decrease year on year. The gold reserve
ounces in South Africa represent 44.3%, while the PNG gold and gold
equivalent ounces represent 55.7% of our total mineral reserves. See
below for our resources and reserves statement.
TSHEPONG/PHAKISA INTEGRATION
The close proximity of the Tshepong and Phakisa mines provides an
opportunity to optimise existing infrastructure of each operation.
In the short-term, additional volumes from Phakisa will be hoisted
from Tshepong.
GOLPU
The Wafi-Golpu Joint Venture parties continued to progress activity in
line with the forward work plan previously communicated, including
engagement with the PNG Government on the application for a Special
Mining Lease (SML) for the Wafi-Golpu project.
The current study work is focussed on assessing:
- self-generation power supply options;
- reassessment of block cave levels and increased mining rates due
to increased knowledge obtained from further drilling undertaken
during the year; and
- deep sea tailings placement options to compare with terrestrial
tailings storage options.
The Joint Venture parties are targeting a complete update of the
feasibility study by the end of March 2018. The focus of this work is
to further optimise the business case and confirm any amendments
necessary to the supporting documents for the SML application.
Timing of first production is dependant on the updated study outcomes
and the granting of the SML.
EXPLORATION
Our exploration strategy is to target highly prospective underexplored
terrains, pursue brownfields exploration targets close to existing
infrastructure and thereby create value for shareholders by discovering
large long-life bulk minable gold and copper-gold deposits and
enhancing the profitability of our existing operations. Key work streams
underpinning the FY17 exploration program include:
- brownfield exploration at Hidden Valley and Kalgold for high-grade
satellite resources to leverage existing open pit operations and
extend mine life;
- brownfield exploration at our underground operations in South
Africa; and
- greenfield exploration to enhance Harmony's world-class portfolio of
copper gold assets in PNG.
REGULATORY CERTAINTY THAT PROMOTES A
SUSTAINABLE MINING INDUSTRY
Harmony has been a key player in transforming the gold mining industry
and remains committed to transformation in South Africa. Regulatory
certainty is key to the future success and sustainability of the South
African mining industry. It is important that the mining regulators
take the interests of all stakeholders into account. Our involvement in
discussions regarding mining regulation through the Chamber of Mines of
South Africa will continue to ensure that transformation is meaningful
and sustainable and does not undermine the viability of an industry
that contributes significantly to the country's economy and its people.
FY18 PRODUCTION AND COST GUIDANCE
In the next year, we plan to produce approximately 1.1Moz at an all-in
sustaining cost of about US$1 180/oz (~R520 000/kg at an exchange
rate of R13.74/US$). We will not mine areas that are unsafe or at
grades lower than planned.
STRONG INVESTMENT CASE
We continue to make progress in growing from a 1.1Moz gold producer
to a 1.5Moz producer by FY19. The first steps to growing our ounces
was obtaining 100% ownership in Hidden Valley (180 000oz per
annum) and commencing with the Central Plant reclamation project
(15 000oz per annum for approximately 19 years) in FY17. Focused
exploration targets, unlocking the value of Golpu and identifying value
accretive acquisitions remain key in improving the quality of our assets,
driving down costs and achieving our aspiration of being a 1.5Moz
producer in FY19. We have also changed our operating model to
ensure, that two executive teams - one in South Africa and the other
in PNG - supported by corporate services, focus on optimising all of our
assets and increasing value for shareholders.
Production is safer and more predictable, grade management is
disciplined, production delivery exceeds guidance, operations are
generating operational free cash flow, and the hedging strategy secures
cash margins. Combined with Harmony's low net debt compared to
peers and its excellent growth opportunities. We believe that Harmony
has a strong investment case.
Peter Steenkamp
Chief executive officer
NOTICE OF CASH DIVIDEND
Our dividend declaration for the year ended 30 June 2017 is as
follows:
Declaration of ordinary dividend no. 88
The board has approved and declared a final dividend of 35 SA cents
(3 US cents) per ordinary share in respect of the year ended
30 June 2017.
In accordance with paragraphs 11.17(a)(i) to (x) and 11.17(c) of the
JSE Listings Requirements the following additional information is
disclosed:
- The dividend has been declared out of income reserves;
- The local Dividends Tax rate is 20% (twenty per centum);
- The gross local dividend amount is 35 SA cents per ordinary share
for shareholders exempt from the Dividends Tax;
- The net local dividend amount is 28 SA cents per ordinary share for
shareholders liable to pay the Dividends Tax;
- Harmony currently has 439 957 199 ordinary shares in issue (which
includes 75 888 treasury shares); and
- Harmony Gold Mining Company Limited's income tax reference
number is 9240/012/60/0.
A dividend No. 88 of 35 SA cents per ordinary share, being the final
dividend for the year ended 30 June 2017, has been declared payable
on Monday, 16 October 2017 to those shareholders recorded in the
books of the company at the close of business on Friday, 13 October
2017. 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, 13 October 2017.
Last date to trade ordinary shares
cum dividend is Tuesday, 10 October 2017
Ordinary shares trade ex-dividend Wednesday, 11 October 2017
Record date Friday, 13 October 2017
Payment date Monday, 16 October 2017
No dematerialisation or rematerialisation of share certificates may
occur between Wednesday, 11 October 2017 and Friday, 13 October
2017, both dates inclusive, nor may any transfers between registers
take place during this period.
SUMMARY UPDATE OF HARMONY'S MINERAL RESOURCES AND
MINERAL RESERVES AS AT 30 JUNE 2017
Harmony's statement of mineral resources and mineral reserves as at
30 June 2017 is produced in accordance with the South African Code
for the Reporting of Mineral Resources and Mineral Reserves (SAMREC)
and the Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves (JORC). It should be noted that the mineral
resources are reported inclusive of the mineral reserves.
This report provides a summary of the update, while the detailed
statement of the mineral resources and mineral reserves will
be available on our website as from 17 August 2017 and published
in the Integrated Report on 26 October 2017, which will be
available at www.harmony.co.za/investors. Refer to the website
(www.harmony.co.za) for the updated reserves and resources tables
as at 30 June 2017.
Harmony uses certain terms in the summary such as 'measured',
'indicated' and 'inferred' resources, which the United States' Securities
and Exchange Commission guidelines strictly prohibit companies
registered in the United States from including in their filings with
the commission. United States investors are urged to consider the
disclosure in this regard in our Form 20-F which will be available
on our website at www.harmony.co.za/investors/reporting/20f on
26 October 2017.
Introduction
Maintaining and growing our margins efficiently is essential to
sustaining our business and meeting our strategic objectives. This
includes delivering safely on our operational plans, reducing costs,
improving productivity and maximising revenue. We are devoted to
improving the company's operational performance. Our values are
entrenched in everything we do - safety, accountability, achievement,
being connected and honest - and they inform our decisions and our
actions. Realistic planning supports our strategy to optimise assets -
our ore bodies, our infrastructure and our people. This will ensure safer,
more profitable production. Our life of mine plans are prepared in line
with this approach.
Harmony - Total
The company's attributable gold and gold equivalent mineral resources
are declared as 104.3Moz as at 30 June 2017, a 0.9% decrease year
on year from the 105.2Moz declared as at 30 June 2016. The total
gold contained in the mineral resources at the South African operations
represents 53.2% of the company total, with the PNG operations
representing 46.8% of Harmony's total gold and gold equivalent
mineral resources as at 30 June 2017. Harmony's attributable gold
and gold equivalent mineral reserves amounts to 36.7Moz, a 0.5%
decrease from the 36.9Moz declared at 30 June 2016. The gold reserve
ounces in South Africa represent 44.3% while the PNG gold and gold
equivalent ounces represent 55.7% of Harmony's total mineral reserves
as at 30 June 2017.
South Africa
South African underground operations
The company's mineral resources at the South African underground
operations as at 30 June 2017 are 46.6Moz (160.1Mt at 9.06g/t), a
decrease of 4.0% year on year from the 48.6Moz (162.1Mt at 9.32g/t)
declared as at 30 June 2016. This decrease is due to depletion and
geological changes at some of the operations. The company's mineral
reserves at the South African underground operations as at 30 June
2017 are 9.1Moz (50.4Mt at 5.61g/t), a decrease of 6.2% year on year
from the 9.7Moz (54.1Mt at 5.55g/t) declared as at 30 June 2016.
The decrease is lower than normal depletion due to gains in reserves
from Masimong, Doornkop and Kusasalethu.
