Wrap Text
Interim results for the six months ended 31 December 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
FY18 INTERIM RESULTS
FOR THE SIX MONTHS ENDED 31 DECEMBER 2017
HALF YEAR ACHIEVEMENTS
- 49% increase in headline earnings per share to 224 SA cents (55% increase to 17 US cents)
- 6% increase in South African gold production
- 4% increase in underground recovered grade to 5.26g/t
- 2% decrease in all-in sustaining costs to R500 248/kg (2% increase to US$1 161/oz)
- Hidden Valley plant upgrade completed ahead of schedule
- Successful hedging programmes topped up
OPERATING RESULTS
Six months Six months
ended ended Six months
December December Variance ended Variance*
2017 2016 % June 2017 %
Gold produced kg 17 418 17 227 1 16 609 5
oz 560 003 553 862 1 533 990 5
Underground grade g/t 5.26 5.04 4 5.10 3
Gold price received R/kg 580 672 585 908 (1) 554 515 5
US$/oz 1 348 1 303 3 1 306 3
Cash operating costs R/kg 419 440 437 996 4 435 784 4
US$/oz 974 974 - 1 027 5
Total costs and capital(1) R/kg 494 369 504 443 2 515 849 4
US$/oz 1 148 1 122 (2) 1 215 6
All-in sustaining costs(2) R/kg 500 248 510 506 2 522 830 4
US$/oz 1 161 1 136 (2) 1 232 6
Production profit R million 2 712 2 474 10 1 978 37
US$ million 203 177 15 150 35
Exchange rate R/US$ 13.40 13.98 (4) 13.20 2
* December 2017 six months and June 2017 six month comparison
(1) Excludes investment capital for Hidden Valley
(2) Excludes share-based payment charge
FINANCIAL RESULTS
Six months Six months
ended ended
December December Variance
2017 2016 %
Basic earnings per share SAc/s 203 352 (42)
USc/s 15 25 (40)
Headline earnings R million 990 657 51
US$ million 74 47 57
Headline earnings per share SAc/s 224 150 49
USc/s 17 11 55
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 is available on our website (www.harmony.co.za/investors)
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 proceeded 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 report. Important factors that could
cause actual results to differ materially from estimates or projections contained in the
forward-looking statements include, without limitation: overall economic and business
conditions in 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 on
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 annual report 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 Geological Society of South Africa (GSSA). 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 31 December 2017 444 724 878
Issued ordinary share capital at 30 June 2017 439 957 199
Issued ordinary share capital at 31 December 2016 439 787 199
MARKET CAPITALISATION
At 31 December 2017 (ZARm) 10 627
At 31 December 2017 (US$m) 858
At 30 June 2017 (ZARm) 9 538
At 30 June 2017 (US$m) 728
At 31 December 2016 (ZARm) 13 866
At 31 December 2016 (US$m) 1 014
HARMONY ORDINARY SHARES AND ADR PRICES
12-month high (1 January 2017 - 31 December 2017) R38.80
for ordinary shares
12-month low (1 January 2017 - 31 December 2017) R20.68
for ordinary shares
12-month high (1 January 2017 - 31 December 2017) US$2.99
for ADRs
12-month low (1 January 2017 - 31 December 2017) US$1.68
for ADRs
FREE FLOAT 100%
ADR RATIO 1:1
JSE LIMITED HAR
Range for six months (1 July 2017 R27.90 - R21.08
- 31 December 2017 closing prices)
Average daily volume for the six months (1 July 2017 2 727 918
- 31 December 2017)
Range for previous six months (1 January 2017 R20.68 - R38.80
- 30 June 2017 closing prices)
Average daily volume for the previous six months 2 158 424
(1 January 2017 - 30 June 2017)
NEW YORK STOCK EXCHANGE HMY
including other US trading platforms
Range for six months (1 July 2017 U$2.19-US$1.56
- 31 December 2017 closing prices)
Average daily volume for the six months (1 July 2017 2 845 843
- 31 December 2017)
Range for previous six months (1 January 2017 US$2.99 - US$1.58
- 30 June 2017 closing prices)
Average daily volume for the previous six months 5 502 443
(1 January 2017 - 30 June 2017)
Investors' calendar
H2 FY18 live presentation from Johannesburg 15 August 2018
Annual General Meeting 23 November 2018
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*^, MV Sisulu*^, JL Wetton*^, AJ Wilkens*
* Non-executive
** Executive
^ Independent
1 Mozambican
INVESTOR RELATIONS
E-mail: HarmonyIR@harmony.co.za
Telephone: +27 11 411 2314
Website: www.harmony.co.za
COMPANY SECRETARY
Telephone: +27 11 411 2094
E-mail: companysecretariat@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 11 713 0800
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 Receipt
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
We continue to deliver on our strategy to produce safe, profitable
ounces and increasing our margins.
Operational excellence, which encompasses safety, good mining
discipline and focused grade management has resulted in a solid
production performance in the six months ended 31 December 2017.
The production from our South African operations has become far
more consistent.
On 1 February 2018 shareholders approved the acquisition of the
Moab Khotsong assets, advancing our growth aspiration of becoming
a 1.5 Moz producer and a leading South African gold mining company.
SAFETY
It is with great regret that we report eight fatalities in four separate
incidents in the six months ended 31 December 2017, which serves
as a constant reminder that we have to do even more in securing a
safe working place. The increase of fall-of-ground related accidents
across the mining industry has led to the investigation into new leading
practices related to ledging and drilling and blasting by an industry
safety task team.
The safety and health of all our employees is our primary concern. Risk
management, employee training, control implementation and control
assessments remain critical in our approach to managing safety. A key
pillar of Harmony's Live Longer safety campaign is the promotion of a
culture of continuous care and learning at all our operations.
OPERATIONAL RESULTS - H1FY17 TO H1FY18
Gold production for the group for the six months ended 31 December
2017 increased by 191kg (1%) to 17 418kg (560 003 oz), compared
to 17 227kg (553 862oz) for the six months ended 31 December 2016.
Gold production from the South African operations increased by
6% for the six months ended 31 December 2017 to 16 756kg
(538 719 oz), compared to 15 812kg (508 369 oz) for the six months
ended 31 December 2016.
The performance from our operations is summarised below:
- Tshepong operations: gold production increased by 10%, due to a
6% increase in recovered grade to 5.68g/t and a 4% increase in
tonnes milled;
- Target 1: gold production increased by 36%, with a 41% increase
in recovered grade to 4.22g/t. The December 2016 six months
production was hampered by unfavourable mining conditions in the
higher grade areas;
- Doornkop: gold production increased by 25%, as a result of a 14%
increase in recovered grade to 4.74g/t and a 10% increase in tonnes
milled;
- Central plant reclamation: The inaugural six months' performance
from the operation was successful. The operation produced 243kg
(7 812oz), 1 900 000 tonnes processed at an all-in sustaining cost of
R405 814/kg (US$942/oz);
- Masimong: gold production increased by 22%, due to an increase in
recovered grade of 23% to 4.56g/t;
- Kusasalethu: gold production increased by 3%, as a result of a 2%
increase in recovered grade to 6.91g/t. The operation has achieved
operational free cash flow for the third consecutive six month period;
- At Joel gold production decreased by 30%, as a result of a 25%
decrease in recovered grade to 3.62g/t, and a 6% decrease in tonnes
milled. Higher grades will be achieved once the decline project is
completed at the end of the financial year; and
- production at Unisel continues to be hampered by lower grades.
