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RESTRUCTURED HARMONY MAKES STRONG TURNAROUND

Release Date: 21/01/1998 12:06:09      Code(s): HAR HARO
GROUP REPORT FOR THE QUARTER ENDED 31 DECEMBER 1997
HARMONY
HARMONY GOLD MINING COMPANY LIMITED
REGISTRATION NUMBER 05/38232/06   NASDAQ TRADING SYMBOL: HGMCY
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
- TURNAROUND IN FACE OF PRICE, LABOUR PROBLEMS
- SIGNIFICANT GRADE INCREASE, COST REDUCTIONS
OPERATING RESULTS
                                                        QUARTER     QUARTER
                                                        31/12/97    30/09/97
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FREE STATE OPERATIONS
UNDERGROUND OPERATIONS
ORE MILLED - T'000                                      1 222       1 477
GOLD PRODUCED - KG                                      5 393       5 411
YIELD - G/T                                             4.41        3.66
GOLD PRICE - R/T MILLED                                 212.72      177.23
CASH OPERATING COSTS - R/T MILLED                       203.44      191.70
CASH OPERATING PROFIT/(LOSS) - R/T MILLED               9.28        (14.47)
SURFACE OPERATIONS
TONNAGE TREATED - T'000                                 211         188
GOLD PRODUCED - KG                                      54          52
YIELD - G/T                                             0.26        0.28
GOLD PRICE - R/T TREATED                                12.40       14.22
CASH OPERATING COSTS - R/T TREATED                      6.99        7.37
CASH OPERATING PROFIT - R/T TREATED                     5.41        6.85
TOTAL FREE STATE OPERATIONS
GOLD PRICE - R/KG                                       48 202      48 379
CASH OPERATING COSTS - R/KG                             45 911      52 375
CASH OPERATING PROFIT/(LOSS) - R/KG                     2 291       (3 996)
EAST RAND OPERATIONS
UNDERGROUND OPERATIONS
ORE MILLED - T'000                                      222         166
GOLD PRODUCED - KG                                      704         616
YIELD - G/T                                             3.17        3.71
GOLD PRICE - R/T MILLED                                 149.80      181.09
CASH OPERATING COSTS - R/T MILLED                       210.30      309.57
CASH OPERATING (LOSS)- R/T MILLED                       (60.50)     (128.48)
SURFACE OPERATIONS
ORE MILLED - T'000                                      10          -
GOLD PRODUCED - KG                                      45          -
YIELD - G/T                                             4.50        -
GOLD PRICE - R/T MILLED                                 210.10      -
CASH OPERATING COSTS - R/T MILLED                       95.80       -
CASH OPERATING PROFIT - R/T MILLED                      114.30      -
TOTAL EAST RAND OPERATIONS
GOLD PRICE - R/KG                                       47 204      48 835
CASH OPERATING COSTS - R/KG                             63 610      83 422
CASH OPERATING (LOSS) - R/KG                            (16 406)    (34 587)
FINANCIAL RESULTS
OPERATIONS    QUARTER 31/12/97                 QUARTER 30/09/97
R'000         FREE STATE  EAST RAND   TOTAL    FREE STATE  EAST RAND TOTAL
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GOLD SALES    262 558     35 356      297 914  264 293     30 061    294354
CASH OPERATING
COSTS         250 078     47 644      297 722  286 123     51 388    337511
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CASH OPERATING
PROFIT/(LOSS) 12 480      (12 288)    192      (21 830)    (21 327)  (43157)
PROFIT
- SALE OF
INVESTMENTS                           12 658                         -
SUNDRY
REVENUE - NET                         5 120                          6 953
EMPLOYMENT
TERMINATION                           (12 760)                       -
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CASH PROFIT/(LOSS)
BEFORE TAXATION                       5 210                          (36204)
SA NORMAL TAXATION                    4 381                          1 041
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CASH PROFIT/(LOSS)                    829                            (37245)