South African surface operations, including Kalgold
The company's mineral resources at the South African surface
operations as at 30 June 2017 are 8.8Moz (984.6Mt at 0.28g/t). There
was an increase in reserves at Kalgold and the company's mineral
reserves after normal depletion at the South African surface operations
as at 30 June 2017 are 7.2Moz (827.8Mt at 0.27g/t), in line with the
7.1Moz (840.4Mt at 0.26g/t) declared at 30 June 2016.
Papua New Guinea (PNG)
Papua New Guinea operations
The company's attributable gold and gold equivalent mineral resources
at the PNG operations as at 30 June 2017 are 48.8Moz, an increase
of 3.6% year on year from the 47.1Moz declared as at 30 June 2016.
This increase is mainly due to acquiring full ownership of Hidden Valley.
The company's gold and gold equivalent mineral reserves at the PNG
operations as at 30 June 2017 are 20.5Moz, an increase of 1.5% year
on year from the 20.2Moz declared as at 30 June 2016.
ASSUMPTIONS
In converting the mineral resources to mineral reserves, the following
commodity prices and exchange rates were applied:
- A gold price of US$1200/oz.
- An exchange rate of R/US$13.61.
- The above parameters resulted in a rand gold price of R525 000/kg
for the South African assets.
- The Hidden Valley mine and the Golpu project used commodity
prices of US$1200/oz Au, US$18.00/oz Ag, US$7.00/lb Mo and
US$3.00/lb Cu at an exchange rate of US$0.76 per A$.
- Gold equivalent ounces are calculated assuming US$1200/oz
Au, US$3.00/lb Cu and US$18.00/oz Ag, and assuming a 100%
recovery for all metals.
Independent review
Harmony's South African mineral resources and reserves at Joel, Target,
Kalgold and the group statement were independently reviewed by The
Mineral Corporation for compliance to SAMREC. The mineral resources
of the Hidden Valley operation were independently reviewed by SRK
Consulting Engineers and Scientists and Golpu was independently
reviewed by AMC Consultants Pty Ltd for compliance with the
standards set out in JORC.
Note: Au = gold; Cu = copper; Ag = Silver, Mo = Molybdenum,
Moz = million ounces.
Mineral resources: Measured Indicated Inferred Total
gold and gold Tonnes Gold Tonnes Gold Tonnes Gold Tonnes Gold
equivalents (Mt) g/t '000oz (Mt) g/t '000oz (Mt) g/t '000oz (Mt) g/t '000oz
SA underground 53.9 9.93 17 195 54.6 8.62 15 145 51.6 8.61 14 277 160.1 9.06 46 616
SA surface incl Kalgold 269.8 0.28 2 450 649.5 0.27 5 592 65.3 0.36 764 984.6 0.28 8 807
Total South Africa 323.7 19 645 704.1 20 737 116.9 15 041 1 144.7 55 423
Hidden Valley 0.5 1.04 17 82.2 1.50 3 967 2.6 1.16 97 85.3 1.49 4 081
Wafi-Golpu system* - - - 400.7 0.86 11 051 99.2 0.74 2 359 499.9 0.83 13 410
Kili Teke - - - - - - 237.0 0.24 1 810 237.0 0.24 1 810
Total Papua New 0.5 17 482.9 15 018 338.7 4 267 822.1 19 301
Guinea
Total gold Resources 324.2 19 662 1 187.0 35 755 455.6 19 308 1 966.8 74 724
Hidden Valley - gold
equivalent ounces 0.5 4 79.4 1 100 2.4 34 82.3 1 137
Wafi-Golpu - gold
equivalent ounces* - - 344.0 20 575 87.8 3 415 431.8 23 990
Kili Teke - gold
ecquivalent ounces - - - - 237.0 4 416 237.0 4 416
Total gold equivalent
resources** 0.5 4 423.5 21 674 327.2 7 864 751.1 29 542
Total Harmony gold
and gold equivalent
resource** 324.2 19 665 1 187.0 57 429 455.6 27 172 1 966.8 104 266
Mineral resources: Measured Indicated Inferred Total
silver and copper
(used in equivalent Tonnes Silver Tonnes Silver Tonnes Silver Tonnes Silver
calculations) (Mt) g/t '000oz (Mt) g/t '000oz (Mt) g/t '000oz (Mt) g/t '000oz
Hidden Valley 0.4 19.73 272 79.4 28.69 73 272 2.4 29.01 2 231 82.3 28.65 75 776
Measured Indicated Inferred Total
Tonnes Copper Tonnes Copper Tonnes Copper Tonnes Copper
(Mt) % 'Mlb (Mt) % 'Mlb (Mt) % 'Mlb (Mt) % 'Mlb
Golpu* - - - 344.0 1.09 8 232 67.9 0.85 1 273 411.9 1.05 9 505
Nambonga* - - - - - - 19.9 0.21 92 19.9 0.21 92
Kili Teke - - - - - - 237.0 0.34 1 767 237.0 0.34 1 767
Total - - - 344.0 1.09 8 232 324.8 0.44 3 132 668.8 0.77 11 364
Proved Probable Total
Mineral reserves: Tonnes Gold Tonnes Gold Tonnes Gold
gold and gold equivalents (Mt) g/t '000oz (Mt) g/t '000oz (Mt) g/t '000oz
SA underground 37.1 5.80 6 921 13.3 5.07 2 163 50.4 5.61 9 084
SA surface incl Kalgold 186.0 0.29 1 717 641.7 0.26 5 462 827.8 0.27 7 179
Total South Africa 223.1 8 639 655.0 7 624 878.1 16 263
Hidden Valley 0.5 1.04 17 25.7 1.66 1 370 26.2 1.65 1 387
Wafi-Golpu system* - - - 189.6 0.91 5 522 189.6 0.91 5 522
Total Papua New Guinea 0.5 17 215.3 6 892 215.8 6 908
Total gold reserves 223.6 8 655 870.3 14 516 1 093.9 23 171
Hidden Valley - gold equivalent ounces 0.4 4 24.4 403 24.8 407
Wafi-Golpu - gold equivalent ounces* - - 189.6 13 168 189.6 13 168
Total gold equivalent reserves** 0.4 4 214.0 13 571 214.4 13 575
Total Harmony gold and gold equivalent
reserves** 223.6 8 659 870.3 28 087 1 093.9 36 746
Mineral reserves: Proved Probable Total
silver and copper Tonnes Silver Tonnes Silver Tonnes Silver
(used in equivalent calculations) (Mt) g/t '000oz (Mt) g/t '000oz (Mt) g/t '000oz
Hidden Valley 0.4 19.73 272 24.4 34.23 26 835 24.8 33.98 27 107
Proved Probable Total
Tonnes Copper Tonnes Copper Tonnes Copper
(Mt) % 'Mlb (Mt) % 'Mlb (Mt) % 'Mlb
Golpu* - - - 189.6 1.26 5 269 189.6 1.26 5 269
* Represents Harmony's equity portion of 50%.
**In instances where individual deposits may contain multiple valuable commodities with a reasonable expectation of being recovered (for example gold and copper
in a single deposit) Harmony computes a gold equivalent to more easily assess the value of the deposit against gold-only mines. Harmony does this by calculating
the value of each of the deposits commodities, then dividing the product by the price of gold. For example, the gold equivalent ounces for the copper portion of
a deposit would be calculated as follows: (copper pounds x copper price per pound)/gold price per ounce. All gold equivalent calculations are done using metal
prices and parameters as stipulated above.
EXPLORATION
Our exploration strategy is to target highly prospective underexplored
terrains, pursue brownfields exploration targets close to existing
infrastructure and thereby create value for shareholders by discovering
large long-life bulk minable gold and copper-gold deposits and
enhancing the profitability of our existing operations. Key work streams
underpinning the FY17 exploration program include:
- brownfield exploration at Hidden Valley and Kalgold for high-grade
satellite resources to leverage existing open pit operations and
extend mine life;
- brownfield exploration at our underground operations in South
Africa; and
- greenfield exploration to enhance Harmony's world-class portfolio of
copper gold assets in PNG.
Papua New Guinea
Kili Teke
The Kili Teke copper-gold deposit is 100% owned by Harmony and
represents the first greenfield porphyry copper gold discovery in PNG
since the Golpu copper gold deposit, which was identified in 1990
and then materially expanded some 20 years later in 2010. Harmony's
exploration team has played an integral role in both discoveries.
Kili Teke is a prolific complex with multiple mineralized intrusive events.
Field work at the Kili Teke deposit has been scaled back in order to fully
model the drilling results, and undertake pre-concept study work to
inform the next phase of follow-up drilling.