Development of the pillar has been accelerated in order to access
higher grade areas earlier than initially planned and mining of the
Leader Reef stopped.
The Hidden Valley processing infrastructure upgrade was completed
safely, ahead of schedule, and within budget. Annualised mining
rate targets have been achieved. The planned plant shutdown, which
commenced in August 2017 resulted in a decrease in production in the
December 2017 six months. The plant was commissioned two weeks
ahead of schedule in November 2017 and mining at stage 5 is a month
ahead of schedule. Commercial levels of production is expected to be
achieved in the June 2018 quarter.
Cash operating costs were well contained during the period.
The December six month period is generally impacted by two months
of higher winter electricity tariffs and annual bargaining unit wage
increases. Higher production at our South African operations resulted
in a 4% decrease in cash operating unit costs to R419 440/kg in the
six months ended 31 December 2017 (R437 996/kg for the six months
ended 31 December 2016). In US dollar terms, cash operating unit
costs remained flat at US$974/oz.
All-in sustaining costs for all operations decreased by 2% to
R500 248/kg in the six months ended 31 December 2017 when
compared to the previous comparable period of 31 December 2016. In
US dollar terms all-in sustaining costs increased by 2% to US$1 161/oz
mainly due to the strengthening of the Rand against the US dollar in
the six months ended 31 December 2017.
In line with our plans, total capital expenditure was 64%
(or R930 million) higher at R2.38 billion (72% to US$177 million)
of which R764 million (US$58 million) related to the Hidden Valley
re-investment. 91% of the US$180 million net-investment expenditure
has been incurred up to 31 December 2017.
FINANCIAL RESULTS - H1FY17 TO H1FY18
Revenue
Revenue for the six months ended 31 December 2017 remained
relatively flat in comparison to the December 2016 period. The average
gold price received decreased by 1% to R580 672/kg (US$1 348/oz),
whilst total gold sales increased 2%.
Forward gold sale contracts of 3 359kg or 108 000oz, with an average
price of R692 836/kg (US$1 609/oz), matured during the December
2017 period. This contributed R503 million (US$38 million) to revenue.
Production costs
Production costs decreased by R264 million or 4% (an increase of
US$3 million or 1%) in the December 2017 period. The decrease in
Rand terms was mainly due to the capitalisation of production costs as
a result of the re-investment into Hidden Valley.
Impairments
An impairment calculation was performed for all operations and an
impairment of R116 million (US$9 million) was recognised on Unisel,
mainly due to a reduction in the expected production performance
going forward.
Net profit
The net profit for the six months ended 31 December 2017
was R897 million (US$65 million), compared to R1 539 million
(US$111 million) for the comparative period which included a gain on
bargain purchase of R848 million (US$61 million). Headline earnings
increased by 49% to 224 SA cents per share (55% to 17 US cents per
share) compared with 150 SA cents per share (11 US cents) for the
December 2016 period.
Borrowings
Borrowings as at 31 December 2017 consist of US$175 million utilised
on the term facility and US$40 million on the revolving credit facility.
Net debt increased to R1 511 million (US$122 million) at the end of
December 2017 from R887 million (US$68 million) at the end of June
2017. The increase is largely as a result of funding Hidden Valley's
US$180 million stage 5 and 6 development.
Hedging activity
The hedging programmes realised gains of R771 million (US$58 million)
for the December 2017 period. Management continues to top-up
these programmes when the market presents attractive opportunities
to do so.
Refer to note 7 and 11 on pages 17 and 20 for further detail.
The gold hedging programme currently provides cover for
approximately 19% of the expected gold production over the next two
years. A summary of all the open hedging contracts as at 31 December
2017 is as follows:
FY18 FY19 FY 2020
2018 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 TOTAL
US$ZAR US$m 120 111 94 38 363
Floor 14.02 14.01 14.09 14.57 14.10
Cap 15.03 15.02 15.09 15.62 15.10
R/gold '000 oz 54 54 54 51 51 24 24 17 329
R'000/kg 713 728 697 621 633 631 642 674 672
US$/gold '000 oz 17 24 24 24 12 12 113
US$/oz 1 279 1 284 1 288 1 291 1 312 1 315 1 292
Total gold '000 oz 71 78 78 75 63 36 24 17 442
US$/silver '000 oz 180 210 240 240 870
Floor 17.10 17.10 17.10 17.10 17.10
Cap 18.10 18.10 18.10 18.10 18.10
ACQUISITION OF MOAB KHOTSONG OPERATIONS:
UPDATE
Since the announcement on 19 October 2017 of Harmony's proposed
acquisition of the Moab Khotsong operations - which includes the
Great Noligwa underground mine and related infrastructure from
AngloGold Ashanti Limited for a consideration of US$300 million in
cash - significant progress with regards to the closing of the transaction
and management of the integration of the operations has been made.
We will continue to update the market as and when conditions
precedent are met in support of the transaction. The Moab Khotsong
acquisition is expected to significantly increase Harmony's cash flow
from year one and further value will be unlocked by expanding the
reserves and extending life of mine.
GOLPU
The Wafi-Golpu Joint Venture parties continues to engage with the
PNG Government on the application for a Special Mining Lease (SML)
for the Wafi-Golpu project.
The joint venture parties are targeting completion of an updated
feasibility study during the March 2018 quarter. The focus of which
is to further optimise the Golpu business case and confirm any
amendments necessary in respect of the supporting documents for the
SML application.
CONCLUSION
We are on track to achieve our group production guidance of
1.1Moz, after producing 560 000 ounces in the six months ended
31 December 2017. The increase in production expected at Hidden
Valley will further boost our annual production.
A weaker R/kg gold price simply serves as a reminder to reassess excess
costs - if any - and to cut back on expenses that do not support the
core business. We have started with our planning process for the next
financial year. Shareholder returns inform every decision we make.
We will therefore relentlessly pursue the production of safe, profitable
ounces. We are confident that our teams realise the importance of
safety and our reinforced focus on various initiatives should ensure a
safer second half of the financial year.
