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Harmony Gold Mining Company Limited - Report to shareholders

Release Date: 29/04/2002 12:00:41      Code(s): HAR
Harmony Gold Mining Company limited
(Incorporated in the Republic of South Africa)
(Registration number 1950/038232/06)
JSE code: HAR     NASDAQ trading code: HGMCY
ISIN: ZAE000015228
Report to shareholders for the quarter ended 31 march 2002
Key indicators
* record cash operating profit of R851 million
* 87% increase in e.p.s from 206 cents to 386 cents
* earnings per share financial year to date of 656 cents
* cost focus results in R37,4 million or 3% reduction in total working costs
* company now operates with total cash cost of US$176/oz, a cash operating
profit margin of 38%
* closure of inappropriate hedge book of Randfontein at after tax cost of
R125 million
* 5 key operations generating in excess of R100,0 million per quarter, i.e.
Free State, Evander, Randfontein, Elandskraal and Free Gold JV
Financial Highlights
                     31-Mar      31-Dec
                     2002        2001
Cash operating
profit
- Rand               851 million 455 million
- US$                74 million  45 million
Earnings
- Rand               615 million 308 million
- US$                53 million  31 million
Earnings per share
- SA cents per share 386 million 206
- US cents per share 33 million  20
                     31-Mar      31-Dec
                     2002        2001
Gold produced
- kg                 20 936      18 484
- oz                 673 106     594 272
Cash costs
- R/kg               65 392      63 863
- $/oz               176         198
"Gold remains everybody's alternative currency, but unfortunately nobody's
responsibility. Even without any central bank support it has still been the
second best performing major currency in the world, after the US Dollar,
over the past 12 months."
BERNARD's REVIEW
SAFETY REPORT
It is with regret that I have to report the loss of five employees,
following five separate mine accidents, during the past quarter. Four of the
five accidents were as the result of a fall of hanging wall in the work
places. Regrettably, one of the fatalities occurred on Brand 5 mine which
had already achieved the benchmark of 500 000 fatality free shifts. We offer
our sincere condolences to the family, friends and colleagues of these
employees.
Notwithstanding the above mentioned unfortunate events, it is with pride
that we can report that Cooke 3 mine achieved the milestone of one million
fatality free shifts on 14 March 2002.
STRATEGIC OVERVIEW
The past quarter has seen significant changes in the operating environment
in South Africa. Whilst the gold price has increased to levels of US$300/oz,
the South African Rand experienced further weakness. The depreciation of our
local currency continued with the Rand averaging R11,53 to the US Dollar for
the March 2002 quarter. This is an additional 14,7% when compared quarter on
quarter.
Events during the quarter which impacted positively on the gold price were
the increased retail purchasing of physical gold by the Japanese market and
the continued decrease in the supply of bullion which will reach the market
following the reduction of producer production and nett hedging activities.
Positive comments from large producers regarding reduced hedging
substantiated the figures supplied by GFMS.
Gold equities were a top-performing sector in 2001, significantly
outperforming the broader markets. Gold remains everybody's alternative
currency, but unfortunately nobody's responsibility. Even without any
central bank support it has still been the second best performing major
currency in the world, after the US Dollar, over the past 12 months. This
trend has continued in the past quarter with a higher level of portfolio
diversification by investors being experienced.
Although analysts have indicated that gold stocks are currently discounting
gold prices above US$300/oz, the consolidation of the gold industry has
resulted in fewer stocks being available. The outperformance of unhedged
producers over hedged producers has increased significantly following the
increase in the gold price. Harmony has and will continue to be unhedged by
choice. Other producers may correctly claim to have made money out of
hedging, but Harmony has demonstrated that being unhedged has been the smart
choice when it came to creating shareholder value. No doubt others will
continue to follow.
On 10 April 2002 the company announced that it had completely closed the
Randfontein hedge book. This hedge book, which I described as
"inappropriate" for a gold mining company at the time, came with the company
in January 2000. A total of 490 000 ounces in respect of the remaining
forward sales contracts and call options were closed. In addition, as a
result of the higher gold price, the company closed a further 220 000 ounces
of forward purchases.
The closure of the hedge book resulted in a net cost after tax of R125
million (US$ 11 million), which has been financed from existing cash
resources. The company will continue restructuring the inherited hedge books
of New Hampton and Hill 50 as and when the market conditions allow.
The further 14,7% devaluation of the South African Rand over the past
quarter has significantly impacted on the profitability of the South African
producers. At R8,05 to the US Dollar, local producers were the most
expensive producers when measured on a cash cost basis. At R11,50 to the US
Dollar, the South African industry has become the lowest cost region. This
has resulted in increased profit margins. Harmony now operates at a cash
cost of US$176/oz and a total cost of US$207/oz. With a real profit margin
of approximately US$100/oz Harmony could rightfully claim to be one of the
most profitable gold mines in the world, if not the most, and yet we have
spectacular leverage remaining in the gold price, the Rand currency and the
largest resource in the world.
The company has decided not to pursue increased production at higher working
costs with the potential of diluting profits, until we have re-established
firm control over unit costs on our South African operations. The South
African industry has in the past year seen profit erosion due to the
pressure from higher working costs due to inflation and increased demands
from various stakeholders. At Harmony we, some six months ago, embarked on a
cost reduction campaign, known as "The Cost Marathon", and although it's
early days yet, we saw a 3% or R37,4 million reduction in total working
costs during the March 2002 quarter.