South Africa
B-Reef
There is significant potential on the B Reef which is currently being
mined as a high grade secondary reef to the Basal Reef at Masimong
and Tshepong. Ongoing exploration at these mines have yielded
positive results and resulted in the addition of higher grade ounces
to the ore reserves. The same B Reef channel is expected to exist at
Phakisa and exploration drilling has commenced from underground to
delineate the high grade payshoots.
Doornkop
A 2D seismic survey has been completed at Doornkop in conjunction
with long incline boreholes drilled from underground drilling platforms.
The results of this work has led to an increase to the reserves at the
mine.
Kalgold
The area beneath and surrounding the existing Kalgold operations is an
exciting Greenstone Belt exploration opportunity. An extensive drilling
program has been planned, which commenced towards the end of
FY17. The exploration drilling is a low cost option that could contribute
to surface growth ounces in the short to medium term.
ADMINISTRATIVE INFORMATION FOR PROFESSIONAL ORGANISATIONS
SACNASP - THE LEGISLATED REGULATORY BODY FOR
NATURAL SCIENCE PRACTITIONERS IN SOUTH AFRICA
Private Bag X540, Silverton, 0127
Gauteng Province, South Africa
Telephone: +27 (12) 841-1075
Facsimile: +27 (86) 206 0427
http://www.sacnasp.org.za/
SAIMM - THE SOUTHERN AFRICAN INSTITUTE OF
MINING AND METALLURGY
PO Box 61127, Marshalltown, 2107
Gauteng Province, South Africa
Telephone: +27 (011) 834-1273/7
Facsimile: +27 (011) 838-5923/8156
http://www.saimm.co.za/
AUSIMM - THE AUSTRALASIAN INSTITUTE OF MINING
AND METALLURGY
PO Box 660, Carlton South, Vic 3053
Australia
Telephone: +61 3 9658 6100
Facsimile: +61 3 9662 3662
http://www.ausimm.com.au/
LEGAL ENTITLEMENT TO THE MINERALS BEING
REPORTED UPON
Harmony's South African operations operate under new order mining
rights in terms of the Minerals and Petroleum Resources Development
of Act of 2002 (Act No. 28, of 2002) (MPRDA). In PNG, Harmony
operates under the Independent State of Papua New Guinea Mining
Act 1992. All required operating permits have been obtained, and are
in good standing. The legal tenure of each operation and project has
been verified to the satisfaction of the accountable Competent Person.
OPERATING RESULTS - YEAR ON YEAR (RAND/METRIC)
South Africa
Underground production Surface production
Total
Year Total Total South Hidden Total
ended Tshepong Phakisa Bambanani Joel Doornkop Target 1 Kusasalethu Masimong Unisel Underground Phoenix Dumps Kalgold Surface Africa Valley(1) Harmony
Ore milled - t'000 Jun-17 1 027 668 231 514 641 745 607 640 394 5 467 6 729 2 810 1 506 11 045 16 512 2 889 19 401
Jun-16 1 088 686 232 542 630 739 668 650 424 5 659 6 465 3 041 1 479 10 985 16 644 1 729 18 373
Yield - g/tonne Jun-17 4.69 6.00 11.90 4.37 4.17 3.58 7.24 3.97 4.05 5.07 0.136 0.375 0.800 0.288 1.87 1.07 1.77
Jun-16 4.62 5.81 12.99 4.20 4.33 4.58 5.78 3.74 4.02 5.02 0.124 0.350 0.746 0.271 1.89 1.31 1.83
Gold produced - kg Jun-17 4 819 4 009 2 750 2 246 2 673 2 669 4 394 2 538 1 595 27 693 918 1 055 1 205 3 178 30 871 2 965 33 836
Jun-16 5 031 3 988 3 013 2 278 2 730 3 387 3 863 2 432 1 704 28 426 804 1 065 1 103 2 972 31 398 2 257 33 655
Gold sold - kg Jun-17 4 817 3 999 2 745 2 280 2 712 2 642 4 498 2 539 1 590 27 822 932 1 064 1 213 3 209 31 031 3 119 34 150
Jun-16 5 029 3 991 3 015 2 245 2 712 3 419 3 822 2 432 1 705 28 370 788 1 058 1 086 2 932 31 302 2 340 33 642
Gold price received - R/kg Jun-17 572 921 575 663 574 227 573 986 572 494 570 091 572 376 571 870 575 650 573 193 549 777 572 172 573 010 565 984 572 447 544 442 570 164
Jun-16 547 967 547 829 536 410 543 442 545 770 536 196 543 633 541 806 542 487 543 291 544 390 544 996 548 072 545 972 543 543 564 272 544 984
Revenue (R'000) Jun-17 2 759 762 2 302 075 1 576 252 1 308 688 1 552 605 1 506 180 2 574 548 1 451 978 915 284 15 947 372 512 392 608 791 695 061 1 816 244 17 763 616 1 499 938 19 263 554
Jun-16 2 755 728 2 186 387 1 617 275 1 220 027 1 480 128 1 833 255 2 077 765 1 317 672 924 940 15 413 177 428 979 576 606 595 206 1 600 791 17 013 968 1 320 396 18 334 364
Cash operating (R'000) Jun-17 2 031 560 1 645 243 874 042 927 796 1 223 571 1 356 071 2 018 699 1 115 342 838 543 12 030 867 363 974 458 624 556 754 1 379 352 13 410 219 1 214 270 14 624 489
cost Jun-16 1 845 207 1 377 684 808 403 845 321 1 058 108 1 242 398 1 847 583 1 038 231 753 780 10 816 715 320 090 427 100 548 181 1 295 371 12 112 086 1 081 545 13 193 631
Inventory (R'000) Jun-17 (2 137) (2 890) (3 245) 7 718 17 079 (11 105) 61 779 (2 354) (740) 64 105 8 067 8 591 7 408 24 066 88 171 99 196 187 367
movement Jun-16 (1 125) (2 519) 2 900 (14 129) (11 402) 7 570 (31 307) (292) 110 (50 194) (7 837) (8 596) (8 137) (24 570) (74 764) 130 573 55 809
Operating costs (R'000) Jun-17 2 029 423 1 642 353 870 797 935 514 1 240 650 1 344 966 2 080 478 1 112 988 837 803 12 094 972 372 041 467 215 564 162 1 403 418 13 498 390 1 313 466 14 811 856
Jun-16 1 844 082 1 375 165 811 303 831 192 1 046 706 1 249 968 1 816 276 1 037 939 753 890 10 766 521 312 253 418 504 540 044 1 270 801 12 037 322 1 212 118 13 249 440
Production profit (R'000) Jun-17 730 339 659 722 705 455 373 174 311 955 161 214 494 070 338 990 77 481 3 852 400 140 351 141 576 130 899 412 826 4 265 226 186 472 4 451 698
Jun-16 911 646 811 222 805 972 388 835 433 422 583 287 261 489 279 733 171 050 4 646 656 116 726 158 102 55 162 329 990 4 976 646 108 278 5 084 924
Capital expenditure (R'000) Jun-17 386 626 329 513 76 759 242 503 242 649 323 699 288 850 119 160 77 864 2 087 623 5 129 162 849 95 573 263 551 2 351 174 1 334 534 3 685 708
Jun-16 306 858 323 063 106 156 215 007 207 627 322 338 359 512 110 289 62 065 2 012 915 5 312 17 599 38 862 61 773 2 074 688 121 321 2 196 009
Cash operating - R/kg Jun-17 421 573 410 387 317 833 413 088 457 752 508 082 459 422 439 457 525 732 434 437 396 486 434 715 462 037 434 031 434 395 466 847 436 917
costs Jun-16 366 767 345 457 268 305 371 080 387 585 366 814 478 277 426 904 442 359 380 522 398 122 401 033 496 991 435 858 385 760 479 196 392 026
- R/tonne Jun-17 1 978 2 463 3 784 1 805 1 909 1 820 3 326 1 743 2 128 2 201 54 163 370 125 812 500 772
Jun-16 1 696 2 008 3 484 1 560 1 680 1 681 2 766 1 597 1 778 1 911 50 140 371 118 728 626 718
Cash operating - R/kg Jun-17 501 802 492 581 345 746 521 059 548 530 629 363 525 159 486 407 574 550 509 822 402 073 589 074 541 350 516 961 510 557 503 475 510 006
cost and Capital(2) Jun-16 427 761 426 466 303 538 465 464 463 639 461 983 571 342 472 253 478 782 451 334 404 729 417 558 532 224 456 643 451 837 532 949 457 276
All-in sustaining - R/kg Jun-17 506 969 507 849 357 025 477 484 562 907 651 833 541 247 500 938 591 913 518 940 404 685 445 451 558 731 476 431 514 333 543 186 516 687
cost Jun-16 438 401 436 477 304 634 424 617 473 562 471 876 584 497 493 527 496 099 458 094 403 907 422 205 549 590 464 470 457 910 597 398 467 611
Operating free % Jun-17 12 14 40 11 6 (12) 10 15 - 11 28 (2) 6 10 11 (56) 6
cash flow margin(3) Jun-16 22 22 43 13 14 15 (6) 13 12 17 24 23 2 15 17 14 16
1 Ore milled for Hidden Valley includes 461 000 tonnes (Jun-16: Nil) that has been capitalised as part of pre-stripping of stages 5 and 6.