OPERATING RESULTS - SIX MONTHLY (RAND/METRIC)
South Africa
Six Underground production Surface production Total
months Tshepong Total Central plant Total South Hidden Total
ended operations Bambanani Joel Doornkop Target 1 Kusasalethu Masimong Unisel Underground Phoenix reclamation Dumps Kalgold Surface Africa Valley(1) Harmony
Ore milled - t'000 Dec-17 897 122 251 347 371 325 330 225 2 868 3 073 1 900 1 030 770 6 773 9 641 723 10 364
Jun-17 833 108 246 324 361 284 309 177 2 642 3 337 - 1 337 753 5 427 8 069 1 656 9 725
Dec-16 862 123 268 317 384 323 331 217 2 825 3 392 - 1 473 753 5 618 8 443 1 233 9 676
Yield - g/tonne Dec-17 5.68 11.56 3.62 4.74 4.22 6.91 4.56 3.18 5.26 0.125 0.128 0.423 0.79 0.25 1.74 1.12 1.72
Jun-17 5.05 11.76 3.85 4.18 4.20 7.79 4.23 3.66 5.10 0.135 - 0.408 0.79 0.29 1.87 0.99 1.75
Dec-16 5.36 12.03 4.84 4.16 3.00 6.75 3.72 4.37 5.04 0.138 - 0.346 0.81 0.28 1.87 1.15 1.78
Gold produced - kg Dec-17 5 093 1 410 908 1 646 1 564 2 245 1 504 715 15 085 384 243 436 608 1 671 16 756 662 17 418
Jun-17 4 210 1 270 948 1 355 1 518 2 213 1 307 647 13 468 451 - 545 595 1 591 15 059 1 550 16 609
Dec-16 4 618 1 480 1 298 1 318 1 151 2 181 1 231 948 14 225 467 - 510 610 1 587 15 812 1 415 17 227
Gold sold - kg Dec-17 5 087 1 412 936 1 570 1 580 2 200 1 502 715 15 002 388 247 437 572 1 644 16 646 551 17 197
Jun-17 4 284 1 293 967 1 388 1 518 2 367 1 332 660 13 809 471 - 573 632 1 676 15 485 1 742 17 227
Dec-16 4 532 1 452 1 313 1 324 1 124 2 131 1 207 930 14 013 461 - 491 581 1 533 15 546 1 377 16 923
Gold price - R/kg Dec-17 581 912 582 493 580 839 585 845 580 493 581 545 580 936 580 827 581 958 550 634 583 619 579 410 586 521 575 725 581 343 543 805 580 672
received Jun-17 560 352 559 817 554 533 557 334 559 443 553 921 558 601 558 620 558 137 524 735 - 557 707 556 910 548 140 557 055 527 552 554 515
Dec-16 587 221 587 059 588 313 588 388 584 472 592 875 586 513 587 737 588 029 575 362 - 589 053 590 523 585 493 587 779 563 456 585 908
Revenue (R'000) Dec-17 2 960 184 822 480 543 665 919 777 917 179 1 279 398 872 566 415 291 8 730 540 213 646 144 154 253 202 335 490 946 492 9 677 032 164 773 9 841 805
Jun-17 2 400 550 723 843 536 233 773 579 849 234 1 311 132 744 057 368 689 7 707 317 247 150 - 319 566 351 967 918 683 8 626 000 769 699 9 395 699
Dec-16 2 661 287 852 409 772 455 779 026 656 946 1 263 416 707 921 546 595 8 240 055 265 242 - 289 225 343 094 897 561 9 137 616 730 239 9 867 855
Cash operating (R'000) Dec-17 1 970 594 452 451 464 715 687 247 674 980 1 049 926 591 135 437 507 6 328 555 163 428 93 354 174 170 275 605 706 557 7 035 112 104 184 7 139 296
cost Jun-17 1 796 867 424 456 443 772 625 800 686 961 981 641 551 023 413 248 5 923 768 176 988 - 229 629 233 040 639 657 6 563 425 551 190 7 114 615
Dec-16 1 879 936 449 586 484 024 597 771 669 110 1 037 058 564 319 425 295 6 107 099 186 986 - 228 995 323 714 739 695 6 846 794 663 080 7 509 874
Inventory (R'000) Dec-17 (348) (1 038) 15 302 (33 780) 8 792 (21 736) 234 (272) (32 846) 1 171 3 024 122 (18 195) (13 878) (46 724) 37 694 (9 030)
movement Jun-17 31 806 11 118 2 012 15 600 (700) 77 760 8 439 7 751 153 786 8 812 - 13 718 22 207 44 737 198 523 104 336 302 859
Dec-16 (36 833) (14 363) 5 706 1 479 (10 405) (15 981) (10 793) (8 491) (89 681) (745) - (5 127) (14 799) (20 671) (110 352) (5 140) (115 492)
Operating costs (R'000) Dec-17 1 970 246 451 413 480 017 653 467 683 772 1 028 190 591 369 437 235 6 295 709 164 599 96 378 174 292 257 410 692 679 6 988 388 141 878 7 130 266
Jun-17 1 828 673 435 574 445 784 641 400 686 261 1 059 401 559 462 420 999 6 077 554 185 800 - 243 347 255 247 684 394 6 761 948 655 526 7 417 474
Dec-16 1 843 103 435 223 489 730 599 250 658 705 1 021 077 553 526 416 804 6 017 418 186 241 - 223 868 308 915 719 024 6 736 442 657 940 7 394 382
Production profit (R'000) Dec-17 989 938 371 067 63 648 266 310 233 407 251 208 281 197 (21 944) 2 434 831 49 047 47 776 78 910 78 080 253 813 2 688 644 22 895 2 711 539
Jun-17 571 877 288 269 90 449 132 179 162 973 251 731 184 595 (52 310) 1 629 763 61 350 - 76 219 96 720 234 289 1 864 052 114 173 1 978 225
Dec-16 818 184 417 186 282 725 179 776 (1 759) 242 339 154 395 129 791 2 222 637 79 001 - 65 357 34 179 178 537 2 401 174 72 299 2 473 473
Capital (R'000) Dec-17 476 946 33 326 128 194 126 919 166 571 150 025 62 563 56 984 1 201 528 1 000 7 672 - 57 040 65 712 1 267 240 1 107 987 2 375 227
expenditure Jun-17 364 512 34 809 122 462 131 391 183 712 149 950 64 241 42 456 1 093 533 1 281 63 523 5 141 87 293 157 238 1 250 771 990 064 2 240 835
Dec-16 351 627 41 950 120 041 111 258 139 987 138 900 54 919 35 408 994 090 3 848 92 581 1 604 8 280 106 313 1 100 403 344 470 1 444 873
Cash operating - R/kg Dec-17 386 922 320 887 511 801 417 526 431 573 467 673 393 042 611 898 419 526 425 594 384 173 399 472 453 298 422 835 419 856 393 147 419 440
costs Jun-17 426 809 334 217 468 114 461 845 452 543 443 579 421 594 638 714 439 840 392 435 - 421 338 391 664 402 047 435 847 435 036 435 784
Dec-16 407 089 303 774 372 900 453 544 581 329 475 497 458 423 448 623 429 322 400 398 - 449 010 530 679 466 096 433 013 497 061 437 996
Cash operating - R/tonne Dec-17 2 197 3 709 1 851 1 981 1 819 3 231 1 791 1 944 2 207 53 49 169 358 104 730 440 723
costs Jun-17 2 157 3 930 1 804 1 931 1 903 3 456 1 783 2 335 2 242 53 - 172 309 118 813 429 761
Dec-16 2 181 3 655 1 806 1 886 1 742 3 211 1 705 1 960 2 162 55 - 155 430 132 811 580 783
Cash operating - R/kg Dec-17 480 569 344 523 652 983 494 633 538 076 534 499 434 640 691 596 499 177 428 198 415 745 399 472 547 113 462 160 495 485 423 804 494 369
cost and Capital(2) Jun-17 513 392 361 626 597 293 558 813 573 566 511 338 470 745 704 334 521 035 395 275 - 430 771 538 375 500 877 518 905 479 524 515 849
Dec-16 483 231 332 119 465 381 537 958 702 951 539 183 503 037 485 974 499 205 408 638 - 452 155 544 252 533 086 502 605 526 223 504 443
All-in sustaining - R/kg Dec-17 483 982 359 282 590 571 510 253 539 615 550 625 450 373 691 636 503 809 426 802 405 814 398 838 565 847 464 593 499 900 519 338 500 248
cost Jun-17 523 898 384 254 545 866 560 074 592 687 526 666 486 166 721 579 529 842 397 200 - 433 661 556 134 469 598 522 905 522 030 522 830
Dec-16 491 743 332 778 427 123 565 877 731 710 557 443 517 240 499 891 508 197 412 332 - 459 209 561 556 483 901 505 795 567 012 510 506
Operating free % Dec-17 17 41 (9) 11 8 6 25 (19) 14 23 30 31 - 18 14 (757) 1
cash flow margin(3) Jun-17 10 37 (6) 2 (3) 14 17 (24) 9 28 (100) 27 10 13 9 (91) 1
Dec-16 16 42 22 9 (23) 7 13 16 14 28 (100) 20 3 5 13 (19) 11
(1) Ore milled for Hidden Valley includes 486 000 tonnes (Jun-17: 371 000t. Dec-16: 90 000t) that has been capitalised as part of pre-stripping of stages 5 & 6.