The current higher gold price levels will be used to allow the company more
flexibility in its planned mining programmes, thereby optimising operating
profit margins and increasing profits. To date, the operations have not been
starved of capital expenditure and no "catch-up" expenditure is required. At
gold price levels of R105 000/kg, Harmony has probably the most prospective
mining projects remaining in South Africa, i.e. Randfontein South Reef
Project, the Rolspruit Extension and Poplar Project at Evander. These
projects are being evaluated, but the company will only consider developing
these assets when market conditions are such that long lead time high
capital projects of this nature show better returns than acquisitions with
turnaround potential.
With gold at levels of US$300/oz, we believe that the consolidation of the
industry will continue. Lower exploration expenditure and the high cost of
replacing the ounces currently being produced are factors which will provide
continued impetus for consolidation.
The company experienced a successful quarter on both a strategic and
operational level. Harmony continued with its strategy of growth with the:
(i)  Conclusion of the acquisition of Free Gold from Anglo Gold
Although the JV company, Free Gold (Pty) Limited, took operational control
of the assets on 3 January 2002, the remaining conditions precedent to the
acquisition were met on 10 April 2002. The acquisition was concluded with
the payment of R900 million by Harmony and ARMgold respectively on 23 April
2002. The outstanding amount of R400 million will be paid by Free Gold on 1
January 2005. Anglogold has decided not to appeal a ruling from the South
African Revenue Services regarding the tax relief sought in terms of Section
39, and an amount of approximately R500 million will be payable by Free Gold
in March 2003. As reported previously the JV company will be able to claim a
significant portion of the purchase price as a capital expenditure against
taxable income. Under the current gold price conditions, this option
enhanced the NPV of the project by some R200 million as compared to the
original option for which the exemption was sought.
From an operational perspective the Free Gold assets generated improved cash
operating profits of R402,8 million, significantly ahead of the conservative
estimates used for acquisition and financing purposes.
A summary of the results follows:
(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 ARMgold        170,3
Due to Harmony        170,3
* Interest was payable to AngloGold in lieu of the purchase price for 3
months.
The operational restructuring has been proceeding according to plan.
Normally, during the first quarter following the acquisition of assets of
this nature, the changeover in ownership impacts on employees and the
overall performance of the operations. The fact that the Free Gold assets
were acquired in a JV company had challenges of their own, but we are
extremely satisfied with the level of co-operation that has been established
between the two parties. This has made the task of the Steering Committee,
who took control of implementing the broad strategies identified in the due
diligence phase, easier.
Free Gold now operates at a profit margin of US$136 or 47% per ounce at a
gold price of US$290/oz. Our strategy of acquiring these operations as part
of consolidating the Free State goldfields has already delivered value to
our shareholders.
Total mine results   Mar '02   Dec '01   Var (%)
Gold price US$/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$       11,53     10,30     (11,9)
All the shafts at Free Gold were profitable despite the impact of
restructuring activities. Bambanani and Tshepong mines contributed R317,0
million or 79% of the operating profits of R402,8 million. We expect that
the contribution from Matjhabeng and Joel mines and the surface operations
will improve during the following year.
Free Gold has been successful in addressing the high overhead costs that
impacted on the short-term profitability of these operations. When measured
on the "Harmony Value Curve" these operations are on the steep upward
performance stage delivering excellent cash operating profits. Our focus
however will be on improving tonnages at slightly lower grades, but
delivering optimal gold production and cash operating profits.
We generally inherit mature mines that are in the process of being
highgraded. It is our intention to return to mining these operations at the
average mining grade of the orebodies whilst increasing expenditure on
working cost development.
(ii) Broadening our production base in Australia
Excellent progress was made with the take-over offer for Hill 50 announced
on 10 December 2001. To date Harmony has received acceptances of
approximately 99% of the shares and options. The process of the compulsory
acquisition of the remaining shares and options has commenced in accordance
with Australian law. In terms of the current timetable the process should be
completed by June 2002. The acquisition was concluded with a final offer of
A$1,45 for each ordinary share and A$0,75 per listed option in Hill 50
valuing the transaction at R1 411 million and Australian $231 million.
The acquisition of Hill 50 has increased Harmony's Australian production
base from approximately 220 000 oz/annum to a sizeable 500 000 oz/annum. The
company now has a solid production base with a package of highly prospective
exploration areas in West and eastern Australia. The company is in a
stronger position in Australia to what it had been in South Africa in 1996,
building a company from modest assets to the fifth largest producer in the
world today.
Hill 50 has increased production over the past two years to the
approximately 300 000 oz forecast for the 2001/2002 financial year.
                   2001/    2000/    1999/    1998/
Hill 50            2002     2001     2000     1999
Gold produced (oz) 290 000  202 000  150 000  150 000
Cash cost A$/oz    322      330      358      310
Cash cost US$/oz   169      176      224      194
These producing assets and our 9,8% holding in Aurion Gold valued at R663,0
million will ensure our participation in the continued consolidation of the
Australian gold industry.
(iii)     Delivery of value to Simane - Black Economic Empowerment on track
Harmony shareholders agreed, in a general meeting in May 2001, to issue 10,9
million Harmony ordinary shares for cash to the IDC and Simane, a black
economic empowerment company. The IDC subscribed for 10,7 million ordinary
shares on behalf of Simane and Simane themselves subscribed for 0,2 million
ordinary shares. In addition, the IDC, on behalf of Simane, subscribed for
10,9 million redeemable convertible preference shares, each share granting
the company the right to subscribe for a Harmony ordinary share at R41,50.
The preference shares were converted into ordinary shares and were placed in
the market from 16 January 2002 to 4 February 2002, realising an average
price of R85,46 per ordinary share. This has enabled Simane to take transfer
of the ordinary shares after the repayment of their loans. Harmony's cash
resources increased by R430 million as a result of this initiative.