Gold produced and sold for Hidden Valley includes 364 kilograms (Jun-16: Nil) that has been capitalised.
2 Excludes investment capital for Hidden Valley.
3 Excludes run of mine costs for Kalgold (Jun-17: R-0.254m. Jun-16: R2.429m) and Hidden Valley (Jun-17: R212.419m. Jun-16: R61.267m).
CONDENSED CONSOLIDATED INCOME STATEMENTS
(RAND)
Year ended
30 June 30 June
2017 2016
Figures in million Notes (Reviewed) (Audited)
Revenue 10 19 264 18 334
Cost of sales 2 (19 639) (15 786)
Production costs (14 812) (13 250)
(Impairment)/Reversal of impairment of assets 8 (1 718) 43
Amortisation and depreciation (2 519) (2 170)
Other items (590) (409)
Gross profit/(loss) (375) 2 548
Corporate, administration and other expenditure (517) (409)
Exploration expenditure (241) (191)
Gains on derivatives 3 1 025 446
Other operating expenses 4 (886) (802)
Operating profit/(loss) (994) 1 592
Gain on bargain purchase 5 848 -
Loss on liquidation of subsidiaries (14) -
Profit/(loss) from associates 9 (22) 7
Investment income 268 256
Finance cost (234) (274)
Profit/(loss) before taxation (148) 1 581
Taxation 6 510 (632)
Current taxation (488) (123)
Deferred taxation 998 (509)
Net profit for the year 362 949
Attributable to:
Owners of the parent 362 949
Earnings per ordinary share (cents) 7
Basic earnings 83 218
Diluted earnings 79 213
The accompanying notes are an integral part of these condensed consolidated financial statements.
The condensed consolidated provisional financial statements (condensed consolidated financial statements) for the year ended
30 June 2017 have been prepared by Harmony Gold Mining Company Limited's corporate reporting team headed by Herman Perry
CA(SA). This process was supervised by the financial director, Frank Abbott CA(SA) and approved by the board of Harmony Gold
Mining Company Limited on 15 August 2017. These condensed consolidated financials have been reviewed by the group's external
auditors, PricewaterhouseCoopers Incorporated (see note 20).
CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (RAND)
Year ended
30 June 30 June
2017 2016
Figures in million Notes (Reviewed) (Audited)
Net profit for the year 362 949
Other comprehensive income for the year, net of income tax 818 143
Items that may be reclassified subsequently to profit or loss: 821 139
Foreign exchange translation gain/(loss) (322) 139
Remeasurement of Rand gold contracts 10
Unrealised gain on Rand gold contracts 2 172 -
Released to revenue (728) -
Released to gains on derivatives (16) -
Deferred taxation thereon (285) -
Items that will not be reclassified to profit or loss: (3) 4
Remeasurement of retirement benefit obligation
Actuarial gain/(loss) recognised during the period (1) 3
Deferred taxation thereon (2) 1
Total comprehensive income for the year 1 180 1 092
Attributable to:
Owners of the parent 1 180 1 092
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 2017
Other Accumulated
Figures in million Share capital reserves loss Total
Balance - 30 June 2016 28 336 4 252 (4 409) 28 179
Share-based payments - 371 - 371
Net profit for the year - - 362 362
Other comprehensive income for the year - 818 - 818
Dividends paid1 - - (439) (439)
Balance - 30 June 2017 (Reviewed) 28 336 5 441 (4 486) 29 291
Balance - 30 June 2015 28 324 3 787 (5 358) 26 753
Share-based payments - 322 - 322
Reversal of provision for odd lot repurchases 12 - - 12
Net profit for the year - - 949 949
Other comprehensive income for the year - 143 - 143
Balance - 30 June 2016 (Audited) 28 336 4 252 (4 409) 28 179
1 Dividend of 50 SA cents declared on 15 August 2016 and dividend of 50 SA cents declared on 31 January 2017.
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED BALANCE SHEETS (RAND)
At At
30 June 30 June
2017 2016
Figures in million Notes (Reviewed) (Audited)
ASSETS
Non-current assets
Property, plant and equipment 8 30 044 29 919
Intangible assets 8 603 870
Restricted cash 64 62
Restricted investments 2 658 2 496
Investments in associates 9 46 -
Investments in financial assets 4 5
Inventories 38 37
Trade and other receivables 185 172
Derivative financial assets 10 306 -
Total non-current assets 33 948 33 561
Current assets
Inventories 5 1 127 1 167
Restricted cash 18 17
Trade and other receivables 1 003 660
Derivative financial assets 10 1 541 369
Cash and cash equivalents 1 246 1 256
Total current assets 4 935 3 469
Total assets 38 883 37 030
EQUITY AND LIABILITIES
Share capital and reserves
Share capital 28 336 28 336
Other reserves 5 441 4 252
Accumulated loss (4 486) (4 409)
Total equity 29 291 28 179
Non-current liabilities
Deferred tax liabilities 6 1 702 2 413
Provision for environmental rehabilitation 5 2 638 2 183
Provision for silicosis settlement 11 917 -
Retirement benefit obligation 179 169
Other non-current liabilities 13 16
Borrowings 12 299 2 039
Total non-current liabilities 5 748 6 820
Current liabilities
Borrowings 12 1 834 300
Trade and other payables 2 010 1 731
Total current liabilities 3 844 2 031
Total equity and liabilities 38 883 37 030
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
(RAND)
Year ended
30 June 30 June
2017 2016
Figures in million Notes (Reviewed) (Audited)
Cash flow from operating activities
Cash generated by operations 4 346 4 659
Interest and dividends received 75 74
Interest paid (79) (155)
Income and mining taxes paid (538) (65)
Cash generated by operating activities 3 804 4 513
Cash flow from investing activities
Increase in restricted cash (1) (12)
Decrease in amounts invested in restricted investments 7 39
Loan to associate repaid - 7
Loan to ARM BBEE Trust - (200)
Cash on acquisition of Hidden Valley 5 459 -
Net additions to property, plant and equipment 14 (3 924) (2 433)
Cash utilised by investing activities (3 459) (2 599)
Cash flow from financing activities
Borrowings raised 12 699 300
Borrowings repaid 12 (710) (2 045)
Dividends paid (439) -
Cash utilised by financing activities (450) (1 745)
Foreign currency translation adjustments 95 20
Net increase/(decrease) in cash and cash equivalents (10) 189
Cash and cash equivalents - beginning of year 1 256 1 067
Cash and cash equivalents - end of year 1 246 1 256
The accompanying notes are an integral part of these condensed consolidated financial statements.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2017 (Rand)
1 Accounting policies
Basis of accounting
The condensed consolidated financial statements for the year ended 30 June 2017 are prepared in accordance with the
requirements of the JSE Limited Listings Requirements for provisional reports and the requirements of the Companies Act no.71
of 2008 of South Africa. The Listings Requirements require provisional reports to be prepared in accordance with the
framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS)
as issued by the International Accounting Standards Board (IASB) and the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and to
also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting . The accounting policies applied in
the preparation of the condensed consolidated financial statements are in terms of IFRS and are consistent with those applied
in the previous consolidated annual financial statements, with the exception of the policy for hedge accounting, which was only
applicable during 2017.
The following standards, amendments to standards and new interpretations have been adopted with effect 1 July 2016 and had
no impact on the results of the group (other than disclosure where relevant):
IFRSs Annual Improvements 2012-2014 cycle
IAS 1 (Amendments) Presentation of Financial Statements
New amendments to standards which had an effect on the condensed consolidated financial statements:
IFRS 11 (Amendments) Joint Arrangements - Acquisitions of interests in joint operations
The principles and disclosure requirements of IFRS 3 Business Combinations were applied to the acquisition of an additional
interest in a joint operation which related to Harmony's acquisition of Newcrest Mining Limited's (Newcrest) 50% interest in the
Hidden Valley operation in Papua New Guinea (PNG). Refer to note 5 for further details.