Production for Hidden Valley includes gold produced (397kgs. Jun-17: 283kgs. Dec-16: 81kgs) and sold (248kgs. Jun-17: 283kgs. Dec-16: 81kgs)
that has been capitalised.
(2) Excludes investment capital for Hidden Valley.
(3) Excludes run of mine costs for Kalgold (Dec-17:-R4.333m. Jun-17:R2.034m. Dec-16:-R2.288m) and Hidden Valley (Dec-17:R10.016m. Jun-17:R71.625m.
Dec-16:R140.794m).
CONDENSED CONSOLIDATED INCOME STATEMENTS (RAND)
Six months ended Year ended
31 December 31 December 30 June
2017 2016 2017
Figures in million Notes (Reviewed) (Reviewed) (Audited)
Revenue 9 842 9 868 19 264
Cost of sales 2 (8 805) (9 066) (19 639)
Production costs (7 130) (7 394) (14 812)
Impairment of assets (116) - (1 718)
Amortisation and depreciation (1 253) (1 274) (2 519)
Other expenses - net (306) (398) (590)
Gross profit/(loss) 1 037 802 (375)
Corporate, administration and other expenditure (303) (226) (517)
Exploration expenditure (81) (144) (241)
Gains on derivatives 337 594 1 025
Other operating income/(expenses) 3 208 140 (886)
Operating profit/(loss) 1 198 1 166 (994)
Gain on bargain purchase - 848 848
Acquisition related costs 6 (44) - -
Loss on liquidation of subsidiaries - - (14)
Profit/(loss) from associates 33 (13) (22)
Investment income 226 140 268
Finance costs (157) (128) (234)
Profit/(loss) before taxation 1 256 2 013 (148)
Taxation 4 (359) (474) 510
Current taxation (335) (363) (488)
Deferred taxation (24) (111) 998
Net profit for the period 897 1 539 362
Attributable to:
Owners of the parent 897 1 539 362
Earnings per ordinary share (cents) 5
Basic earnings 203 352 82
Diluted earnings 197 333 79
The accompanying notes are an integral part of these condensed consolidated financial statements.
The condensed consolidated financial statements for the six months ended 31 December 2017 have been prepared by Harmony Gold
Mining Company Limited's corporate reporting team headed by Boipelo Lekubo 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 13 February 2018. These
condensed consolidated financials have been reviewed by the group's external auditors, PricewaterhouseCoopers Incorporated (see
note 18).
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (RAND)
Six months ended Year ended
31 December 31 December 30 June
2017 2016 2017
Figures in million (Reviewed) (Reviewed) (Audited)
Net profit for the period 897 1 539 362
Other comprehensive income/(loss) for the period, net of (475) 1 076 818
Items that may be reclassified subsequently to profit or loss: (475) 1 076 821
Foreign exchange translation loss (400) (190) (322)
Remeasurement of rand gold hedging contracts
Deferred gain/(loss) on gold hedging contracts (96) 1 591 1 428
Deferred taxation thereon 21 (325) (285)
Items that will not be reclassified to profit or loss: - - (3)
Remeasurement of retirement benefit obligation
Actuarial loss recognised during the period - - (1)
Deferred taxation thereon - - (2)
Total comprehensive income for the period 422 2 615 1 180
Attributable to:
Owners of the parent 422 2 615 1 180
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (RAND)
for the six months ended 31 December 2017 (Reviewed)
Other Accumulated
Figures in million Share capital reserves loss Total
Balance - 30 June 2017 28 336 5 441 (4 486) 29 291
Share-based payments 1 190 - 191
Net profit for the year - - 897 897
Other comprehensive loss for the year - (475) - (475)
Dividends paid(1) - - (154) (154)
Balance - 31 December 2017 28 337 5 156 (3 743) 29 750
Balance - 30 June 2016 28 336 4 252 (4 409) 28 179
Share-based payments - 182 - 182
Net profit for the period - - 1 539 1 539
Other comprehensive income for the period - 1 076 - 1 076
Dividends paid(2) - - (218) (218)
Balance - 31 December 2016 28 336 5 510 (3 088) 30 758
(1) Dividend of 35 SA cents declared on 15 August 2017.
(2) Dividend of 50 SA cents declared on 15 August 2016.
