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Harmony Gold Mining Company Limited - Results for the quarter ended 31 March

Release Date: 12/04/2002 16:44:12      Code(s): HAR
Harmony Gold Mining Company Limited
Harmony Gold Mining Company Limited Free Gold Joint Venture with Africa
Rainbow Minerals Limited (Armgold)
Results for the quarter ended 31 March 2002
Financial Results (rand/metric) (unaudited)
                                      Quarter ended
                                      31 March 2002
Ore milled           - tonne '000
                     - underground              926
                         - surface            1 161
                           - total            2 087
Yield                    - g/tonne
                     - underground             7,70
                         - surface             0,70
                           - total             3,81
Gold produced                 - kg
                      - underground           7 127
                          - surface             815
                            - total           7 942
Gold price received          - R/kg         107 631
Cash operating costs         - R/kg          56 914
                          - R/tonne             217
Gold sales                                  854 803
Cash operating costs                        452 010
Cash operating profit                       402 793
Amortisation                               (26 823)
Other income - net                            4 929
Interest paid                              (40 265)
Profit before taxation                      340 634
South African normal
- Current tax                                    -
- Deferred tax                            (102 197)
Net earnings                                238 437
Financial Results   (US$/imperial)      (unaudited)
                                      Quarter ended
                                      31 March 2002
Ore milled           - tonne '000
                     - underground            1 022
                         - surface            1 280
                           - total            2 302
Yield                   - oz/tonne
                     - underground            0,224
                         - surface            0,020
                           - total            0,111
Gold produced                - oz
                    - underground           229 137
                        - surface            26 203
                          - total           255 340
Gold price received        - $/oz               290
Cash operating costs       - $/oz               154
                        - $/tonne                17
Gold sales                                   74 137
Cash operating costs                         39 203
Cash operating profit                        34 934
Amortisation                                (2 326)
Other income - net                              427
Interest paid                               (3 492)
Profit before taxation                       29 543
South African normal taxation
- Current tax                                     -
- Deferred tax                              (8 864)
Net earnings                                 20 679
Prepared in accordance with International Accounting Standards.
Currency conversion rates average for the quarter: US$1=R11.53.
Free Gold Joint Venture
Safety Report
On 30 January 2002, a mudrush on 104 level at South Shaft, Joel, resulted in
the accidental loss of life of Mr Elias Tsoaela. We offer our sincere
condolences to his family, friends and colleagues.
Operational Review
As the first reporting period for the ARMgold/Harmony Joint Venture, the
operational performance from the Free Gold operations have been excellent
and have exceeded all expectations. Normally this is a period during which
the restructuring and changeover in management impacts on both employees and
the overall performance of the operations. The acquisition process has been
completed with all the remaining conditions precedent for the transaction
having been met by 10 April 2002. The JV management took operational control
on 3 January 2002, after which changes identified in the due diligence
process were initiated.
(R'million)            Mar '02    Dec '01         Var (%)
Cash operating profit    402,8      261,5            54,0
Net interest charges      35,4
Amortisation charges      26,8
Profit before tax        340,6
Due to ARM               170,3
Due to Harmony           170,3
The operations generated R402,8 million in cash operating profits, an
increase of 54% over the R261,5 million reported for the December 2001
Underground operations  Mar '02    Dec '01         Var (%)
Gold price R/kg         107 657     88 530           21,6
Cash cost R/kg           57 882     61 784           (6,3)
Profit margin R/kg       49 775     26 746            86,1
The operations are operating at a 47%, or R50 717/kg, cash operating profit
margin. This is an improvement of 87% on the
27 144/kg reported previously.
This improvement does reflect the gearing present from restructuring and
successfully extracting value from mature turnaround assets. Over the
reporting period the R/Kg gold price increased by 22% from R88 530/kg to
R107 631/kg.