Management is continuing with its assessment of the new standards that are effective from 1 July 2018, the most prominent
being IFRS 9 Financial Instruments , and IFRS 15 Revenue from Contracts with Customers. Further analysis of the potential
impact of the standards still indicates that they will not have a significant impact on the financial statements.
The line items "Social investment expenditure", "Loss on scrapping of property, plant and equipment" and "Foreign exchange
translation" were presented separately in the income statement for 2016. These line items have been included within "Other
operating expenses" for 2017.
2 Cost of sales
Year ended
30 June 30 June
2017 2016
Figures in million (Reviewed) (Audited)
Production costs - excluding royalty(1) 14 597 13 079
Royalty expense 215 171
Amortisation and depreciation 2 519 2 170
Impairment/(Reversal of impairment) of assets(2) 1 718 (43)
Rehabilitation expenditure/(credit)(3) 23 (41)
Care and maintenance cost of restructured shafts 109 114
Employment termination and restructuring costs(4) 74 16
Share-based payments 391 329
Other (7) (9)
Total cost of sales 19 639 15 786
1 Production costs increased for 2017 as a result of increases in labour costs (annual increases and bonuses) and consumables together with the
inclusion of 100% of Hidden Valley from November 2016.
2 The impairment of the long-lived assets in 2017 consist of: Kusasalethu shaft (R678 million), Tshepong Operations (R255 million) and Target 1
shaft (R785 million). The net reversal of impairment in 2016 consists of a reversal of impairment of R738 million on Doornkop, offset by an
impairment of R466 million on Hidden Valley and R229 million on Masimong. There were no reversals recognised in 2017. Refer to note 8 for further
details.
3 Included in the total for 2017 is a credit of R109 million (2016: R110 million) relating to the change in estimate following the annual reassessment of
the provision for environmental rehabilitation.
4 Included in the total for 2017 is R61 million relating to consulting and contractor fees for the optimisation of the Hidden Valley operation.
3 Gains on derivatives
Gains on derivatives include the fair value movements of derivatives which have not been designated as hedging instruments
for hedge accounting purposes, the amortisation of day one gains and losses for hedging instruments and the hedging
ineffectiveness.
Year ended
30 June 30 June
2017 2016
Figures in million (Reviewed) (Audited)
Unrealised derivative gain/(loss)1 100 369
Realised derivative gain1 1 019 77
Day one loss amortisation (94) -
Total gains on derivatives 1 025 446
1 Relates primarily to the foreign exchange hedging contracts. Refer to note 10.
4 Other operating expenses
Year ended
30 June 30 June
2017 2016
Figures in million (Reviewed) (Audited)
Social investment expenditure 74 58
Loss on scrapping of property, plant and equipment (refer to note 8) 140 64
Foreign exchange translation1 (refer to note 12) (194) 638
Silicosis settlement provision (refer to note 11) 917 -
Profit on sale of property, plant and equipment (42) (7)
Other (9) 49
Total other operating expenses 886 802
1 The gains arising from the foreign exchange hedging contracts were previously included as part of the foreign exchange translation gain/loss line.
The derivative gains and losses are now included in the gains from derivatives (refer to note 3). As a result, the foreign exchange translation
gain/loss has been re-presented for 2016 to exclude the gains on derivatives.
5 Acquisition of full ownership of Hidden Valley
Background prior to the transaction
The group had a 50% interest in the mining and exploration assets located in the Morobe province, PNG. Newcrest owned the
remaining 50% interest in these assets. The assets include the Hidden Valley mine and the Wafi-Golpu projects. This
partnership was formed during the 2009 financial year through a range of transactions, and was completed by 30 June 2009.
This partnership was considered a joint arrangement and was accounted for as a joint operation.
Hidden Valley transaction
On 19 September 2016 Harmony announced the agreement to purchase Newcrest PNG 1 Ltd, the wholly owned subsidiary of
Newcrest which holds Newcrest's 50% interest in the Hidden Valley joint venture, for a cash consideration of US$1. As part of
the transaction, Newcrest made a once-off contribution of US$22.5 million (R309 million) towards Hidden Valley's future
estimated environmental liability. The transaction was conditional upon certain regulatory approvals which were obtained on
25 October 2016 and Harmony gained control over Hidden Valley from this date.
The completion of the transaction gives Harmony 100% ownership of the Hidden Valley mine and surrounding exploration
tenements. The acquisition of the additional 50% interest in the Hidden Valley mine is aligned with the group's growth
aspirations. The Hidden Valley operation is an open-pit gold and silver mining operation which includes the processing plant.
The mine reached commercial levels of production in the 2009 financial year. There is an established quality management team
that have good relationships with key stakeholders including the community and a stable workforce. Full ownership of the mine
has enabled management to commit to the re-investment of capital at the operation (previously delayed by the joint venture
partners) and commence the stripping of stages 5 and 6 which is expected to extend the life of mine of the operation.
Since the close of the transaction, the additional 50% interest in Hidden Valley contributed revenue of R583 million and
R52 million profit to the group. If the acquisition had occurred on 1 July 2016, the group's unaudited consolidated revenue would
have increased by R533 million and profit would have decreased by R34 million.
IFRS does not currently provide guidance how to account for step-up transactions from joint operations to control and the group
has elected to apply the principles of IFRS 3 to such transactions. The purchase price allocation was initially prepared on a
provisional basis in accordance with IFRS 3.
No new information has been obtained since the acquisition date about facts and circumstances that existed at the acquisition
date requiring adjustments to the below amounts, or any additional provisions that existed at the date of acquisition, and
therefore accounting for the acquisition has been concluded.
Consideration transferred
The cash consideration paid to acquire Newcrest's 50% interest in Hidden Valley amounted to US$1. The group acquired a
cash balance of R459 million which is presented within the cash flow statement as a net inflow of cash from investing activities.
The cash paid by Newcrest as a once-off contribution to the rehabilitation liability is included in the cash balance presented as
part of the net assets acquired in the transaction.
Acquisition related costs
The Group incurred acquisition related costs of R4 million on advisory and legal fees. These costs are recognised as
transaction costs as part of corporate and administrative expenses.
Identifiable assets acquired and liabilities assumed
The fair value of the identifiable net assets acquired was determined on the expected discounted cash flows based on the life-of-
mine plan of Hidden Valley at a post-tax real discount rate of 12.53%, exchange rate of PGK/US$3.17, gold price of
US$1 189/oz and silver price of US$17.80/oz. The valuation was performed at 26 October 2016. The fair values are as follows:
Previously Acquired Total
Figures in million held interest interest(1) (100%)
Fair value of identifiable net assets acquired
Property, plant and equipment 636 636 1 272
Inventories (current) 491 491 982
Trade and other receivables (current) 22 19 41
Cash and cash equivalents 54 459 513
Provision for environmental rehabilitation (483) (483) (966)
Trade and other payables (current) (114) (274) (388)
606 848 1 454
Less fair value of previously held interest(2) (606)
Net fair value of identifiable net assets acquired 848
1 Harmony acquired the legal entity which held Newcrest's interest in Hidden Valley. This subsidiary contained certain assets and liabilities which
were different to those held by Harmony with respect to its interest in Hidden Valley.
2 The fair value of the previously held interest equalled the carrying amount of the assets and liabilities recognised by Harmony relating to the
previously held interest at the date of acquisition and no gain or loss was recognised with respect to the deemed disposal of the previously held
interest.
The fair value of the previously held interest at 30 June 2016 was R615 million which consisted of Harmony's long term assets
and related rehabilitation provision for its interest in Hidden Valley totalling R319 million and the working capital relating to
Harmony's interest in Hidden Valley totalling R296 million.
On the date of acquisition, the fair value of the previously held interest does not equal 50% of the fair value of the total
identifiable assets and liabilities assumed primarily because the acquired legal entity which held Newcrest's interest in Hidden
Valley included the cash paid by Newcrest (R309 million or US$22.5 million) and other assets and liabilities which differed from
the assets and liabilities held in Harmony's previously held interest.
Gain on bargain purchase
A gain on bargain purchase arising from the acquisition has been determined as follows:
Figures in million
Consideration paid -
Fair value of identifiable net assets acquired 848
Gain on bargain purchase 848
Since Harmony only paid US$1 for the 50% share a gain on bargain purchase results. A strategic review of the Hidden Valley
operation conducted by Newcrest resulted in their decision to exit the operation as it represented a non-core asset.
6 Taxation
Current taxation expense increased for the year ended 30 June 2017 compared to the previous year, due to the utilisation of
assessed losses and unredeemed capital at most of the South African operations in the prior year as well as the inclusion of
derivative gains in determining taxable income.