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED BALANCE SHEETS (RAND)
At At At
31 December 30 June 31 December
2017 2017 2016
Figures in million Notes (Reviewed) (Audited) (Reviewed)
ASSETS
Non-current assets
Property, plant and equipment 30 954 30 044 30 639
Intangible assets 600 603 863
Restricted cash 70 64 58
Restricted investments 2 822 2 658 2 584
Investments in associates 79 46 -
Investments in financial assets 5 4 5
Inventories 38 38 37
Trade and other receivables 240 185 185
Derivative financial assets 7 258 306 645
Total non-current assets 35 066 33 948 35 016
Current assets
Inventories 8 1 370 1 127 1 616
Restricted cash 36 18 17
Trade and other receivables 993 1 003 820
Derivative financial assets 7 1 595 1 541 1 514
Cash and cash equivalents 1 055 1 246 1 215
Total current assets 5 049 4 935 5 182
Total assets 40 115 38 883 40 198
EQUITY AND LIABILITIES
Share capital and reserves
Share capital 28 337 28 336 28 336
Other reserves 5 156 5 441 5 510
Accumulated loss (3 743) (4 486) (3 088)
Total equity 29 750 29 291 30 758
Non-current liabilities
Deferred tax liabilities 4 1 704 1 702 2 849
Provision for environmental rehabilitation 2 661 2 638 2 721
Provision for silicosis settlement 9 953 917 -
Retirement benefit obligation 183 179 173
Borrowings 10 2 566 299 1 504
Derivative financial liabilities 7 5 - -
Trade and other payables 9 13 17
Total non-current liabilities 8 081 5 748 7 264
Current liabilities
Borrowings 10 - 1 834 -
Derivative financial liabilites 7 26 - -
Trade and other payables 2 258 2 010 2 176
Total current liabilities 2 284 3 844 2 176
Total equity and liabilities 40 115 38 883 40 198
The accompanying notes are an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
(RAND)
Six months ended Year ended
31 December 31 December 30 June
2017 2016 2017
(Reviewed) (Reviewed) (Audited)
Figures in million Notes (Restated)*
Cash flow from operating activities
Cash generated by operations 2 044 2 241 4 346
Interest received 44 40 75
Interest paid (60) (35) (79)
Income and mining taxes paid (196) (332) (538)
Cash generated by operating activities 1 832 1 914 3 804
Cash flow from investing activities
(Increase)/Decrease in restricted cash (22) 4 (1)
Decrease in amounts invested in restricted investments 2 3 7
Cash on acquisition of Hidden Valley - 459 459
Proceeds from disposal of property, plant and equipment 1 39 42
Additions to property, plant and equipment 12 (2 565) (1 473) (3 890)
Cash utilised by investing activities (2 584) (968) (3 383)
Cash flow from financing activities
Borrowings raised 10 2 856 - 699
Borrowings repaid 10 (2 147) (710) (710)
Dividends paid (154) (218) (439)
Cash generated/(utilised) by financing activities 555 (928) (450)
Foreign currency translation adjustments 6 (59) 19
Net decrease in cash and cash equivalents (191) (41) (10)
Cash and cash equivalents - beginning of year 1 246 1 256 1 256
Cash and cash equivalents - end of year 1 055 1 215 1 246
* Cash generated by operations has been decreased by R39 million and interest paid decreased by R39 million from the original amounts published on 2 February 2017 of
R2 280 million and R74 million respectively. This restatement Is due to the incorrect accrual amount being reversed at the beginning of the year as a non-cash adjustment against
interest paid, overstating the interest paid and cash generated by operations for the six months ended 31 December 2016. The net effect on cash generated by operating activities is
zero and there was no other impact on the cash flow statement.
The accompanying notes are an integral part of these condensed consolidated financial statements.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
for the six months ended 31 December 2017 (Rand)
1 Accounting policies
Basis of accounting
The condensed consolidated interim financial statements are prepared in accordance with International Financial Reporting
Standards, IAS 34 Interim Financial Reporting , the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and the requirements of the
Companies Act of South Africa. The accounting policies applied in the preparation of these interim financial statements are in terms
of International Financial Reporting Standards (IFRS) and are consistent with those applied in the previous consolidated annual
financial statements.
The amendment to IAS 7, Statement of Cash Flows has been adopted with effect 1 July 2017 and had no impact on the results of
the group (other than disclosure within the full financial statements) in the current period.
As of 1 July 2018, IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers will become effective for the
group. The impact of these two standards are discussed below.
Impact of the adoption of IFRS 9 - Financial Instruments
The group has performed a preliminary assessment of the potential impact of the adoption of IFRS 9 based on its position at
31 December 2017, which is subject to changes arising from further detailed analyses or additional reasonable and supportable
information being made available to the group in the future.
Recognition and measurement
Overall, the group does not expect that the new guidance, if applied at 31 December 2017, would have had a significant impact on
its balance sheet.
The group expects to continue measuring environmental rehabilitation obligation funds at fair value. Financial assets and trade and
other receivables are held to collect contractual cash flows and have contractual cash flows that are solely payments of principal and
interest. The group therefore expects that these will continue to be measured at amortised cost under IFRS 9. The group however
will analyse the contractual cash flow characteristics of those instruments in more detail before concluding whether all those
instruments meet the criteria for amortised cost measurement under IFRS 9. Investments in financial assets that are classified as
held-to-maturity investments are expected to be classified under fair value through other comprehensive income and derivative
financial assets will continue to be measured at fair value through profit and loss.
Financial liabilities
There will be no impact on the group's accounting for financial liabilities as the new requirements only affect those that are
designated at fair value through profit or loss and the group's financial liabilities are all measured at amortised cost.
Impairment
IFRS 9 requires the group to record expected credit losses on all of its loans and trade receivables, either on a 12-month or lifetime
basis. The group expects to apply the simplified approach and record lifetime expected losses on all trade receivables. The group is
assessing the extent of this impact, but, in general, expects that the application of the expected credit loss model will result in earlier
recognition of credit losses.
Hedge accounting
Hedge accounting in terms of IAS 39 is applied to Rand gold forward contracts entered into by the group as these contracts have
been designated as cash flow hedging instruments. The effective portion of the unrealised gains and losses is recognised in other
comprehensive income (other reserves). The gain or loss relating to the ineffective portion is recognised immediately in profit or loss
within gains/losses on derivatives. The group intends to adopt IFRS 9 which is not expected to have a material impact on the hedge
accounting for the group.
Disclosure
The new standard also introduces expanded disclosure requirements and changes in presentation. These are expected to change
the nature and extent of the group's disclosures about its financial instruments particularly in the year of the adoption of the new
standard. More granular credit risk and impairment disclosures will be required.
Impact of the adoption of IFRS 15 - Revenue from Contracts with Customers
Management has assessed the potential impact of IFRS 15 on the financial statements of the group and concluded that the group
does not sell product based on multiple-element arrangements and it does not sell product on a provisional or variable pricing basis
and as such the new standard is not expected to have a significant impact on the timing or amount of the group's revenue
recognition.
The adoption of IFRS 15 will result in the recognition of by-product revenue in "revenue from product sales". Revenue from product
sales includes gold income and by-product revenue. This change in classification results in a consequential increase in costs of
sales, and therefore will not have an impact on previously reported gross profit or loss.
Harmony intends to apply IFRS 15 retrospectively to each prior reporting period presented in accordance with IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors.
If IFRS 15 was retrospectively applied from 1 July 2017 to the earliest comparative period, it would have the following impact on
revenue and cost of sales:
Six months ended Year ended
31 December 31 December 30 June
Figures in million 2017 2016 2017
Revenue 9 842 9 868 19 264
By-product revenue 33 133 230
Revenue (restated) 9 875 10 001 19 494
% Change 0.3% 1% 1%
Cost of sales 8 805 9 066 19 639
By-product revenue 33 133 230
Cost of sales (restated) 8 838 9 199 19 869
% Change 0.4% 1% 1%
2 Cost of sales
Six months ended Year ended
31 December 31 December 30 June
2017 2016 2017
Figures in million (Reviewed) (Reviewed) (Audited)
Production costs - excluding royalty (a) 7 039 7 246 14 597
Royalty expense 91 148 215
Amortisation and depreciation 1 253 1 274 2 519
Impairment of assets (b) 116 - 1 718
Rehabilitation expenditure 47 82 23
Care and maintenance cost of restructured shafts 60 57 109
Employment termination and restructuring costs (c) 92 61 74
Share-based payments 123 201 391
Other (16) (3) (7)
Total cost of sales 8 805 9 066 19 639
(a) Production costs for the six months ended 31 December 2017 were lower than the comparative period as Hidden Valley was
developing stage 5 and 6 with the resultant costs capitalised.
