HARMONY REPORTS RECORD OPERATING PROFITS
Release Date: 29/04/2002 12:01:13 Code(s): HAR
Johannesburg, 29 April 2002 - Harmony Gold Mining Company Limited today
reported an 87% increase in operating profits, up from R455,2 million in
December 2001 to a record R850,9 million for the March 2002 quarter.
The increase is due to the inclusion of R201,4 million in respect of the
Free Gold JV, as well as the increase in gold price in R/kg terms following
the 14,7% depreciation of the Rand quarter on quarter. The company's focus
on working costs also delivered excellent results with the operations
reporting a 3% or R37,4 million reduction.
Kilograms recovered were 13% higher at 20 936 kgs and is due to the
inclusion of New Hampton and the 50% inclusion of Free Gold.
Profit before tax increased by 106% from R412,4 million to R849,0 million.
Taxation was R130 million higher at R233,8 million compared to the R104,7
million for the December 2001 quarter.
Harmony's net profit increased by 100% to R615,1 million. Earnings per share
increased by 87% from 206 cents for the December 2001 quarter to 386 cents
for the past quarter. Earnings for the financial year to date total 656
"The company achieved a US$110 or 38% cash operating profit margin with cash
costs of US$176/oz. Working costs in R/kg terms increased marginally by
2,4% due to lower gold production caused by the recovery grade being 2%
lower. Cash costs in US$ terms decreased from US$198/oz to US$176/oz," said
Bernard Swanepoel, chief executive.
"The further 14,7% devaluation of the South African Rand over the past
quarter has significantly impacted on the profitability of 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 producer.
This has resulted in increased profit margins," continued Swanepoel.
The Free State operations reported a 66% increase in cash operating profits
from R87,4 million to R145,4 million. The operations' focus on working costs
resulted in a decrease of R21,4 million or 6% quarter on quarter. In US
Dollar terms these operations are producing an annualised 600 000 ounces at
cash costs of US$197/oz.
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. Cost in both R/tonne and R/kg decreased due to a
R7,1 million reduction in working costs.
The Randfontein operations returned a 32% improvement in cash operating
profits, increasing from R150,3 million to R198,0 million. Working cost
reductions of R14,0 million were achieved.
Although the Elandskraal operations reported cash operating profits of
R115,2 million, an increase of 32% over the R87,2 million reported
previously, the continued lack of flexibility at these operations resulted
in gold recovery from underground being 347 kgs less at 3 105 kgs. The
development programmes at Elandsrand and Deelkraal which were embarked on a
year ago will in 9 to 12 months allow more mining flexibility and a recovery
Kalgold's cash operating profits decreased to R8,3 million. 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. The grade was further
adversely impacted by a change in the nature of the orebody that saw a
higher ratio of high grade refractory ore reporting to the mill, resulting
in high residues and lower recoveries.
The March 2002 quarter has been an extremely busy period for Harmony's
Australian operations with both units reporting operating profits. The
company was successful in the completion of the redevelopment of the
seismically affected lower portions of the Big Bell underground mine, with
the first stoping production blasts taken. At Jubilee, the completion of the
pre-stripping of the southern portion of Trojan pit, will for the first time
since Harmony's acquisition, allow access to higher grade material for at
least 8 months.
The advance of the decline and lateral development for ventilation at
Bendigo has progressed well since start up at the end of December 2001 and
is ahead of budget. It is envisaged to take the first development blast in
the first orebody in August 2002, instead of December 2002 as originally
The company successfully acquired 99% of Hill 50 and has initiated the
process for the compulsory acquisition of the remaining minorities. This
transaction at an acquisition cost of R1 411 million (A$231 million) will
contribute approximately 300 000 oz annually, at a cash cost of US$169 to
our Australian production base.
"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," said chief executive
"Even without any central bank support it has still been the second best
performing 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$300/oz, the consolidation of the gold industry has
resulted in fewer stocks being available. The outperformance of unhedged
producers over hedged producers has increased significantly following the
increase in the gold price. Harmony has and will continue to be unhedged by
choice," he concluded.
PROFIT MARGIN ANALYSIS - March 2002
OPERATIONS US$ CASH COST % MARGIN
Free State 197 31%
Evander 147 49%
Randfontein 160 44%
Elandskraal 191 33%
Kalgold 234 18%
Offshore 244 15%
Sub total 182 36%
Free Gold (50%) 153 47%
TOTAL 176 38%
For further details contact:
On + 27(0)83-303-9922
Issued by Harmony Gold Mining Company Limited
Tel +27 11 411 2036
Fax +27 11 411 2169
Mobile +27(0)83 380 6614