The weighted average deferred tax rates for most South African companies decreased as a result of decreased forecast
profitability of these operations. The deferred tax rate for Freegold decreased from 20.0% to 12.5% and for Randfontein
(consisting of Doornkop and Kusasalethu) decreased from 10.1% to 3.8%. The effect of these decreases resulted in the credit
to the income statement in 2017.
7 Earnings per ordinary share
Year ended
30 June 30 June
2017 2016
(Reviewed) (Audited)
Weighted average number of shares (million) 438 436
Weighted average number of diluted shares (million) 459 446
Total earnings per share (cents):
Basic earnings 83 218
Diluted earnings 79 213
Headline earnings 298 221
Diluted headline earnings 284 216
Figures in million
Reconciliation of headline earnings:
Net profit 362 949
Adjusted for:
Gain on bargain purchase1 (848) -
Loss on liquidation of subsidiary1 14 -
Impairment/(Reversal of impairment) of assets 1 718 (43)
Taxation effect on impairment/reversal of impairment of assets (26) 12
Profit on sale of property, plant and equipment (42) (7)
Taxation effect on profit on sale of property, plant and equipment 7 1
Loss on scrapping of property, plant and equipment 140 64
Taxation effect on loss on scrapping of property, plant and equipment (19) (12)
Headline earnings 1 306 964
1 There is no taxation effect on this item.
8 Property, plant and equipment and Intangible assets
(a) Acquisition of Hidden Valley
Refer to note 5 for details of the property, plant and equipment acquired as part of the Hidden Valley transaction.
(b) Impairment/reversal of impairment of property, plant and equipment and goodwill
The recoverable amount of mining assets is generally determined utilising real discounted future cash flows. One of the
most significant assumptions that influence the group's operations' life-of-mine plans, and therefore impairment, is the
expected gold price. During this year's planning and testing, commodity price and exchange rate assumptions as per the
table below were used. Post-tax real discount rates ranging between 8.98% and 11.92% (2016: 8.43% and 11.77%),
depending on the asset, were used to determine the recoverable amounts (fair value less costs to sell).
2018 onwards
US$ gold price ($/ounce) 1 200
US$ silver price ($/ounce) 17.00
Exchange rate (R/US$) 13.61
Exchange rate (PGK/US$) 3.16
Rand gold price (R/kg) 525 000
For South African operations, values of US$32.69, US$18.68 and US$4.67 per ounce were used for measured, indicated
and inferred resources, respectively. For Hidden Valley, US$5.84 per ounce was used for indicated and inferred resources.
The impairment assessment performed resulted in an impairment loss of R1.7 billion for the 2017 financial year. The slight
decrease in the gold price used in the life-of-mine plans, together with cost inflation, impacted negatively on margins. This,
as well as increases in the discount rates used, contributed to the lower recoverable amounts.
- An impairment of R785 million was recorded for Target 1, resulting in a recoverable amount of R2.0 billion. Information
gained from the underground drilling during the year indicated that some areas of the bottom reef of the Dreyerskuil are
highly channelised, which negatively impacted on the overall grade for the operation. These areas were subsequently
excluded from the life-of-mine plan. This, together with the general pressure on margins, reduced the profitability of the
operation over its life and contributed to the decrease in the recoverable amount.
- An impairment of R678 million was recorded for Kusasalethu mainly following a reduction in the additional attributable
resource value as a result of a decrease in the ounces. The company investigated the viability of a decline to extend the life.
The business case showed that the option was not feasible and therefore the resource ounces were reduced. The
recoverable amount of the operation is R 2.8 billion.
- An impairment of R255 million was recorded for Tshepong Operations resulting in a recoverable amount of R7.8 billion. Due
to the integration of Tshepong and Phakisa as of 1 July 2017, the two cash generating units (CGUs) were combined for
impairment testing for the first time. The carrying amount of the combined CGU included goodwill of R581 million. The
planned improvement to the environmental conditions at the operation resulted in additional capital expenditure, which
impacted on the recoverable amount. The impairment has been allocated to the CGU's goodwill, which is included in
intangible assets.
The recoverable amounts for these assets were determined on a fair value less costs to sell basis using the assumptions
above in discounted cash flow models and attributable resource values. These are fair value measurements classified as
level 3.
The sensitivity scenario of a 10% decrease in the commodity price used in the discounted cash flow models and the
resource values used (with all other variables held constant) would have resulted in additional impairments as follows:
Figures in million
Tshepong Operations 3 439
Kusasalethu 1 374
Hidden Valley 1 041
Target 1 1 006
Doornkop 934
Masimong 395
Other surface operations 257
Unisel 221
Bambanani 128
(c) Loss on scrapping of property, plant and equipment
An amount of R140 million was recorded for various operations as a result of the abandonment of individual surface assets
that are no longer core to the business or in use.
9 Investments in associate
Harmony's gross portion of the subordinated shareholders' loan extended to Rand Refinery Proprietary Limited (Rand Refinery)
in December 2014 amounted to R120 million. The loan formed part of the net investment in associate and was included in
Trade and other receivables. On 5 June 2017, the loan was converted into redeemable preference shares. The fair value of the
loan on the date of the conversion was R71 million, resulting in a loss of R15 million being recognised. The fair value was
determined using a discounted cash flow model which included expected dividends and redemption amounts at a discount rate
of 17.6%. The fair value measurement is classified as a level 3 model and is non-recurring.
Harmony's share of losses from associates amounted to R7 million for the year, which have been accounted for as part of the
investment in associates. The cumulative losses of R25 million result in the net investment balance of R46 million at
30 June 2017.
10 Derivative financial assets
At At
30 June 30 June
2017 2016
Figures in million (Reviewed) (Audited)
Non-current 306 -
Rand gold contracts (a) 298 -
US$ commodity contracts (b) 8 -
Current 1 541 369
Rand gold contracts (a) 1 080 -
US$ commodity contracts (b) 12 -
Foreign exchange hedging contracts (c) 449 369
(a) During the year Harmony started a hedging programme and entered into Rand gold forward sale derivative contracts (Rand
gold contracts). At 30 June 2017, the volume of open contracts is 10 077 kg (324 000 oz) spread over 21 months at an
average forward sale price of R693 437/kg. Cash flow hedge accounting is applied to these contracts, resulting in the
effective portion of the unrealised gains and losses being recorded in other comprehensive income (other reserves). During
the year ended 30 June 2017, the contracts that matured realised a gain of R744 million, of which R728 million has been
included in revenue and the ineffective portion of R16 million in gains on derivatives. The unamortised portion of the day one
gain or loss amounted to R34 million on 30 June 2017.
(b) During May 2017, Harmony began a hedging programme for Hidden Valley by entering into commodity hedging contracts.
The contracts comprise US$ gold forward sale derivative contracts as well as silver zero cost collars which establish a
minimum (floor) and maximum (cap) silver sales price. At 30 June 2017, the volume of open contracts is 1 991 kg
(64 000 oz) for the gold contracts at an average of US$1 276/oz and 30 170 kg (970 000 oz) for the silver contracts, spread
over 18 months. The weighted average prices for the silver contracts are as follows: cap US$18.10/oz and floor
US$17.10/oz. Hedge accounting is not applied and the resulting gains and losses are recorded in gains on derivatives in the
income statement.
(c) Harmony has entered into foreign exchange hedging contracts (forex hedging contracts) in the form of zero cost collars,
which establish a floor and cap US$/Rand exchange rate at which to convert US dollars to Rands. The nominal value of
open forex hedging contracts at 30 June 2017 is US$422 million (30 June 2016: US$500 million). The hedging contracts are
spread over a 12-month period with a weighted average cap price of US$1=R 15.53 (30 June 2016: US$1=R18.27) and
weighted average floor price of US$1=R14.41 (30 June 2016: US$1=R15.55). As hedge accounting is not applied, the
resulting gains and losses have been recorded in gains on derivatives in the income statement (refer to note 3).
11 Provision for silicosis settlement
Harmony and certain of its subsidiaries (Harmony group), together with other mining companies, are named in a class action for
silicosis and tuberculosis which was certified by the Johannesburg High Court in May 2016. The companies requested leave to
appeal to the Supreme Court of Appeal, which was granted on 13 September 2016 and is scheduled to be heard from
19 – 23 March 2018.