(b) At 31 December 2017, management assessed the potential triggers for impairment. All key assumptions disclosed remained the
same as at 30 June 2017, with the exception of the discount rates on the South African operations. Post-tax discount rates for
the South African operations ranged between 9.29% and 12.13% (2017: 8.98% and 11.81%). The impairment for the six months
ended 31 December 2017 is related to Unisel, where production performance negatively impacted on the recoverable amount.
Also contributing to the impairment is the increase in the carrying value, as a result of the decrease in the deferred tax balance
set off against the asset value. The recoverable amount of R399 million was determined on a fair value less cost to sell basis.
This is a fair value measurement classified as level 3. The impairment test on the other South African operations did not result in
any impairments or reversals.
Sensitivity Analysis
One of the most significant assumptions that influence the life-of-mine plan and therefore the impairments is the expected
commodity prices. A 10% decrease in the commodity price used in the 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
Unisel 187
Bambanani 211
Kusasalethu 1 722
Tshepong Operations 4 405
The sensitivities of the other operations to this change has not changed significantly from the disclosure at 30 June 2017.
The impairment of the long-lived assets for the year ended 30 June 2017 consist of: Kusasalethu (R678 million), Tshepong
operations (R255 million) and Target 1 (R785 million). There were no reversals recognised in 2017.
(c) The costs for the six months ended 31 December 2017 relate to a retrenchment programme that started in July 2017. The
R61 million recorded for the six months ended 31 December 2016 relates to consulting and contractor fees resulting from the
acquisition of Newcrest's 50% interest in the Hidden Valley operation.
3 Other operating income/(expenses)
Six months ended Year ended
31 December 31 December 30 June
2017 2016 2017
Figures in million (Reviewed) (Reviewed) (Audited)
Social investment expenditure (26) (27) (74)
Profit on sale of property, plant and equipment - 42 42
Loss on scrapping of property, plant and equipment - - (140)
Foreign exchange translation (refer to note 10) 177 119 194
Silicosis settlement provision - - (917)
Reversal of provision/(provision) for ARM BEE loan(1) 40 - (13)
Other 17 6 22
Total other operating income/(expenses) 208 140 (886)
(1) The provision was reversed following an increase in African Rainbow Minerals Limited's share price and dividends paid in the period between July 2017
and December 2017, which form part of the recoverability test at 31 December 2017.
4 Taxation
The lower deferred tax expense in the December 2017 six months relates primarily to decreased tax rates compared to the
December 2016 six months. Deferred tax rates decreased for Freegold from 20% to 12.5% and Randfontein (comprising Doornkop
and Kusasalethu) from 10.1% to 3.8% following the annual reassessment of the rates. The decrease was due to a reduction in the
profitability of the operations per their life-of-mine plans used as a base for the rate calculation at 30 June 2017.
5 Earnings per ordinary share
Six months ended Year ended
31 December 31 December 30 June
2017 2016 2017
Figures in million (Reviewed) (Reviewed) (Audited)
Weighted average number of shares (million) 441 437 438
Weighted average number of diluted shares (million) 454 462 459
Total earnings per share (cents):
Basic earnings 203 352 82
Diluted earnings 197 333 79
Headline earnings 224 150 298
Diluted headline earnings 218 142 284
Reconciliation of headline earnings:
Net profit 897 1 539 362
Adjusted for:
Gain on bargain purchase(1) - (848) (848)
Loss on liquidation of subsidiary(1) - - 14
Impairment of assets 116 - 1 718
Taxation effect on impairment of assets (22) - (26)
Profit on sale of property, plant and equipment (1) (43) (42)
Taxation effect on profit on sale of property, plant and equipment - 9 7
Loss on scrapping of property, plant and equipment - - 140
Taxation effect on loss on scrapping of property, plant and equipment - - (19)
Headline earnings 990 657 1 306
(1) There is no taxation effect on this item.
6 Acquisition of Moab Khotsong
On 19 October 2017, Harmony announced that it would acquire AngloGold Ashanti Limited's Moab Khotsong and Great Noligwa
mines together with other assets and related infrastructure for a cash consideration of the Rand equivalent of US$300 million. The
transaction is subject to approval from Harmony's shareholders and other conditions precedent, including regulatory approvals. The
Board of Harmony has unanimously approved the transaction and has resolved to recommend the transaction to its shareholders.
The transaction was approved by shareholders on 1 February 2018.
US$100 million of the consideration will be settled from Harmony's existing US$350 million syndicated loan facility. The remaining
US$200 million will be funded through a fully underwritten US$200 million bridge facility, which has a 12-month term with similar
terms and covenants as the existing loan facilities. The mandated bridge providers are UBS Limited, Nedbank Limited, Absa Bank
Limited and JP Morgan Securities plc. Up to US$100 million of the bridge facility is expected to be financed from internal cash
resources and debt facilities and approximately $100 million is expected to be refinanced through a private share placement or a
rights issue.
The assets and liabilities will be acquired by a wholly-owned subsidiary of Harmony. When all conditions precedent have been met,
Harmony will apply the principles of IFRS 3, Business Combinations, and the process of a purchase price allocation of the assets
acquired and liabilities assumed will commence.
The acquisition-related costs relate to advisory services provided as part of the acquisition.
7 Derivative financial assets/liabilities
At At At
31 December 30 June 31 December
2017 2017 2016
Figures in million (Reviewed) (Audited) (Reviewed)
Non-current 253 306 645
Rand gold forward sale contracts (a) 258 298 645
US$ commodity contracts (b) (5) 8 -
Current 1 569 1 541 1 514
Rand gold forward sale contracts (a) 1 032 1 080 946
US$ commodity contracts - net (b) (21) 12 -
Foreign exchange hedging contracts (c) 558 449 568
Total derivative financial assets 1 822 1 847 2 159
(a) Harmony has entered into rand gold forward sale derivative contracts to hedge the risk of lower rand/gold prices. 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 six months ended 31 December 2017, the contracts that
matured realised a gain of R503 million (June 2017: R744 million; December 2016: R233 million), of which R503 million
(June 2017: R728 million; December 2016: R233 million) has been included in revenue and the ineffective portion of Rnil
(June 2017: R16 million) in gains on derivatives. The unamortised portion of the day one gain or loss amounted to R24 million on
31 December 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. Hedge accounting is not applied and the resulting gains and losses are recorded in
gains on derivatives in the income statement. The loss amounted to R43 million (June 2017: R20 million gain).
(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$/Rand exchange rate at which to convert US dollars to Rands. As hedge accounting is not applied,
the resulting gains and losses have been recorded in gains on derivatives in the income statement. These gains amounted to
R403 million (June 2017: R1 082 million) (December 2016: R594 million).