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CAPITAL EXPENDITURE
- NET         10 138      5 765       15 903   12 214      3 466     15 680
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ABRIDGED BALANCE SHEET
R'000                                             AT 31/12/97    AT 30/09/97
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CAPITAL EMPLOYED
SHAREHOLDERS' EQUITY                              1 131 662      1 144 489
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EMPLOYMENT OF CAPITAL
NET MINING ASSETS AFTER DEPRECIATION              1 376 472      1 380 226
OTHER LONG TERM ASSETS                            80 839         81 399
LONG TERM PROVISIONS
DEFERRED TAX                                      (142 715)      (147 804)
REHABILITATION                                    (134 628)      (134 077)
PROVISION FOR POST-RETIREMENT BENEFITS            (35 884)       (34 932)
NET CURRENT LIABILITIES (EXCLUDING CASH)          (89 110)       (72 662)
CASH AND SHORT TERM INVESTMENTS                   76 688         72 339
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                                                  1 131 662      1 144 489
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SHAREHOLDERS' EQUITY IS ADJUSTED FOR NON-CASH
ITEMS, BEING DEPRECIATION AND PROVISIONS
AMOUNTING TO:                                     13 656         29 133
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DEVELOPMENT RESULTS DEVELOPMENT RESULTS
                         SAMPLED    CHANNEL    CHANNEL
                         METRES     WIDTH CM   G/T         CM.G/T
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FREE STATE OPERATIONS
BASAL REEF               476        116        8.7         1 006
LEADER REEF              1 768      104        6.0         622
"A" REEF                 676        138        4.3         595
EAST RAND OPERATIONS
BLACK REEF               428        107        2.3         249
KIMBERLEY REEF           818        123        3.3         407
COMMENTS
AS ANTICIPATED, HARMONY'S PERFORMANCE IMPROVED MATERIALLY IN THE PERIOD UNDER
REVIEW AND IT MADE A MODEST CASH PROFIT AFTER POSTING A R37.2 MILLION LOSS IN
THE SEPTEMBER QUARTER. THIS WAS ACHIEVED IN SPITE OF THE POOR GOLD PRICE,
PRODUCTION LOST AS A RESULT OF ILLEGAL STRIKES, AND A MAJOR RESTRUCTURING
EXERCISE DESIGNED TO EQUIP THE COMPANY TO OPERATE PROFITABLY AT A GOLD PRICE
LEVEL OF $280/OZ.
THE RESTRUCTURING PROGRAMME
THREE SHAFTS (VIRGINIA 1 IN THE FREE STATE AND NEP AND VAN RIJN ON THE EAST
RAND) WERE CLOSED AND A FOURTH - SAAIPLAAS 3 IN THE FREE STATE - WAS PUT ON
CARE AND MAINTENANCE. THE REMAINING 12 SHAFTS WERE SCRUTINISED CLOSELY WITH A
VIEW TO ELIMINATING PRODUCTION FROM LOW  GRADE AREAS. A REVIEW OF THE COMPANY'S
METALLURGICAL FACILITIES LED TO THE CLOSURE OF THE MERRIESPRUIT PLANT, WHICH
HAS BEEN LIMITED TO THE TREATMENT OF SURFACE MATERIAL. THE RESTRUCTURING
REGRETTABLY NECESSITATED THE RETRENCHMENT OF SOME 700 EMPLOYEES. THE
RETRENCHMENT COST OF R12.8 MILLION WAS EFFECTIVELY OFFSET BY THE PROFIT ON THE
SALE OF THE COMPANY'S INTEREST IN WELTEVREDEN MINES LIMITED.
OPERATIONS
THE FREE STATE OPERATIONS MAINTAINED GOLD OUTPUT DESPITE A 17% DROP IN TONNAGE
RESULTING FROM ILLEGAL LABOUR ACTIONS WHICH LED TO THE DISMISSAL OF 4 600
WORKERS. THESE RESULTS WERE MADE POSSIBLE BY A 20% IMPROVEMENT IN RECOVERED
GRADE AND A 12.5% REDUCTION IN WORKING COSTS. IT IS EXPECTED THAT THE GRADE IS
SUSTAINABLE AT ITS CURRENT LEVEL OF 4.4 G/T.
ON THE EAST RAND, THE MERGER BETWEEN GROOTVLEI AND CONS MODDER WAS COMPLETED,
AND THE COMBINED OPERATIONS RECOVERED WELL, REDUCING THE PREVIOUS QUARTER'S
CASH LOSSES BY R9 MILLION. IN DECEMBER, THE CASH LOSS WAS LESS THAN R600 000
AND PRESENT INDICATIONS ARE THAT THIS BUSINESS UNIT IS CLOSE TO BREAKEVEN AND
COULD BE VIABLE AT THE CURRENT GOLD PRICE. THE PREVIOUS QUARTER'S PROCESS
PROBLEMS WERE FOLLOWED BY MECHANICAL DIFFICULTIES IN THE PLANT, BUT THESE HAVE
ALSO NOW BEEN RESOLVED. THROUGHPUT RESTRICTIONS CAUSED THE STOCKPILE OF
UNPROCESSED ORE TO GROW BY 14 000 TONS TO 54 000 TONS.