Simane now hold 10,9 million unencumbered shares in Harmony, representing 7
per cent of Harmony's issued ordinary share capital, making it the company's
largest shareholder.
(iv) Granting of option to Gold Fields Limited to acquire a stake in Aurion
Gold and option by Harmony to negotiate for the acquisition of St Helena and
Oryx mines
The options granted by the respective companies expired on 15 February 2002
without any agreements being reached. Value will however be created with the
inclusion of St Helena in the continued consolidation of the Free State
Goldfields. The possible acquisition of these assets will be revisited in
future.
(v)  Listing on Chicago Board Options Exchange
On 2 April 2002 the company was informed that it had been selected for
listing on the Chicago Board Options Exchange. Trading in the option was set
to start on 3 April 2002 and it is expected to impact on the tradability of
Harmony stock on the various exchanges.
The Chicago Board Options Exchange is the world's largest options market.
(vi) Listing on Berlin Stock Exchange
To enable institutional and retail shareholders to acquire and trade Harmony
stock in their domestic currency, the company was listed on the Berlin Stock
Exchange. Trading started on 20 March 2002 under the symbol HAM1.
(vii)     Kalplats Project
R3,0 million was spent on this project during the quarter. Exploration
drilling has added 500 000 oz to the mineral resources which currently
stands at 3,8 million oz at 1,5 g/t TPM (Total Precious Metals) in the
indicated and inferred categories to 150m depth. Included in this resource
is 1,5 million oz of higher grade reef at 3,7 g/t TPM.
The pre-feasibility drilling and metallurgical studies are continuing. A
total of 41 infill boreholes representing 3 160m were drilled. Metallurgical
work on representative drill samples is in progress to test provisional
process flowsheets. The pre-feasibility study will be completed by June
2002.
QUARTERLY OPERATIONAL REVIEW
The company reported improved operational profits of 87%, increasing from
R455,2 million to a record R850,9 million. This was due to the inclusion of
R201,4 million in respect of the Free Gold JV and the increase in gold price
in R/kg terms following the continued depreciation of the Rand against other
major currencies. Our focus on working costs is delivering excellent results
with the operations reporting a 3% or R37,4 million reduction in working
cost expenditure. Kilograms recovered from the operations were 13% higher at
20 936 kgs mainly due to increased production from New Hampton and the
inclusion of Free Gold.
Profit before tax increased by 106% from R412,4 million to R848,9 million.
Taxation was R130 million higher at R233,8 million compared to the R104,7
million for the previous quarter.
Net profit after tax at R615,1 million was 100% more than the R307,7 million
reported for the December quarter.
Earnings per share increased by 87% from 206 cents for the December 2001
quarter to 386 cents for the past quarter. Earnings for the nine months of
the current financial year total 656 cents.
The performance of the operations are best highlighted in the following
table:
                         March   December  Variance
                         2002    2001      %
Production     R/kg      20 936  18 484    13,3
               US$/oz    673 106 594 272   13,3
Revenue        R/kg      106 037 88 491    19,8
Cash cost      R/kg      65 392  63 863    (2,4)
Cash cost      R/tonne   228     238       4,2
Revenue        US$/oz    286     274       4,4
Cash cost      US$/oz    176     198       11,1
Exchange rate  R/US$     11,53   10,05     (14,7)
The company achieved a US$110 or 38% cash operating profit margin with cash
costs of US$176/oz. Working costs in R/kg terms increased marginally by 2,4%
due to lower gold production caused by the recovery grade being lower by 2%.
Cash costs in US$ terms decreased from US$198/oz to US$176/oz.
The company reverted back to a more logical work arrangement around the
Christmas break. Although tonnages for January 2002 were still affected,
there was a dramatic improvement compared to the results for January 2001.
A quarter on quarter cash operating profit analysis of the various
operations is as follows:
TOTAL CASH OPERATING PROFIT (R'million)
                      March    December
Operations            2002     2001       Variance
Free State            145,4    87,5       57,9
Evander               169,3    111,4      57,9
Randfontein           198,0    150,3      47,7
Elandskraal           115,2    87,2       28,0
Kalgold               8,3      17,8       (9,5)
Australian Operations 13,3     1,0        12,3
Sub-total             649,5    455,2      194,3
Free Gold (50%)       201,4    -          201,4
Total                 850,9    455,2      395,7
Free State Operations - continue to improve
The Free State Operations reported a 66% increase in cash operating profits
from R87,4 million to R145,4 million. These operations, although affected by
the Christmas holidays, milled 996 000 tonnes at a recovery grade of 4,4 g/t
compared to the 1 074 000 tonnes at a recovery grade of 4,6 g/t for the
previous quarter. To utilise mill capacity during the break, 96 000 tonnes
from surface sources were treated which contributed an additional 30 kgs to
gold production.
Our focus on reducing working costs resulted in a decrease of R21,4 million
or 6% quarter on quarter. This impacted on the cost/tonne decreasing from
R319 to R294. In US Dollar terms these operations are producing an
annualised 600 000 ounces at cash costs of US$197/oz.
Harmony 4 Shaft, which has been in closure mode for the past 12 months, will
close by June 2002. The shaft has had the benefit of an increased gold price
which resulted in postponement of the closure on a quarterly basis. The
excellent teams at this mine will be re-deployed to mainly the Masimong 4
Shaft complex from which additional production is planned.
The gold price has had a positive impact on the viability of the Saaiplaas 3
Shaft complex. This mine which was purchased from AngloGold for R87 million
in 1998 was closed due to the decrease in the gold price at the time. Mining
regions which were accessible from Masimong 4 Shaft were previously included
in that shaft's mining plan.