The following table shows the open position at the reporting date:
FY18 FY19 FY20 TOTAL
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
US$ZAR
US$m 120 111 94 38 363
Floor 14.02 14.01 14.09 14.57 14.10
Cap 15.03 15.02 15.09 15.62 15.10
R/gold
'000 oz 54 54 54 51 51 24 24 17 329
R'000/kg 713 728 697 621 633 631 642 674 672
US$/gold
'000 oz 17 24 24 24 12 12 113
US$/oz 1 279 1 284 1 288 1 291 1 312 1 315 1 292
Total gold
'000 oz 71 78 78 75 63 36 24 17 442
US$/silver
'000 oz 180 210 240 240 870
Floor 17.10 17.10 17.10 17.10 17.10
Cap 18.10 18.10 18.10 18.10 18.10
Refer to note 11 for details on the fair value measurements.
8 Inventories
Hidden Valley's run-of-mine stockpile increased from R41 million in June 2017 to R162 million in December 2017. This is due to the
increase in development stripping and the temporary planned shutdown during the December 2017 period.
9 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 (SCA), which was granted on 13 September 2016 and was 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-Stillwater 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.
At 30 June 2017, management had estimated Harmony's share of a possible settlement of the class action claims and related costs
as R917 million (pre-tax) which was recognised in the 2017 year. The time value of money recognised for the six months ended
31 December 2017 was R36 million. There were no changes to the assumptions applied on the initial recognition of the provision.
The working group, as well as the claimants' attorneys, have subsequently requested the SCA to postpone the hearing of
19 - 23 March 2018, given the advanced stage at which negotiations for a settlement are at, which was granted.
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.
10 Borrowings
During the six months ended 31 December 2017:
- R300 million was repaid on the R1.0 billion Nedbank revolving credit facility (RCF) in September 2017.
- US$140 million (R1 847 million) was repaid on the existing US$ RCF in August 2017. On 28 July 2017, Harmony concluded an
agreement for a new three-year syndicated facility of US$350 million (US$175 million term loan plus US$175 million RCF). The
facility was negotiated on similar terms to the previous facility. US$175 million (R2 309 million) was drawn down on the term loan
in August 2017. US$40 million (R547 million) was drawn down on the RCF during November 2017.
US$ term US$ RCF Rand facility
Figures in million US dollar US dollar SA rand
Borrowings summary at 31 December 2017
Facility 175 175 1 000
Drawn down 175 40 -
Undrawn committed borrowing facilities - 135 1 000
Maturity July July February
2020 2020 2020
Interest rate LIBOR + LIBOR + JIBAR +
3.15% 3.00% 3.15%
The foreign exchange translation movements on the US$ loan are as follows:
Six months ended Year ended
31 December 31 December 30 June
2017 2016 2017
Figures in million (Reviewed) (Reviewed) (Audited)
Translation gain on US$ revolving credit facility 196 134 215
Rand/US$ exchange rate:
Closing/spot 12.32 13.79 13.11
Average 13.40 13.37 13.60
11 Financial risk management activities
Foreign exchange risk
Harmony's revenues are sensitive to the R/US$ exchange rate as all revenues are generated by gold sales denominated in US$.
During 2016 Harmony started a foreign currency hedging programme in order to manage the foreign exchange risk. The limit
currently set by the Board is $500 million, which amounts to approximately 35% of the group's foreign exchange risk exposure. Refer
to note 7 for the details of the contracts. The audit and risk committee reviews the details of the programme quarterly.
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. 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, but are not
required to maintain hedging at these levels. The audit and risk committee reviews the details of the programme quarterly.
Refer to note 7 and the fair value determination section below for further detail on these contracts.
Credit risk
In April 2017, two of the three international rating agencies, Standard and Poor's and Fitch, downgraded South Africa's long-term
sovereign credit rating due to increased perception of political risk and the risk of policy shifts that could undermine fiscal and
economic growth in South Africa. Fitch downgraded the national and foreign currency rating to sub-investment grade whereas
Standard and Poor's only downgraded the foreign currency rating to sub-investment grade and downgraded the national currency
rating by one notch which is still investment grade. Moody's has kept the sovereign credit risk of South Africa as investment grade.
This has led to the downgrade of various financial and parastatal institutions and companies in South Africa. This was largely limited
to international scale ratings, not the national scale ratings. The group has identified the following risks as a result of this downgrade,
which are:
(i) Increased credit risk;
(ii) Increased cost of capital; and
(iii) Difficulty in obtaining funding.
In assessing the credit worthiness of local institutions, management uses the national scale long-term ratings which are unchanged.
Management will continue monitoring these ratings.
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:
Fair At At At
value 31 December 30 June 31 December
hierarchy 2017 2017 2016
level (Reviewed) (Audited) (Reviewed)
Available-for-sale financial assets
Investment in financial assets(1) Level 3 5 4 5
Fair value through profit or loss financial assets
Restricted investments(2) Level 2 893 839 643
Derivative financial instruments - net(3) Level 2 1 822 1 847 2 159
(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, implied
volatilities on the rand/US$ exchange rate, rand/US$ inter-bank interest rates and discounted at market interest rate (zero-coupon interest rate curve).
- 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, strike price, implied volatilities,
time to maturity and interest rates and discounted at market interest rate.
For all other financial instruments, fair value approximates carrying value.
12 Net additions to property, plant and equipment
Six months ended Year ended
31 December 31 December 30 June
2017 2016 2017
Figures in million (Reviewed) (Reviewed) (Audited)
Capital expenditure - operations 1 214 1 136 2 354
Additions resulting from development at Hidden Valley(1) 1 108 226 1 335
Capital and capitalised exploration and evaluation expenditure for Golpu 187 116 197
Additions resulting from stripping activities 53 - 77
Other(2) 3 (44) (39)
Net additions 2 565 1 434 3 924
(1) December 2017 includes capitalised revenue of R159 million.
(2) Includes sale of Ernest Oppenheimer Hospital in the six months ended 31 December 2016.
13 Commitments and contingencies
`
At At At
31 December 30 June 31 December
2017 2017 2016
Figures in million (Reviewed) (Audited) (Reviewed)
Capital expenditure commitments:
Contracts for capital expenditure 459 369 311
Authorised by the directors but not contracted for 1 880 789 1 298
2 339 1 158 1 609
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 2017.
14 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.
Movement in shares owned by directors/prescribed officers for six months ended 31 December 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) - - 141 075
Beyers Nel (Chief Operating Officer: SA)(1) - - 24 933
Phillip Tobias (Chief Operating Officer: new business)(1) - - 31 166
Johannes van Heerden (Chief Executive Officer: South-east Asia) - - 50 000
(1) These shares have been voluntarily locked-up in terms of the minimum shareholding requirement of the 2006 Share Plan but remains beneficially
owned.
15 Segment report
As of 1 July 2017, Tshepong and Phakisa, previously two separate segments have been integrated. As a result, they now form one
segment, Tshepong operations, and the results for the 2017 year have been re-presented for this change. The shafts have been
integrated to take advantage of their close proximity, which allows for existing infrastructure to be optimised. From this date, the chief
operating decision-maker has reviewed the single segment information.
The segment report follows below.
16 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.