A gold mining industry working group consisting of African Rainbow Minerals Limited, Anglo American South Africa Limited,
AngloGold Ashanti Limited, Gold Fields Limited, Sibanye Gold Limited and Harmony (collectively the working group) was
formed in November 2014 to address issues relating to the compensation and medical care for occupational lung diseases in
the gold mining industry in South Africa. Essentially, the companies are seeking a comprehensive and sustainable solution
which deals with both the legacy compensation issues and future legal frameworks which, while being fair to employees, also
ensures the future sustainability of companies in the industry. The working group has engaged all stakeholders on these
matters, including government, organised labour, other mining companies and legal representatives of claimants who have filed
legal suits against the companies. The Working Group believes that achieving a comprehensive settlement which is fair to past,
present and future employees and sustainable for the sector is preferable to protracted litigation.
The facts of the matter have previously been disclosed as a contingent liability. As a result of the progress made by the working
group and the status of negotiations with affected stakeholders, management is now in a position to reasonably estimate
Harmony's share of a possible settlement of the class action claims and related costs within an acceptable range. A pre-tax
charge of R917 million has been recognised in the results for the year ending 30 June 2017.
The assumptions that were made in the determination of the provision amount include:
- Silicosis prevalence rates;
- Estimated settlement per claimant;
- Benefit take-up rates;
- The contributions to fund the benefit payments and administration costs;
- An appropriate discount rate; and
- Inflation.
There is uncertainty with regard to the rate at which potential claims would be reported as well as the benefit take-up rates.
The ultimate outcome of these matters remains uncertain, with a possible failure to reach a settlement or to obtain the requisite
court approval of the settlement. The provision recorded in the financial statements is consequently subject to adjustment or
reversal in the future, depending on the progress of the working group discussions and stakeholder consultations, and the
ongoing legal proceedings.
12 Borrowings
During the year ended 30 June 2017:
- R300 million was repaid on the R1.3 billion Nedbank revolving credit facility (RCF) in July 2016. The facility matured during
February 2017 and was replaced with a new R1 billion Nedbank RCF with similar terms to the previous facility. During March
2017, R300 million was drawn down on the new facility.
- US$30 million (R410 million) was repaid on the US$ RCF between August and November 2016. US$30 million
(R399 million) was drawn down on the facility during April 2017.
US$ facility Rand facility
Figures in million US dollar SA rand
Borrowings summary at 30 June 2017
Facility 250 1 000
Drawn down 140 300
Undrawn committed borrowing facilities 110 700
Maturity February February
2018 2020
Interest rate LIBOR + JIBAR +
3% 3.15%
The foreign exchange translation movements on the US$ loan are as follows:
Year ended
30 June 30 June
2017 2016
Figures in million (Reviewed) (Audited)
Translation gain/(loss) on US$ revolving credit facility 214 (665)
Rand/US$ exchange rate:
Closing/spot 13.11 14.72
Average 13.60 14.50
At 30 June 2017, the drawn amount of US$140 million on the US$ RCF is repayable within 12 months and has been reclassified
as current. Management has concluded a new US$ facility. Refer to note 17 for details after the reporting date.
13 Financial risk management activities
Commodity price sensitivity
The profitability of the group's operations, and the cash flows generated by those operations, are affected by changes in the
market price of gold, and in the case of Hidden Valley, silver as well. During 2017, Harmony entered into derivative contracts to
manage the variability in cash flows from the group's production, in order to create cash certainty and protect the group against
lower commodity prices. The limits currently set by the Board are for 20% of the production from gold and 25% from silver over
a 24-month period. Management continues to top-up these programmes as and when opportunities arise to lock in attractive
margins for the business.
The variability in the price of gold is managed by entering into gold forward sales contracts for the portion of the group's
production. The production of the South African operations is linked to Rand gold forward contracts. These contracts have been
designated as cash flow hedging instruments and hedge accounting has been applied. US$ gold forward contracts were entered
into for the production from Hidden Valley, which were not designated as hedging instruments for hedge accounting and are
accounted for in the income statement.
The variability in to the price of silver for Hidden Valley is managed by entering into US$ zero cost collars. These contracts have
not been designated as hedging instruments for hedge accounting and are accounted for in the income statement.
Refer to note 3 and 10 and the fair value determination section below for further detail on these contracts.
Fair value determination
The fair value levels of hierarchy are as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets;
Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset, either directly or indirectly
(that is, as prices) or indirectly (that is derived from prices);
Level 3: Inputs for the asset that are not based on observable market data (that is unobservable inputs).
The following table presents the group's assets and liabilities that are measured at fair value at reporting date:
At At
30 June 30 June
Fair value
hierarchy 2017 2016
level (Reviewed) (Audited)
Available-for-sale financial assets
Investment in financial assets(1) Level 3 4 5
Fair value through profit or loss financial assets
Restricted investments(2) Level 2 840 639
Derivative financial assets(3) Level 2 1 847 369
1 Level 3 fair values have been valued by the directors by performing independent valuations on an annual basis.
2 The majority of the level 2 fair values are directly derived from the Top 40 index on the JSE, and are discounted at market interest rate. This relates
to equity-linked deposits in the group's environmental rehabilitation trust funds. The balance of the environmental trust funds are held to maturity and
therefore not disclosed here.
3 The mark-to market remeasurement of the following contracts is derived from:
- Forex hedging contracts (zero cost collars): a Black-Scholes valuation technique, derived from spot Rand/US$ exchange rate inputs and
discounted at market interest rate.
- Rand gold hedging contracts (forward sale contracts): spot Rand/US$ exchange rate, Rand and dollar interest rates (forward points), spot
US$ gold price, differential between the US interest rate and gold lease interest rate which is discounted at market interest rate.
- US$ gold hedging contracts (forward sale contracts): spot US$ gold price, differential between the US interest rate and gold lease interest
rate and discounted at market interest rate.
- Silver hedging contracts (zero cost collars): a Black-Scholes valuation technique, derived from spot US$ silver price and discounted at market
interest rate.
For all other financial instruments, fair value approximates carrying value.
14 Net additions to property, plant and equipment
Year ended
30 June 30 June
2017 2016
Figures in million (Reviewed) (Audited)
Capital expenditure - operations 2 354 2 152
Additions resulting from development at Hidden Valley 1 335 -
Capital and capitalised exploration and evaluation expenditure for Golpu 197 240
Additions resulting from stripping activities 77 42
Other1 (39) (1)
Net additions 3 924 2 433
1 Includes sale of Ernest Oppenheimer Hospital in 2017.
15 Commitments and contingencies
At At
30 June 30 June
2017 2016
Figures in million (Reviewed) (Audited)
Capital expenditure commitments:
Contracts for capital expenditure 187 264
Authorised by the directors but not contracted for 789 516
976 780
This expenditure will be financed from existing resources and, where appropriate, borrowings.
Contingent liabilities
For a detailed disclosure on contingent liabilities refer to Harmony's annual financial statements for the financial year ended
30 June 2016. Except as disclosed in note 11, there were no significant changes in contingencies since 30 June 2016.
16 Related parties
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
activities of the group, directly or indirectly, including any director (whether executive or otherwise) of the group.
(a) Movement in shares owned by directors/prescribed officers for year ended 30 June 2017:
Shares Shares sold Performance
purchased in in open shares
open market market vested and
retained
Name of director/prescribed officer
Frank Abbott (Financial director)(1) - - 84 952
Beyers Nel (Chief Operating Officer: SA) - - 14 646
Johannes van Heerden (Chief executive officer (South East Asia)) - - 25 000
1 These shares have been voluntarily locked-up in terms of the minimum shareholding requirement of the 2006 Share Plan but remains beneficially
owned.
(b) Refer to note 5 for details on the transaction related to the Hidden Valley acquisition.
17 Subsequent events
(a) On 28 July 2017, Harmony entered into an agreement for a new three-year syndicated facility of US$350 million
(US$175 million term loan plus US$175 million revolving credit facility). The facility was negotiated on similar terms to the
previous facility. Management has signed and executed the new facility and all the conditions precedent were fulfilled by
15 August 2017.
(b) On 15 August 2017, the board declared a final dividend for the 2017 year of 35 SA cents per share, payable on
16 October 2017.
18 Segment report
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-
maker (CODM). The CODM has previously been identified as the executive committee (Exco). During April 2017, the top
management structure was changed, creating a group CEO's office consisting of the chief executive officer, financial director,
director corporate affairs and chief operating officer: new business. The group CEO's office has replaced Exco as the CODM.
There has been no change to the information reported to the CODM.
The segment report follows below
19 Reconciliation of segment information to condensed consolidated income statements and balance sheets
The "Reconciliation of segment information to condensed consolidated financial statements" line item in the segment report is
broken down in the following elements, to give a better understanding of the differences between the financial statements and
segment report.