A re-evaluation of the Shaft Pillar Extraction Project shows an NPV of
R109,1 million at a discounted rate of 17%. This project which requires
capital expenditure of only R27,5 million, will return cashflows of R152,8
million over a four year period. Work on the project will commence during
the June 2002 quarter.
Saaiplaas 3 shaft pillar extraction
Capital            R27,5 million
expenditure
Tonnes milled      740 000
Total kg recovered 3 808
Total cost/tonne   R270,00
Life of project    4 years
Gold price         R100 000 kg
NPV@17%            R109,1 million
Although the decision to shut this shaft down soon after acquisition was a
tough one, it has proved to be the right one. Instead of wasting the orebody
by mining it at a loss it was maintained for a better gold price environment
where it can now be mined at a profit.
Evander Operations - strength to strength
Evander continues to deliver excellent results with a cash operating profit
of R169,3 million. This is a 52% improvement on the R111,4 million reported
for the December quarter.
Costs in both R/tonne and R/kg decreased marginally due to a R7,1 million
lower total working cost expenditure. More scope exists for further
sustainable cost reductions. Total gold recovered was 3 230 kgs. In US$/oz
terms this operation reported the lowest cash costs in the company of
US$147/oz and was operating on a profit margin of US$139/oz at a gold price
of US$286/oz.
Although the current R/kg gold price has had a favourable impact on the life
of Evander 9 Shaft, the lack of availability of ore resources has finally
resulted in its closure. This shaft, which has been in its closure phase
with the final extraction of the shaft pillar, will cease operating at the
end of June 2002. Employees at the shaft are in the process of being
relocated to No. 2, 3 and 5 Shafts at Evander. These shafts which were re-
opened earlier in the financial year are, following a period of investment
in development programmes, contributing to cash operating profits. During
the past quarter Evander 9 Shaft produced 36 000 tonnes at a grade of 3,8
g/t. The impact of the closure on the overall results from Evander will be
negligible.
Randfontein Operations - excellent results
The Randfontein operations returned a 32% improvement in cash operating
profits, increasing from R150,3 million to R198,0 million. This improvement
was mainly due to the gold price as kilograms produced were lower due to the
impact of the public holidays on underground production. These operations
produced 816 000 tonnes from underground at a recovery grade of 4,99 g/t.
In March 2002 these operations milled 816 000 tonnes at a recovery grade of
4,99 g/t. This resulted in a lower gold recovery of 4 070 kgs compared with
4 485 kgs for the December 2001 quarter. Kilograms from surface operations
were marginally lower at 184 kgs compared to the 186 kgs reported
previously.
Randfontein reported a R14,0 million decrease in total working costs. In
R/tonne terms cost decreased from R222/tonne to R205/tonne. These operations
continue to contribute significantly to the company's cash flows with a
US$126 or 44% cash operating margin at a gold price of US$286/oz.
Results at Randfontein will be affected by the expected decline in tonnage
and grade at Cooke 1 Shaft by September 2002. Cooke 1 Shaft has over the
past few quarters focussed on the extraction of the shaft pillar which has
contributed 20 000 tonnes per month at a recovery grade of 4,7 g/t.
By December 2002 quarterly underground production at Randfontein is expected
to decrease to 800 000 tonnes at a recovery grade of 5,0 g/t.
Elandskraal Operations - tough quarter
As was the case with the majority of our previous acquisitions, Elandskraal
is now in its "restructuring for optimal returns" phase on our value curve.
The high overhead costs have been addressed and the implementation of the
"Harmony Way" is well underway. These operations however now require
flexibility in underground operations. The development at Elandsrand and
Deelkraal which were embarked on a year ago will in 9 to 12 months allow
more mining flexibility and a recovery in grades.
These operations reported cash operating profits of R115,2 million, an
increase of 32% over the R87,2 million reported previously. Tonnage
decreased marginally from 551 000 tonnes to 541 000 tonnes. The expected
lack of flexibility at Elandskraal resulted in the recovery grade decreasing
from 6,3 g/t to 5,7 g/t. This has resulted in gold recovery from underground
being 347 kgs less at 3 105 kgs compared to the 3 452 kgs for the December
2001 quarter.
The decrease in kilograms impacted adversely as the R/kg working costs
increased by R6 342/kg to R71 398/kg, but in R/tonne terms underground
working costs remained constant at R410/tonne. This is significantly higher
than what was believed to be achievable and the same effort that was put
into cost reductions at the other operations will now be focused on
Elandskraal.
The Elandskraal operations with cash costs of US$191/oz operate at a cash
operating profit margin of US$95/oz or 33% at a gold price of US$286/oz.
Kalgold Operations - can do better
Cash operating profits decreased to R8,3 million compared to the R17,8
million in the December 2001 quarter. This was mainly caused by the
previously reported mill breakdown which resulted in 26 days of production
time being lost by one of the two mills. Tonnage was lower at 218 000 tonnes
compared to 256 000 tonnes reported previously. At a lower recovery grade of
1,88 g/t gold recovery decreased by 29% to 409 kgs.
A change in the nature of the orebody resulted in a higher ratio of high-
grade refractory ore reporting to the mill. This has impacted on the
recovery grade of these operations as residual values are higher than
normal. An evaluation into improving metallurgical recovery using a
flotation process is underway.
AUSTRALIAN OPERATIONS - welcome improvement
This has been an extremely busy period for Harmony's Australian operations,
with the highlights being:
- The successful acquisition of 99% of Hill 50 and a subsequent move to
compulsory acquisition of the remaining minorities,
- Operating profits being reported at both operations.