Six months ended
31 December 31 December
Figures in million 2017 2016
(Reviewed) (Reviewed)
Reconciliation of production profit to gross profit
Total segment revenue 9 842 9 868
Total segment production costs (7 130) (7 394)
Production profit per segment report 2 712 2 474
Impairment of assets (116) -
Amortisation and depreciation (1 253) (1 274)
Other expenses - net (306) (398)
Gross profit as per income statements(1) 1 037 802
(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
31 December 31 December
2017 2016
Figures in million (Reviewed) (Reviewed)
Reconciliation of total segment mining assets to consolidated property, plant and equipment
Property, plant and equipment not allocated to a segment
Mining assets 1 217 1 280
Undeveloped property 5 139 5 139
Other non-mining assets 184 160
Wafi-Golpu assets 1 842 1 769
8 382 8 348
17 Subsequent events
See note 6 for changes related to the Moab Khotsong transaction since the reporting date.
18 Review conclusion
These condensed consolidated interim financial statements for the six months ended 31 December 2017 and 31 December 2016
have been reviewed by PricewaterhouseCoopers Inc., who expressed an unmodified conclusion thereon. A copy of the auditor's
report on the condensed consolidated interim financial statements 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 six months ended 31 December 2017 (Reviewed)
Revenue Production cost Production profit Mining assets Capital expenditure# Kilograms produced* Tonnes milled*
31 December 31 December 31 December 31 December 31 December 31 December 31 December
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 operations(a) 2 960 2 661 1 970 1 843 990 818 8 575 8 439 477 352 5 093 4 618 897 862
Bambanani 822 852 451 435 371 417 706 777 33 42 1 410 1 480 122 123
Joel 544 772 480 490 64 282 998 821 128 120 908 1 298 251 268
Doornkop 920 779 653 599 267 180 3 007 2 986 127 111 1 646 1 318 347 317
Target 1 917 657 684 659 233 (2) 1 975 2 795 167 140 1 564 1 151 371 384
Kusasalethu 1 279 1 263 1 028 1 021 251 242 2 790 3 636 150 139 2 245 2 181 325 323
Masimong 873 708 591 554 282 154 393 453 63 55 1 504 1 231 330 331
Unisel 415 547 437 417 (22) 130 411 527 57 35 715 948 225 217
Surface
All other surface operations 947 899 694 718 253 181 524 434 65 107 1 671 1 587 6 773 5 618
Total South Africa 9 677 9 138 6 988 6 736 2 689 2 402 19 379 20 868 1 267 1 101 16 756 15 812 9 641 8 443
International
Hidden Valley(b) 165 730 142 658 23 72 3 193 1 423 1 108 344 662 1 415 723 1 233
Total international 165 730 142 658 23 72 3 193 1 423 1 108 344 662 1 415 723 1 233
Total operations 9 842 9 868 7 130 7 394 2 712 2 474 22 572 22 291 2 375 1 445 17 418 17 227 10 364 9 676
Reconciliation of the segment
information to the consolidated income
statement and balance sheet (refer to
note 15) 8 382 8 348
9 842 9 868 7 130 7 394 2 712 2 474 30 954 30 639 2 375 1 445 17 418 17 227 10 364 9 676
# Capital expenditure for international operations excludes expenditure spend on Wafi-Golpu of R187 million (2016: R112 million).
(a) Tshepong and Phakisa were two separate segments for the 2017 financial year. As of 1 July 2017, they have been integrated into Tshepong operations and have been treated as one segment for the 2018 financial year. December 2016 amounts have been
re-presented as a result of the integration.
(b) Capital expenditure comprises of expenditure of R1 267 million net of capitalised revenue of R159 million.
* Production statistics are unaudited and not reviewed.
DEVELOPMENT RESULTS
6 Month average
July 2017 - December 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 441 404 9,03 127,50 1 152 Basal 1 447 1 325 4,00 3,31 13
B Reef 230 240 145,23 10,21 1 483 B Reef 755 787 57,00 0,30 17
All Reefs 671 644 59,79 21,33 1 275 All Reefs 2 201 2 113 24,00 0,61 15
Phakisa Phakisa
Basal 1 058 1 060 43,64 28,36 1 238 Basal 3 471 3 478 17,00 0,84 14
All Reefs 1 058 1 060 43,64 28,36 1 238 All Reefs 3 471 3 478 17,00 0,84 14
Bambanani Bambanani
Basal - - - - - Basal - - - - -
All Reefs - - - - - All Reefs - - - - -
Doornkop Doornkop
Main Reef - 171 209,79 0,89 187 Main Reef - 561 83,00 0,03 2
South Reef 800 786 64,07 17,18 1 100 South Reef 2 624 2 579 25,00 0,51 13
All Reefs 800 957 90,11 10,40 937 All Reefs 2 624 3 140 35,00 0,31 11
Kusasalethu Kusasalethu
VCR Reef 582 454 62,62 24,75 1 550 VCR Reef 1 910 1 490 25,00 0,71 18
All Reefs 582 454 62,62 24,75 1 550 All Reefs 1 910 1 490 25,00 0,71 18
Target 1 Target 1
Elsburg 256 40 260,00 2,94 765 Elsburg 841 131 102,00 0,09 9
All Reefs 256 40 260,00 2,94 765 All Reefs 841 131 102,00 0,09 9
Masimong 5 Masimong 5
Basal 605 466 64,95 13,00 845 Basal 1 984 1 529 26,00 0,37 10
B Reef 442 504 99,21 35,79 3 551 B Reef 1 450 1 654 39,00 1,05 41
All Reefs 1 047 970 82,75 27,20 2 251 All Reefs 3 434 3 182 33,00 0,78 26
Unisel Unisel
Basal 437 390 186,17 7,08 1 317 Basal 1 434 1 280 73,00 0,21 15
Leader 123 100 209,20 6,18 1 293 Leader 402 328 82,00 0,18 15
All Reefs 560 490 190,87 6,88 1 312 All Reefs 1 836 1 608 75,00 0,20 15
Joel Joel
Beatrix 857 852 118,60 7,43 881 Beatrix 2 810 2 795 47,00 0,22 10
All Reefs 857 852 118,60 7,43 881 All Reefs 2 810 2 795 47,00 0,22 10
Total Harmony Total Harmony
Basal 2 541 2 320 65,85 17,57 1 157 Basal 8 335 7 612 26,00 0,51 13
Beatrix 857 852 118,60 7,43 881 Beatrix 2 810 2 795 47,00 0,22 10
Leader 123 100 209,20 6,18 1 293 Leader 402 328 82,00 0,18 15
B Reef 672 744 114,06 25,28 2 884 B Reef 2 205 2 441 45,00 0,74 33
Elsburg 256 40 260,00 2,94 765 Elsburg 841 131 102,00 0,09 9
South Reef 800 786 64,07 17,18 1 100 South Reef 2 624 2 579 25,00 0,51 13
VCR 582 454 62,62 24,75 1 550 VCR 1 910 1 490 25,00 0,71 18
Main Reef - 171 209,79 0,89 187 Main Reef - 561 83,00 0,03 2
All Reefs 5 830 5 467 88,65 15,15 1 343 All Reefs 19 127 17 936 35,00 0,44 15
13 February 2018
Date: 13/02/2018 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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