Operating overview and trading statement for the year ended 30 June 2018
Harmony Gold Mining Company Limited
Registration number 1950/038232/06
Incorporated in the Republic of South Africa
JSE share code: HAR
(“Harmony” and/or “the Company”)
Operating overview and trading statement for the year ended 30 June
Johannesburg, Friday, 17 August 2018. Harmony Gold Mining Company Limited
(“Harmony” or the “Company”) announces an update on its operating results
related to all-in sustaining unit costs and provides a trading statement
relating to its financial year June 2018 (“FY18”).
Overview of FY18 performance
In FY18 Harmony delivered a strong production performance and achieved
two significant milestones in driving the Company’s strategy to produce
safe, profitable ounces and increase margins:
- the Hidden Valley re-investment was delivered safely, below budget
and ahead of schedule; and
- the acquisition of the Moab Khotsong operations and its successful
integration into Harmony’s portfolio.
These two investments enhance the quality of the Company’s portfolio and
are already contributing to strengthening Harmony’s results. In FY18,
Harmony achieved an all-in sustaining unit cost of
R508 970/kg (US$1 231/oz), beating annual guidance of R520 000/kg and
beating the all-in sustaining unit cost of R516 687/kg (US$1 182/oz)
reported for the June 2017 financial year.
Harmony achieved its production guidance for the third consecutive year
and increased its underground recovered grade by 8% (an increase in grade
for a sixth consecutive year).
Headline and basic earnings
In terms of paragraph 3.4(b) of the Listings Requirements of the JSE
Limited (JSE), a company listed on the JSE is required to publish a
trading statement as soon as they are satisfied that a reasonable degree
of certainty exists that the financial results for the period to be
reported upon next will differ by at least 20% from the financial results
for the previous corresponding period.
Shareholders of Harmony are advised that a reasonable degree of certainty
exists that earnings for the year ended 30 June 2018 (“FY18”) will be
lower than for the year ended 30 June 2017 (“the previous comparable
period” or “FY17”) primarily due to once-off non-cash impairments, a
reported translation loss on the US$ denominated debt at 30 June 2018
and lower derivative gains recorded in FY18. The recorded impairments
reduce the net profit of the Company but have no impact on reported cash
balances and free cash flow.
Headline earnings per share (“HEPS”) are expected to be between 164 and
179 South African cents – a year on year decrease of approximately 40%
to 45% reported for the previous comparable period (which was 298 South
African cents). In US dollar terms, HEPS are expected to be between 12
and 14 US cents per share, which is between 35% to 45% lower than the
headline earnings of 21 US cents per share reported for the previous
Earnings per share (“EPS”) are expected to decrease to a loss of between
995 and 1 011 South African cents per share, which is more than a 100%
lower than the 82 South African cents per share reported for the previous
comparable period. In US dollar terms, the loss per share is expected
to be between 68 and 84 US cents per share, which is more than 100%
lower than the earnings of 4 US cents per share reported for the previous
The life-of-mine plans form the basis for assessing whether any
impairment against the carrying value of an asset is required. These
values are informed by a number of factors, including estimates of future
gold prices and exchange rates and operating and capital cost estimates.
An impairment of R5.3 billion (US$386 million) was recorded at Harmony’s
Tshepong Operations, Target 1, Joel, Kusasalethu, Unisel, Masimong,
Doornkop, and the Target North undeveloped property. The impairments
were mainly driven by forecasted cost inflation and a subdued gold price
of R535 000/kg ($1 250 at R/$13.30) applied in the Company’s life-of-
mine plans and the resultant impact on margins. Furthermore, in the case
of Target North and Doornkop, lower resource multiples were applied to
estimate the value of the resources. The values per resource ounce have
decreased substantially as a result of the low levels of merger and
acquisition activity of resource companies in South Africa, and more
specifically gold mining companies.
A translation loss of approximately R669 million was recognised on the
US$ denominated debt as at 30 June 2018, compared to a translation gain
of R215 million recorded in the previous comparable period.
Lower derivative gains
Included in FY17 were derivative gains of R1.1 billion (US$75 million)
compared to R0.1 billion (US$8 million) in FY18.
The financial information on which this trading statement has been based
has not been reviewed or reported on by Harmony’s external auditors.
Harmony will publish its production and financial results for the year
ended 30 June 2018 on Tuesday, 21 August 2018.
For more details contact:
Investor Relations Manager
+27(0)71 607 1498 (mobile)
Marian van der Walt
Executive: Investor Relations
+27(0)82 888 1242 (mobile)
Johannesburg, South Africa
17 August 2018
J.P. Morgan Equities South Africa Proprietary Limited
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