- The successful completion of the redevelopment of the seismically affected
lower portions of the Big Bell underground mine, with the first stoping
production blasts taken,
- The completion of the pre-stripping of the southern portion of the Trojan
pit at Jubilee, giving us access to 8 months of higher grade material, and
Big Bell
During the quarter, Big Bell milled a total of 709 000 tonnes to produce 31
058 ounces. The operations returned an operational profit of A$1,0 million.
Big Bell continued with its good performance (albeit at marginal grades)
from the open pits. Ore is being sourced from four different pits. Lower
grade remnant mining in the upper levels of the Big Bell underground mine
ceased as these ore resources were exhausted.
The redevelopment and rehabilitation (after the seismic event of late 2000)
of the lower levels of the Big Bell underground mine progressed well and two
levels of the mine are accessible for stoping. Production is planned to
increase to 65,000tpm for this area in the June quarter.
Exploration success has resulted in two new open pits being planned at City
of Chester (15,000 oz resource to date) and Try Again (in excess 30,000 oz
resource) whilst new extensions were discovered at the Rheingold and
Chieftain pits. In the year since the acquisition of New Hampton, Harmony
has by exploration successfully replaced the open pit resources it has mined
out.
Jubilee
During the quarter Jubilee milled 282 000 tonnes to produce 14 596oz for an
operating profit of A$1,2 million. Production from Jubilee was sourced in
equal proportions from Trojan, the small Jubilee West pit and old
stockpiles.
Although Jubilee has a lack of high-grade resources, these operations should
produce steady profits from existing resources for at least 18 months and
provide opportunities for exploration success.
The prestripping of the southern part of Trojan pit to expose the main part
of the ore body was completed. At the end of March, and for the first time
since Harmony's acquisition, a large block of reserves is available for
mining.
Exploration drilling beneath the old Golden Ridge pit has demarcated the re-
establishment of at least 35 000oz of production which has been scheduled
for the March and June quarters of 2003.
Three separate grass roots exploration projects returned ore grade
intersections at good widths during the quarter. Intensive follow up is in
progress on all three projects. Whilst it is still too early to predict
whether or not these discoveries will develop into sizeable reserves, these
are the best exploration results Harmony has achieved to date in the
Kalgoorlie area. This confirms the ongoing prospectivity of the Kalgoorlie
region and bodes well for exciting exploration initiatives when we can
combine the Harmony and Hill 50 land packages from April onwards.
The operations are expected to continue to show profits and positive cash
flow after capital for the next 15 months if production targets are
achieved. Upside opportunities will come from cost initiatives, certain
synergies with Hill 50 and continuing to expose the company to the
possibility of exploration success by judicious expenditure in this area.
Bendigo - excellent progress
The advance of the decline and lateral development for ventilation at
Bendigo (of which Harmony owns 31%) has progressed well since start-up at
the end of December 2001 and is ahead of budget.
Changes to the development strategy and anticipated productivity
improvements have resulted in the proposal of a new plan that should enable
Bendigo to access and take the first development blast in the first orebody
to be tested in September 2002 instead of December 2002 as originally
envisaged.
Plans for bulk sampling, grade validation and metallurgical testwork are
progressing on schedule.
CAPITAL EXPENDITURE
                March     June
                Quarter   Quarter
Operations      Actuals   Forecast
Free State      28        28
Evander         26        24
Randfontein     3         2
Elandskraal     31        31
Free Gold (50%) 9         11
New Hampton     4         4
Kalgold         -         5
Total           101       105
Operating and financial results (rand/metric)
                  Free    Free                                  Rand-
                  State   State    Evander   Evander Kalgold    fontein
                  U/g     Surface  U/g       Surface Opencast   U/g
Ore milled 2-Mar  996     96       538       60      218        816
- t'000    1-Dec  1 074   -        538       59      256        860
Gold       2-Mar  4 370   30       3 203     27      409        4 070
produced
- kg       1-Dec  4 884   -        3 296     31      575        4 485
Yield -    2-Mar  4.39    0.31     5.95      0.45    1.88       4.99
g/t
           1-Dec  4.55    -        6.13      0.53    2.25       5.22
Cash       2-Mar  73 182  47 600   54 080    85 444  86 597     58 326
operating
Costs -    1-Dec  70 152  -        54 963    46 968  56 675     56 565
R/kg
Cash       2-Mar  321     15       322       38      162        291
operating
costs -    1-Dec  319     -        337       25      127        295
R/tonne
Working    2-Mar  463     3 208    341 907   2 931   43 734     430 974
revenue          446
(R'000)    1-Dec  430     -        291 084   2 946   50 342     399 847
                075
Cash       2-Mar  319     1 428    173 217   2 307   35 418     237 388
operating        804
costs      1-Dec  342     -        181 159   1 456   32 588     253 692
(R'000)          620
Cash       2-Mar  143     1 780    168 690   624     8 316      193 586
operating        642
profit     1-Dec  87 455  -        109 925   1 490   17 754     146 155
(R'000)
          Rand-    Elands-  Elands-  Free     Free       Australian
          fontein  kraal    kraal    Gold     Gold       Opera-
          Surface  U/g      Surface  U/g      Surface    tions         Total
Ore       416      541      275      464      581        991           5 992
milled
- t'000   339      551      284      -        -          1 009         4 970
Gold      184      3 105    146      3 564    408        1 420         20 936
produced
- kg      186      3 452    178      -        -          1 397         18 484
Yield -   0.44     5.74     0.53     7.68     0.70       1.43          3.49
g/t
          0.55     6.26     0.63     -        -          1.38          3.72
Cash      81 495   71 398   57 692   57 874   48 390     90 404        65 392
operating
Costs -   68 473   65 056   48 517   -        -          88 034        63 863
R/kg
Cash      36       410      31       445      34         130           228
operating
costs -   38       408      30       -        -          122           238
R/tonne
Working   19 447   329 905  15 384   383 637  43 765     141 646       2 219 98