Total mine results     Mar '02    Dec '01         Var (%)
Gold price US$/oz          290        261            11,1
Cash cost US$/oz           154        188            18,1
Profit margin US$/oz       136         73            86,3
Exchange rate
  rand per US$1,00      11,53      10,30           (11,9)
When measured in US$/oz terms, the cash operating margin increased by 86%
from US$73/oz to US$136/oz quarter on quarter. This is despite only an 11,1%
increase in the gold price in US$/oz terms and a 11,9% depreciation in our
local currency.
For comparison purposes it is worth noting that production was affected by
the quarter under review being eleven days shorter than normal. During March
2002 only 58 production days were used for reporting purposes, whilst 69
days were used in December 2001. This was due to the contractual handover
date agreed to being 3 January 2002.
Tonnes milled (000's)      Jan        Feb            Mar
Underground                291        307            328
Surface                    319        426            416
Total                      610        733            744
Kgs recovered
Underground              2 213      2 598          2 316
Surface                    274        295            246
Total                    2 487      2 893           2 562
The shorter quarter impacted on underground production results with 18% less
tonnes being available for milling. A higher underground recovery grade of
7,70 g/t however contributed to net gold recovery being lower by 16% at 7
127 kgs.
The Bambanani and Tshepong operations both returned improved results mainly
due to the higher recovery grades and the increase in gold price. Matjhabeng
which was placed in closure mode by the previous owners continued operating
and contributed to operating profit, albeit at lower production levels.
Mine results
(R'million)            Mar '02    Dec '01         Var (%)
Bambanani                158,4      61,0           159,7
Tshepong                 158,6     110,9            43,0
Matjhabeng                32,5      42,4          (23,3)
Joel                       5,2      22,2          (76,6)
Surface                   48,1      25,0            92,4
Total                    402,8     261,5            54,0
The significant variance in the performance of Joel being that only
underground results have been included in the R5,2 million for the March
2002 quarter. Previously results at Joel reflected both surface and
underground operations. During the past two quarters, pre the acquisition of
Free Gold, Joel was in a clean-up and closure phase which resulted in a
disproportionate gold recovery from underground.
Labour restructuring, following implementation of the due diligence
recommendations, was undertaken at all the shafts. A total number of 4 108
positions in mainly service or supporting departments were identified as
being in excess of the needs of the operations. A total of 1 763 employees
requested voluntary retrenchment which was accepted by the company.
Due to the lower cost structure now envisaged at these operations,
management commenced with the re-opening of West, Sable and Kudu Shafts.
These shafts will contribute approximately 184 kgs per month to overall
production. A total of R6,8 million in costs was capitalised to re-open
these shafts. Discussions are in progress with the respective unions and
associations to possibly re-open Nyala Shaft which, if operated on a
continuous operations basis (CONOPS), has the potential to alleviate the
number of remaining redundant employees.
                    March quarter      June quarter
                          Actuals          Forecast
Capital expenditure         R'000             R'000
Bambanani Shaft               6,2              15,7
Tshepong Shaft                2,0               2,0
Kudu/Sable Shaft              3,9               1,2
West Shaft                    5,0               1,3
Total                        17,1              20,2
A view on the June 2002 quarter
As always the easy and first stage of addressing unnecessary overhead costs
has been completed. However the benefits from utilising centralised services
from either Harmony, ARMgold or outside contractors will only accrue to Free
Gold and become visible over the next two quarters.
The current JV Steering Committee which consists of three representatives
from ARMgold and Harmony respectively has proved very successful. Mr Peter
Steenkamp will assume overall management responsibility for the Free Gold
operations. He will however, be assisted by the necessary personnel from
both partners to ensure that the broad strategies formulated during the due
diligence process are actually converted and incorporated into the mining
and metallurgical plans.
We do however anticipate that further benefits from restructuring the
operations will be partially offset by the impact of grades slowly
recovering to the average mining grade of the orebodies. Our investment on
behalf of our shareholders has been a sound one and we look forward to
reporting back in July 2002.
12 April 2002

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