CAPITAL EXPENDITURE
ESTIMATED CAPITAL EXPENDITURE FOR THE MARCH QUARTER IS R5.0 MILLION. THE
CONSIDERABLE REDUCTION IS DUE TO THE COMPLETION OF MAJOR CAPITAL PROJECTS AND
THE RE-EVALUATION OF NEW PROJECTS IN LINE WITH THE CURRENT GOLD PRICE.
HEDGING
IN ORDER TO PROTECT THE COMPANY AGAINST A DECLINING PRICE WHILE IT IS BEING
RESTRUCTURED, HEDGING CONTRACTS FOR 128 000 OZ AT $310/OZ WERE SECURED. AT THE
END OF DECEMBER 112 000 OZ OF THIS TOTAL WERE OUTSTANDING.
PROSPECTS
THE RESTRUCTURING WILL LEAD TO A REDUCTION IN TONNAGE, GOLD PRODUCTION AND
DEVELOPMENT IN THE MARCH QUARTER. IT IS EXPECTED THAT THE GRADE WILL CONTINUE
TO IMPROVE AND THAT FURTHER COST REDUCTIONS SHOULD RESULT IN THE COST PER
KILOGRAM REDUCING.
FOR AND ON BEHALF OF THE BOARD
Z B SWANEPOEL                   FRANK ABBOTT
MANAGING DIRECTOR               FINANCIAL DIRECTOR
21 JANUARY 1998
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REGISTERED OFFICE
HARMONY GOLD MINING COMPANY LIMITED, GLEN HARMONY, VIRGINIA, FREE STATE.
PO BOX 1, GLEN HARMONY, VIRGINIA, 9435, SOUTH AFRICA
TELEPHONE: +27 (57) 231-9111  FAX: +27 (57) 217-4592
SHARE TRANSFER SECRETARIES
OPTIMUM REGISTRARS (PTY) LIMITED, EDURA HOUSE, 41 FOX STREET, JOHANNESBURG,
2001. PO BOX 62391, MARSHALLTOWN, 2107, SOUTH AFRICA
TELEPHONE: +27 (11) 834-1050 FAX: +27 (11) 834-2446
DEPOSITARY BANK
AMERICAN DEPOSITARY RECEIPTS, THE BANK OF NEW YORK, SHAREHOLDER RELATIONS
DEPARTMENT, 101 BARCLAY STREET, NEW YORK, NY 10286
TELEPHONE: 1 (800) 524-4458
INVESTOR RELATIONS
FOR FURTHER INFORMATION, CONTACT KATHY DU PLESSIS
TELEPHONE +27 (11) 728-4701, FAX +27 (11) 728-2547,
E-MAIL:GOLD@DPA.CO.ZA
UNITED KINGDOM TRANSFER AGENTS
THE ROYAL BANK OF SCOTLAND PLC, PO BOX 663,
1ST FLOOR 5/10 GREAT TOWER STREET, LONDON EC3R 5DH, UK
DIRECTORS: L HEWITT (CHAIRMAN), ZB SWANEPOEL (MANAGING), F ABBOTT, R A ANDREW
(BRITISH), R A L ATKINSON, G P BRIGGS (ALTERNATE), F DIPPENAAR, P H FLACK, N J
FRONEMAN, T S A GROBICKI, R A R KEBBLE, P C PIENAAR (ALTERNATE), F R SULLIVAN
PRESS RELEASE
JOHANNESBURG, 21 JANUARY - HARMONY GOLD MINING COMPANY OVERCAME A POOR GOLD
PRICE, A SERIES OF UNLAWFUL STRIKES AND MAJOR RESTRUCTURING, TO POST A CASH
PROFIT OF R0.8 MILLION FOR THE DECEMBER QUARTER AFTER MAKING A R37.2 MILLION
LOSS IN THE THREE MONTHS TO SEPTEMBER.
FEATURES OF THE COMPANY'S PERFORMANCE WERE A 20% GRADE IMPROVEMENT ACCOMPANIED
BY A 12.5% REDUCTION IN WORKING COSTS AT ITS FREE STATE OPERATIONS, AND AN
ENCOURAGING RECOVERY BY ITS NEWLY MERGED EAST RAND OPERATIONS.