revenue
(R'000)   16 927   304 032  16 429   -        -          123 979       1 635 66
Cash      14 995   221 692  8 423    206 263  19 743     128 374       1 369 05
operating
costs     12 736   224 575  8 636    -        -          122 983       1 180 44
(R'000)
Cash      4 452    108 213  6 961    177 374  24 022     13 272        850 932
operating
profit    4 191    79 457   7 793    -        -          996           455 216
(R'000)
Financial results
 total operations (rand/metric) (unaudited)
                                                 Quarter   Quarter
                                                 ended     ended
                                                 31-Mar    31-Dec
                                                 2002      2001
Ore milled - t'000                               5 992     4 970
Gold produced - kg                               20 936    18 484
Gold price received - R / kg                     106 037   88 491
Cash operating costs - R / kg                    65 392    63 863
                                                 R'000     R'000
Gold sales                                       2 219 984 1 635 661
Cash operating costs                             1 369 052 1 180 445
Cash operating profit                            850 932   455 216
Amortisation                                     (72 082)  (54 086)
Mark to market of financial instruments          -         11 141
Employment termination costs                     (4 759)   (10 432)
Other income/(expenditure) - net                 18 119    (8 690)
Interest paid                                    (62 143)  (40 437)
Corporate expenditure                            (15 603)  (14 302)
Exploration and new business                     (13 892)  (12 923)
Mark to market of listed investments             148 340   86 939
Profit before taxation                           848 912   412 426
South African normal taxation
- Current tax                                    (140 469) (83 851)
- Deferred tax                                   (93 316)  (20 872)
Net earnings                                     615 127   307 703
Adjustments:
- Profit on sale of property plant and equipment 4 532     6 985
Headline earnings                                610 595   300 718
Earnings per share - cents
- Earnings*                                      386       206
- Headline earnings*                             383       202
- Fully diluted earnings **                      374       198
Dividends per share - (cents)                    -         75
*  Calculated on number of shares in issue during the quarter: 159,5 million
(December: 149,1 million)
** Calculated on average number of diluted shares in issue for the quarter:
164,7 million (December:  155,1 million). Diluted earnings per share is
calculated on the listed warrants issued.
Abridged balance sheet (rand) (unaudited)
                                 **At       At
                                 31-Mar     31-Dec
                                 2002       2001
                                 R'000      R'000
Employment of capital
Mining assets after amortisation 6 873 819  5 868 014
Investments*                     2 127 522  694 253
Net current assets/(liabilities) 41 271     (447 079)
(excluding cash)
Short-term investments
- Aurion Gold                    663 106    488 647
Cash                             1 466 015  1 213 343
                                 11 171 733 7 817 178
Capital employed
Shareholders' equity             6 144 785  4 924 354
Free Gold loan                   1 350 000  -
Loans                            2 277 655  1 337 570
Preference shares                -          5 479
Long-term provisions             692 491    475 360
Unrealised hedging loss          557 292    663 830
Deferred tax                     149 510    410 585
                                 11 171 733 7 817 178
Accounting Policies
The financial statements are prepared on the historical cost basis and in
accordance with South African Statements of Generally Accepted Accounting
Practice (except for Cash flow Statement) and International Accounting
Standards. The accounting policies are, in all material respects, consistent
with the annual financial statements for the year ended 30 June 2001.
Issued share capital:  159,6 million ordinary shares of 50 cents each.
(December 2001: 149,1)
*  Includes Hill 50 investment, which will be consolidated in results for
next quarter.
** Significant variances in balances caused by inclusion of Free Gold Joint
Venture.
Operating and financial results(US$/imperial)
                 Free    Free                                    Rand-
                 State   State  Evander   Evander    Kalgold     fontein
                 U/g     Surfac U/g       Surface    Opencast    U/g
                      e
Ore       2-Mar  1 098   106    593       66         240         900
milled
- t'000   1-Dec  1 184   -      593       65         282         948
Gold      2-Mar  140 498 965    102 978   868        13 150      130 853
produced
- oz      1-Dec  157 024 -      105 968   997        18 487      144 195
Yield -   2-Mar  0.128   0.009  0.174     0.013      0.055       0.145
oz/ton
          1-Dec  0.133   -      0.179     0.015      0.066       0.152
Cash      2-Mar  197     128    146       230        234         157
operating
costs -   1-Dec  217     -      170       145        175         175
$/oz
Cash      2-Mar  25      1      25        3          13          23
operating
costs -   1-Dec  29      -      30        2          12          27
$/t
Working   2-Mar  40 195  278    29 654    254        3 793       37 378
revenue
($'000)   1-Dec  42 794  -      28 964    293        5 009       39 786
Cash      2-Mar  27 737  124    15 023    200        3 072       20 589
operating
costs     1-Dec  34 092  -      18 026    145        3 243       25 243
($'000)
Cash      2-Mar  12 458  154    14 631    54         721         16 789
operating
profit    1-Dec  8 702   -      10 938    148        1 766       14 543
($'000)
          Rand-   Elands-  Elands- Free      Free       Australian
          fontein kraal    kraal   Gold      Gold       Opera-
          Surface U/g      Surface U/g       Surface    tions           Total
Ore       459     597      303     512       641        1 093           6 608
milled
- t'000   374     608      313     -         -          1 113           5 480
Gold      5 916   99 828   4 694   114 585   13 117     45 654          673 106
produced
- oz      5 980   110 984  5 723   -         -          44 914          594 272
Yield -   0.013   0.167    0.015   0.224     0.020      0.042           0.102
oz/ton
          0.016   0.183    0.018   -         -          0.040           0.108
