HARMONY GOLD MINING COMPANY LIMITED - PRESS ANNOUNCEMENT
Release Date: 12/04/2002 16:45:12 Code(s): HAR
Free Gold Joint Venture returns 54% increase in Cash Operating Profits
Johannesburg, 12 April 2002 - African Rainbow Minerals Limited (ARMgold) and
Harmony Gold Mining Company Limited today reported excellent performance by
their newly formed Free Gold Joint Venture company, and that it had exceeded
The company assumed operational control on 3 January 2002 with all the
remaining conditions precedent having been met by 10 April 2002.
The Free Gold operations reported a cash operating profit of R402,8 million,
an increase of 54% over the R261,5 million reported for the December 2001
These newly acquired mines are now operating at a
R50 717/kg or a 47% cash operating profit margin. This is an improvement of
87% on the R27 144/kg margin reported during the December 2001 quarter.
Patrice Motsepe, executive chairman of ARMgold said: "The first quarter
following an acquisition, is usually a period during which the re-
structuring and changeover in management impacts on both employees and the
overall performance of the operations. This improvement in profit margin
reflects the gearing present from our restructuring process in extracting
value from mature turnaround assets."
Following the implementation of the due diligence recommendations, labour
restructuring was undertaken at all the mines. A total 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
Although the R/Kg gold price increased by 22% from R88 530/kg to R107
657/kg, when measured in US$/oz terms, the cash operating margin increased
by 86% from US$73/oz to US$136/oz, quarter on quarter. These increases
occurred despite a mere 11,1% increase in the gold price in US$/oz terms,
and a 11,9% depreciation of our local currency.
For comparison purposes, it is worth noting that production was affected by
the period under review being seven days shorter than normal. March 2002
composed of only 58 production days compared to 69 days in December 2001.
The impact of the shorter reporting period is visible in underground
production results with 18% less tonnes available for milling. A higher
underground recovery grade of 7,70 g/t however contributed to net gold
recovered being 16% lower at 7 127 kgs.
The Bambanani and Tshepong operations both returned improved results mainly
due to the higher recovery grades and the increase in the gold price.
Matjhabeng, which was placed in closure mode by the previous owners,
continued operating and contributed to the operations' profit, albeit at
lower production levels. The significant variance in Joel's performance can
be attributed to the fact that only underground results have been included
in the R5,2 million for the March 2002 quarter, as opposed to previous
results which reflected both surface and underground operations.
As a result of the lower cost structure now envisaged at Free Gold,
management has commenced the re-opening of West, Sable and Kudu mines. It
is estimated that these mines will contribute approximately 184 kgs per
month to the overall production figure. A total of R6,8 million in costs was
capitalised to re-open these shafts.
"The current JV Steering Committee consisting of three representatives from
ARM and Harmony respectively, has proved to be very successful. Mr Peter
Steenkamp will assume overall management responsibility for the Free Gold
operations. He will be assisted by the necessary personnel, from both
partners, to ensure that the broad strategies formulated during the due
diligence process, are accurately converted and incorporated into the mining
and metallurgical plans. We anticipate that further benefits from the
restructuring of the operations will be partially offset by the impact of
grades, slowly recovering to the average mining grade of the orebodies."
commented Bernard Swanepoel chief executive of Harmony.
"Our investment on behalf of our shareholders has been a sound one and we
look forward to reporting back in July 2002", he concluded.
For further details contact:
Bernard Swanepoel on +27(0)83-303-9922
African Rainbow Minerals Gold Limited (ARMgold) and Harmony Gold Mining
Tel +27 11 411 2036