THE FREE STATE IMPROVED FROM A CASH OPERATING LOSS OF R21.8 MILLION TO A PROFIT
OF R12.5 MILLION, IN SPITE OF A 17% DROP IN TONNAGE AS A RESULT OF THE STRIKES
AND RESTRUCTURING. GOLD OUTPUT REMAINED VIRTUALLY CONSTANT, THANKS TO THE
INCREASE IN THE RECOVERED GRADE, WHICH IS BELIEVED TO BE SUSTAINABLE AT ITS
CURRENT LEVEL OF 4.4 G/T.
ON THE EAST RAND, THE PREVIOUS QUARTER'S LOSS OF R21.3 MILLION WAS REDUCED TO A
LOSS OF R12.3 MILLION. THE OPERATIONAL MERGER BETWEEN GROOTVLEI AND CONS MODDER
WAS COMPLETED AND VARIOUS PLANT PROBLEMS HAVE BEEN RESOLVED. THESE HAVE,
HOWEVER, CAUSED THE STOCKPILE OF UNPROCESSED ORE TO GROW BY 14 000 TONNES TO 54
000 TONNES.
HARMONY MANAGING DIRECTOR BERNARD SWANEPOEL SAID THE FACT THAT THE EAST RAND'S
OPERATING LOSS HAD BEEN REDUCED TO LESS THAN R600 000 PER MONTH BY DECEMBER WAS
HEARTENING, INDICATING THAT THIS BUSINESS UNIT WAS CLOSE TO BREAKEVEN AND COULD
BE VIABLE AT THE CURRENT GOLD PRICE LEVEL. HE POINTED OUT, HOWEVER, THAT THE
SHORTFALL ON THE PUMPING COSTS INCURRED ON BEHALF OF THE DORMANT MINES WAS IN
EXCESS OF R1 MILLION A MONTH AND CONTINUED TO THREATEN THE VIABILITY OF THIS
OPERATION. ALL STAKEHOLDERS REMAINED COMMITTED TO RESOLVING THIS ISSUE AND HAD
APPEALED TO THE MINISTER OF MINERALS AND ENERGY AFFAIRS TO APPROVE THE
ADDITIONAL FUNDING TO COVER THE SHORTFALL.
DURING THE PAST QUARTER THE COMPANY'S OPERATIONS WERE RADICALLY RESTRUCTURED TO
ALIGN THEM WITH A GOLD PRICE OF $280/OZ. THREE SHAFTS - ONE IN THE FREE STATE
AND TWO ON THE EAST RAND - WERE CLOSED DOWN AND A FOURTH WAS PLACED ON CARE AND
MAINTENANCE. AT THE REMAINING 12 SHAFTS, PRODUCTION FROM LOW-GRADE AREAS HAS
BEEN ELIMINATED. THE MERRIESPRUIT METALLURGICAL PLANT HAS ALSO BEEN CLOSED, AND
WILL IN FUTURE BE USED ONLY FOR THE TREATMENT OF SURFACE MATERIAL. SOME 700
EMPLOYEES WERE RETRENCHED AS PART OF THE RESTRUCTURING EXERCISE AND A FURTHER 4
600 WERE DISMISSED FOR TAKING PART IN THE ILLEGAL STRIKES.
TO PROTECT THE COMPANY AGAINST A DECLINING GOLD PRICE WHILE ITS OPERATIONS WERE
BEING RESTRUCTURED, HEDGING CONTRACTS FOR 128 000 OZ AT $310/OZ WERE SECURED.
AT THE END OF DECEMBER, 112 000 OZ OF THIS TOTAL WAS STILL OUTSTANDING.
"THE RESTRUCTURING WILL REDUCE OUR TONNAGE, GOLD PRODUCTION AND DEVELOPMENT IN
THE MARCH QUARTER. THE RESULTING COST REDUCTIONS SHOULD, HOWEVER, BRING DOWN
OUR COST PER KILOGRAM AND WE EXPECT THE GRADE TO CONTINUE INCREASING. BARRING
SERIOUS OPERATIONAL SETBACKS OR A FURTHER DETERIORATION OF THE GOLD PRICE,
HARMONY SHOULD THEREFORE PRODUCE ANOTHER PERFORMANCE IMPROVEMENT," SWANEPOEL
SAID.
ENDS
ISSUED BY DU PLESSIS ASSOCIATES +27(11) 728-4701 ON BEHALF OF HARMONY GOLD
MINING COMPANY LIMITED.



                                        
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