Cash      220     193      156     156       131        244             176
operating
costs -   212     201      150     -         -          272             198
$/oz
Cash      3       32       2       35        3          10              18
operating
costs -   3       37       3       -         -          11              21
$/t
Working   1 687   28 613   1 334   33 273    3 796      12 285          192 540
revenue
($'000)   1 684   30 252   1 635   -         -          12 336          162 753
Cash      1 301   19 227   731     17 889    1 712      11 134          118 739
operating
costs     1 267   22 346   859     -         -          12 237          117 458
($'000)
Cash      386     9 386    603     15 384    2 084      1 151           73 801
operating
profit    417     7 906    776     -         -          99              45 295
($'000)
Prepared in accordance with International Accounting Standards
Financial results
  total operations (US$/imperial) (unaudited)
                                                  Quarter   Quarter
                                                  ended     ended
                                                  31-Mar    31-Dec
                                                  2002      2001
Ore milled - t'000                                6 608     5 480
Gold produced - oz                                673 106   594 272
Gold price received - $ / oz                      286       274
Cash operating costs - $ / oz                     176       198
                                                  $'000     $'000
Gold sales                                        192 540   162 753
Cash operating costs                              118 739   117 458
Cash operating profit                             73 801    45 295
Amortisation                                      (6 252)   (5 382)
Mark to market of financial instruments           -         1 109
Employment termination costs                      -413      (1 038)
Other income/(expenditure) - net                  1 571     -865
Interest paid                                     (5 390)   (4 024)
Corporate expenditure                             (1 353)   (1 423)
Exploration and new business                      (1 205)   (1 286)
Mark to market of listed investments              12 866    8 651
Profit before taxation                            73 625    41 037
South African normal taxation
- Current tax                                     (12 183)  (8 343)
- Deferred tax                                    (8 093)   (2 077)
Net earnings                                      53 349    30 617
Adjustments:
- Profit on sale of property, plant and equipment 393       695
Headline earnings                                 52 956    29 922
Earnings per share - cents
- Earnings*                                       33        20
- Headline earnings*                              33        20
- Fully diluted earnings **                       32        20
Dividends per share - (cents)                     -         7
Prepared in accordance with International Accounting Standards
Currency conversion rates:  average for the quarter:  March: US$1 = R11,53
(December: US$1 = R10,05)
*  Calculated on number of shares in issue during the quarter: 159,5 million
(December: 149,1 million)
** Calculated on average number of diluted shares in issue for the quarter:
164,7 million (December: 155,1 million). Diluted earnings per share is
calculated on the listed warrants issued.
Abridged balance sheet (US$) (unaudited)
                                   **At      At
                                   31-Mar    31-Dec
                                   2002      2001
                                   US$'000   US$'000
Employment of Capital
Mining assets after amortisation   604 026   471 326
Investments*                       186 953   55 763
Net current assets/(liabilities)   3 627     (35 909)
(excluding cash)
Short-term investments
- Aurion Gold                      58 269    39 249
Cash                               128 824   97 457
                                   981 699   627 886
Capital Employed
Shareholders' equity               539 964   395 530
Free Gold loan                     118 629   -
Loans                              200 145   107 435
Preference shares                  -         440
Long-term provisions               60 852    38 182
Unrealised hedging loss            48 971    53 320
Deferred tax                       13 138    32 979
                                   981 699   627 886
Prepared in accordance with International Accounting Standards.
Issued share capital: 159,6 million ordinary shares of 50 cents each.
(December 2001: 149,1 million)
Currency converted at closing rate:  March 2002: US$1 = R11,38
(December 2001: R12,45)
*  Includes Hill 50 investment, which will be consolidated in results for
next quarter.
** Significant variances in balances caused by inclusion of Free Gold Joint
Venture.
Condensed statement of changes in shareholders' equity (unaudited)
                     At        At        At        At
                     31-Mar    31-Mar    31-Mar    31-Mar
                     2002      2001      2002      2001
                     R'000     R'000     US$'000   US$'000
Balance as at the
  beginning of the
financial year       4 593 699 2 874 718 403 664   358 220
Currency translation
  adjustment and
other                56 965    6 877     5 006     857
Issue of share
  capital            589 696   192 936   51 819    24 042
Net earnings         904 425   192 139   79 475    23 943
Balance as at the
  end of March       6 144 785 3 266 670 539 964   407 062
Prepared in accordance with International Accounting Standards.
Commodity contractsas at 31 March 2002
            F 2002    F 2003   F 2004    Total
Randfontein
Forward
purchases   130,000   -        -         130,000
$ / ounce   329       -        -         329
Note: All Forwards and Calls were closed in early April 2002
            F 2002    F 2003   F 2004    Total
New Hampton
Forward
Sales
Ounces      34,871    190,000  9,000     233,871
A$ / ounce  414       515      539       501
Calls Sold
Ounces      10,000    90,425   175,500   275,925
A$ / ounce  505       521      526       523
Total       44,871    280,425  184,500   509,796
Currency
Forward
Sales
Dollar
amount
(million)   45        90       -         135
Avg Rand /
Dollar rate                              11.20
The mark-to-market value of all currency and commodity contracts in the
above Randfontein and New Hampton tables was a negative R388 million (US$34
million) as at 31 March 2002. The value was based on a gold price of $303.15
per ounce, exchange rates of R/$11.44 and $/A$ 0.53 and the prevailing
market interest rates and volatilities at the time.