Year ended
30 June 30 June
2017 2016
Figures in million (Reviewed) (Audited)
Reconciliation of production profit to gross profit
Total segment revenue 19 264 18 334
Total segment production costs (14 812) (13 250)
Production profit per segment report 4 452 5 084
Amortisation and depreciation (2 519) (2 170)
(Impairment)/Reversal of impairment of assets (1 718) 43
Other cost of sales items (590) (409)
Gross profit/(loss) as per income statements1 (375) 2 548
1 The reconciliation was done up to the first recognisable line item on the income statement. The reconciliation will follow the income statement after
that.
At At
30 June 30 June
2017 2016
Figures in million (Reviewed) (Audited)
Reconciliation of total segment mining assets to consolidated property,
plant and equipment
Property, plant and equipment not allocated to a segment
Mining assets 713 657
Undeveloped property 5 139 5 139
Other non-mining assets 177 168
Wafi-Golpu assets 1 790 1 785
7 819 7 749
20 Review conclusion
These condensed consolidated financial statements for the year ended 30 June 2017 have been reviewed by
PricewaterhouseCoopers Inc., who expressed an unmodified review conclusion thereon. A copy of the auditor's review
conclusion is available for inspection at the company's registered office, together with the financial statements identified in the
auditor's report.
Segment report (Rand/Metric)
For the year ended 30 June 2017
Revenue Production cost Production profit Mining assets Capital expenditure# Kilograms produced* Tonnes milled*
30 June 30 June 30 June 30 June 30 June 30 June 30 June
2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
R million R million R million R million R million kg t'000
South Africa
Underground
Tshepong(a) 2 760 2 756 2 029 1 844 731 912 4 332 4 161 387 307 4 819 5 031 1 027 1 088
Phakisa(a) 2 302 2 186 1 642 1 375 660 811 4 134 4 246 330 323 4 009 3 988 668 686
Bambanani 1 576 1 617 871 811 705 806 745 807 77 106 2 750 3 013 231 232
Joel 1 309 1 220 936 831 373 389 909 728 243 215 2 246 2 278 514 542
Doornkop 1 553 1 480 1 241 1 047 312 433 2 979 2 984 243 208 2 673 2 730 641 630
Target 1 1 506 1 833 1 345 1 250 161 583 2 021 2 826 324 322 2 669 3 387 745 739
Kusasalethu 2 575 2 078 2 080 1 816 495 262 2 846 3 766 289 360 4 394 3 863 607 668
Masimong 1 452 1 318 1 113 1 038 339 280 433 485 119 110 2 538 2 432 640 650
Unisel 915 925 838 754 77 171 529 543 78 62 1 595 1 704 394 424
Target 3(b) - - - - - - 521 526 - - - - - -
Surface
All other surface operations 1 816 1 601 1 404 1 272 412 329 486 448 261 59 3 178 2 972 11 045 10 985
Total South Africa 17 764 17 014 13 499 12 038 4 265 4 976 19 935 21 520 2 351 2 072 30 871 31 398 16 512 16 644
International
Hidden Valley 1 500 1 320 1 313 1 212 187 108 2 290 650 1 335 79 2 965 2 257 2 889 1 729
Total international 1 500 1 320 1 313 1 212 187 108 2 290 650 1 335 79 2 965 2 257 2 889 1 729
Total operations 19 264 18 334 14 812 13 250 4 452 5 084 22 225 22 170 3 686 2 151 33 836 33 655 19 401 18 373
Reconciliation of the segment
information to the consolidated income
statement and balance sheet (refer to
note 19) 7 819 7 749
19 264 18 334 14 812 13 250 4 452 5 084 30 044 29 919 3 686 2 151 33 836 33 655 19 401 18 373
# Capital expenditure for international operations excludes expenditure spend on Wafi-Golpu of R197 million (2016: R240 million).
(a) Tshepong and Phakisa are two separate segments for the 2017 year. As of 1 July 2017, they have been integrated into Tshepong Operations and will be treated as one segment for the 2018 year.
(b) Target 3 was placed on care and maintenance in October 2014.
* Production statistics are unaudited and not reviewed.
The segment report for the year ended 30 June 2016 has been audited. The segment report for the year ended 30 June 2017 has been reviewed.
DEVELOPMENT RESULTS
FY 2017
METRIC IMPERIAL
Channel Channel
Reef Sampled Width Value Gold Reef Sampled Width Value Gold
Meters Meters (Cm's) (g/t) (Cmg/t) Feet Feet (Inch) (oz/t) (In.oz/t)
Tshepong Tshepong
Basal 1 202 1 092 9,35 141,71 1 325 Basal 3 944 3 583 4,00 3,80 15
B Reef 533 482 131,83 5,01 660 B Reef 1 748 1 581 52,00 0,15 8
All Reefs 1 735 1 574 46,86 23,93 1 121 All Reefs 5 693 5 164 18,00 0,72 13
Phakisa Phakisa
Basal 1 293 1 308 51,74 27,57 1 427 Basal 4 241 4 291 20,00 0,82 16
All Reefs 1 293 1 308 51,74 27,57 1 427 All Reefs 4 241 4 291 20,00 0,82 16
Bambabani Bambabani
Basal 130 92 153,04 16,26 2 489 Basal 427 302 60,00 0,48 29
All Reefs 130 92 153,04 16,26 2 489 All Reefs 427 302 60,00 0,48 29
Doornkop Doornkop
Main Reef - 189 91,41 4,58 419 Main Reef - 620 36,00 0,13 5
South Reef 1 337 1 083 58,13 21,35 1 241 South Reef 4 387 3 553 23,00 0,62 14
All Reefs 1 337 1 272 63,08 17,74 1 119 All Reefs 4 387 4 173 25,00 0,51 13
Kusasalethu Kusasalethu
VCR Reef 1 127 1 138 92,96 15,41 1 433 VCR Reef 3 698 3 734 37,00 0,44 16
All Reefs 1 127 1 138 92,96 15,41 1 433 All Reefs 3 698 3 734 37,00 0,44 16
Target 1 Target 1
Elsburg 104 116 292,48 5,59 1 636 Elsburg 342 381 115,00 0,16 19
All Reefs 104 116 292,48 5,59 1 636 All Reefs 342 381 115,00 0,16 19
Masimong 5 Masimong 5
Basal 1 106 952 81,79 12,75 1 043 Basal 3 630 3 123 32,00 0,37 12
B Reef 927 993 90,79 19,68 1 787 B Reef 3 042 3 258 36,00 0,57 21
All Reefs 2 034 1 945 86,38 16,47 1 423 All Reefs 6 672 6 381 34,00 0,48 16
Unisel Unisel
Basal 1 042 658 138,48 8,17 1 131 Basal 3 418 2 159 55,00 0,24 13
Leader 1 042 946 206.10 5.42 1 116 Leader 3 418 3 104 81.00 0.16 13
Middle 118 74 169,68 14,39 2 441 Middle 387 243 67,00 0,42 28
All Reefs 2 202 1 678 177,98 6,63 1 180 All Reefs 7 223 5 505 70,00 0,19 14
Joel Joel
Beatrix 1 423 1428 145,67 7,72 1 125 Beatrix 4 668 4 685 57,00 0,23 13
All Reefs 1 423 1 428 145,67 7,72 1 125 All Reefs 4 668 4 685 57,00 0,23 13
Total Harmony Total Harmony
Basal 4 773 4 102 63,61 20,23 1 287 Basal 15 660 13 458 25,00 0,59 15
Beatrix 1 423 1 428 145,67 7,72 1 125 Beatrix 4 668 4 685 57,00 0,23 13
Leader 1 042 946 206,10 5,42 1 116 Leader 3 418 3 104 81,00 0,16 13
B Reef 1 460 1 475 104,20 13,62 1 419 B Reef 4 791 4 839 41,00 0,40 16
Middle 118 74 169,68 14,39 2 441 Middle 387 243 67,00 0,42 28
Elsburg 104 116 292,48 5,59 1 636 Elsburg 342 381 115,00 0,16 19
South Reef 1 337 1 083 58,13 21,35 1 241 South Reef 4 387 3 553 23,00 0,62 14
VCR 1 127 1 138 92,96 15,41 1 433 VCR 3 698 3 734 37,00 0,44 16
Main Reef - 189 91,41 4,58 419 Main Reef - 620 36,00 0,13 5
All Reefs 11 384 10 551 99,53 12,82 1 276 All Reefs 37 349 34 616 39,00 0,38 15
17 August 2017
Date: 17/08/2017 07:50:00 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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