            F 2002  F 2003   F 2004  F 2005  F 2006 F 2007  F 2008  F      Tota
                                                            2009
Hill 50
Forward
Sales
Ounces      68,250  210,500  220,000 167,50  150,00 125,00  100,00  100,0  1,14
                                 0       0      0       0       00     0
A$ / ounce  508     512      521     515     511    514     518     518    515
Calls Sold
Ounces      12,750  55,000   20,000  50,000  -      -       -       -      137,
A$ / ounce  524     549      518     448     -      -       -       -      505
Convertible Puts
Ounces      -       -        -       37,500  37,500 -       -       -      75,0
A$ / ounce  -       -        -       560     567    -       -       -      564
Total       81,000  265,500  240,000 255,00  187,50 125,00  100,00  100,0  1,35
                                 0       0      0       0       00     0
The mark-to-market value of all commodity contracts in the above Hill 50
table was negative R880 million (US$77 million) as at 31 March 2002. The
value was based on a gold price of $303.15 (A$569.62) per ounce, exchange
rates of R/$11.44 and $/A$ 0.53 and the prevailing market interest rates and
volatilities at the time.
Development results - (Metric)
                                   Channel   Channel
               Reef      Sampled   Width     Value     Gold
               Meters    Meters    (Cm's)    (g/t)     (Cmg/t)
RANDFONTEIN
VCR REEF       522       390       94        16.87     1 586
UE1A           3 400     3 137     92        12.22     1 124
E8 REEF        204       154       107       8.51      911
KIMBERLEY REEF 705       705       242       4.55      1 101
ALL REEFS      4 831     4 386     117       9.88      1 154
FREE STATE
BASAL          1 818     1 563     91        8.47      771
LEADER         850       780       155       8.81      1 366
A REEF         418       384       234       2.53      592
MIDDLE         460       414       192       6.78      1 301
B REEF         474       462       50        24.66     1 233
ALL REEFS      4 020     3 603     126       7.92      1 001
EVANDER
KIMBERLEY REEF 2 350     2 430     67        15.84     1 061
ELANDSKRAAL
VCR REEF       867       738       104       5.80      603
Development results - (imperial)
                                   Channel   Channel
               Reef      Sampled   Width     Value     Gold
               Feet      Feet      (inches)  (oz/t)    (in.ozt)
RANDFONTEIN
VCR REEF       1 713     1 280     37        0.492     18
UE1A           11 155    10 292    36        0.361     13
E8 REEF        669       505       42        0.238     10
KIMBERLEY REEF 2 313     2 313     95        0.137     13
ALL REEFS      15 850    14 390    46        0.283     13
FREE STATE
BASAL          5 965     5 128     36        0.246     9
LEADER         2 789     2 559     61        0.257     16
A REEF         1 371     1 260     92        0.074     7
MIDDLE         1 509     1 358     76        0.197     15
B REEF         1 555     1 516     20        0.708     14
ALL REEFS      13 189    11 821    50        0.230     11
EVANDER
KIMBERLEY REEF 7 710     7 972     26        0.468     12
ELANDSKRAAL
VCR REEF       2 844     2 421     41        0.169     7
Z B Swanepoel
Chief Executive
26 April 2002
Investor relations
Business address
Harmony Gold Mining
Company Limited
Randfontein Office Park
C/o Main Reef Road and
Ward Avenue
Randfontein, PO Box 2,
Randfontein, 1760
Telephone: +27 (11) 411-2011
Telefax:    +27 (11) 692-3879
E-mail: corporate@harmony.co.za
Investor relations contacts
Corn  Bobbert
Telephone: +27 (11) 411-2036
Telefax:   +27 (11) 411-2169
E-mail: cbobbert@harmony.co.za
Ferdi Dippenaar
Telephone: +27 (11) 411-2011
Telefax: +27 (11) 692 3693
E-mail: fdippenaar@harmony.co.za
Share transfer secretaries
Ultra Registrars (Pty) Ltd
Contact: Polly Pollard
Telephone: +27 (11) 370-5775
Telefax: +27 (11) 370-5780
E-mail: ultra@registrars.co.za
11 Diagonal Street
Johannesburg 2001
(PO Box 4844, Johannesburg, 2000)
United States Depositary
American Depositary Receipts,
The Bank of New York
Contact: Figen Inal
Telephone: +1 (646) 885-3294
Telefax: +1 (646) 885-3043
E-mail: final@bankofny.com
Shareholder Relations Department
620 Avenue of the Americas
New York, NY10011
United States of America
United Kingdom Registrars
Capita IRG Plc
Contact(s): Melvyn Leigh/
Therese Hodgin
Telephone: +44 (208) 639-1001
Telefax: +44 (208) 478-2876
E-mail: mleigh@capita-irg.com/
thodgin@capita-irg.com
Balfour House 390-398
High Road, Ilford
Essex IG1 1NQ, United Kingdom
Directors
A R Fleming*+ (Chairman),
Z B Swanepoel (Chief executive),
F Abbott, F Dippenaar,
T S A Grobicki, T A Mokhobo*,
M F Pleming*, Lord Renwick of
 Clifton KCMG*+,
J G Smithies*
*Non executive directors +British
Trading Symbols
Ordinary Shares
JSE Securities Exchange  :    HAR
Nasdaq                   :    HGMCY
London Stock Exchange    :    HRM
Euronext Paris           :    HG
Euronext Brussels        :    HMY
Berlin Stock Exchange    :    HAM1
Warrants
JSE Securities Exchange  :    HARW
Nasdaq                   :    HGMCW
Options
Chicago Board Options
Exchange
ISIN                     :    ZAE000015228



                                        
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