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Harmony Gold Mining Company Limited - Quarterly Report

Release Date: 27/10/2003 08:00:16      Code(s): HAR
Harmony Gold Mining Company Limited - Quarterly Report                          
Harmony Gold Mining Company Limited                                             
ISIN: ZAE000015228                                                              
Registration number: 1950/038232/06                                             
Key indicators                                                                  
Highlights for the quarter                                                      
Harmony/ARMgold merger concluded on 22 September 2003                           
Higher US Dollar gold price negates some impact of stronger South African Rand  
Robustness of asset base delivers solid operational performance from all regions
Abelle Ltd - feasibility study on Morobe continues and further good exploration 
results from Wafi                                                               
Crystallized strategic investments in Highland Gold and High River Gold         
Proforma combined quarterly financial highlights                                
                             Sept 2003   June 2003  % Variance                  
Cash earnings per share                                                         
- SA cents per share         130         133        (2)                         
- US cents per share         18          17         1                           
Basic earnings per share                                                        
excluding mark to market of                                                     
financial instruments and                                                       
impairment charges                                                              
- SA cents per share         44          19         132                         
- US cents per share         6           2          200                         
Basic earnings per share                                                        
including mark to market of                                                     
financial instruments and                                                       
impairment charges                                                              
- SA cents per share         (24)        (134)      82                          
- US cents per share         (3)         (17)       82                          
Gold produced                                                                   
- kg                         30 145      29 959     1                           
- oz                         969 179     963 200    1                           
Cash costs                                                                      
- R/kg                       75 319      73 480     (3)                         
- $/oz                       316         296        (7)                         
The past quarter in review - operational improvements contribute to solid       
performance                                                                     
As predicted the South African Rand continued its strong trend against the US   
Dollar. This company however proved its robustness by returning a solid         
operational performance as well as effectively dealing with the impact of the   
annual wage increases through productivity improvements.                        
Following the successful completion of the merger between Harmony and ARMgold on
22 September 2003, we are presenting the Q1/F2004 results in a pro-forma        
combined format to allow for a quarter on quarter comparison.                   
The merged company reported increased cash operating profits up 1%, up from     
R330,4 million to R332,9 million. This was achieved through a combination of a  
1% increase in production as well as good management of working costs following 
the granting of annual labour increases, in excess of 10%, in July 2003.        
The performance of the company is highlighted in the following table:           
                                 Sept 2003       June 2003      % Variance      
Production - kg                  30 145          29 959         1               
Production - oz                  969 179         963 200        1               
Revenue - R/kg                   86 364          84 507         2               
Revenue - US$/oz                 362             340            6               
Cash cost - R/kg                 75 319          73 480         (3)             
Cash cost - US$/oz               316             296            (7)             
Exchange rate - R/US$            7,42            7,73           (4)             
For comparison purposes the contribution from both Harmony and ARMgold measured 
quarter on quarter are best illustrated as follows:                             
September 2003              June 2003                               
             Harmony  ARMgold  Total    Harmony   ARMgold  Total                
Production -                                                                    
kg           22 725   7 420    30 145   21 992    7 967    29 959               
Production -                                                                    
oz           730 622  238 557  969 179  707 053   256 147  963 200              
Cash                                                                            
operating                                                                       
profit                                                                          
(R"million)  217,4    115,5    332,9    183,4     147,0    330,4                
Whilst Harmony returned vastly improved operational results, ARMgold performed  
in line with predictions following the expected reduction in output from its    
Welkom/Orkney Operations.                                                       
On an operational level the merger has progressed well with the integration of  
the various activities of the underlying companies. At the time of the merger it
was anticipated that savings of approximately R10,0 million per month would be  
achieved. I anticipate that it will be achieved within the next three months.   
Although we have reached an agreement with the labour unions on the introduction
of CONOPS (continuous operations) at our Free Gold operations, these benefits   
are only expected to contribute to the performance of the company in six to nine
months time. Activities related to the introduction of CONOPS are underway at   
the various Free Gold shafts and are progressing well.                          
                             Sept 2003   June 2003  % Variance                  
Cash earnings per share                                                         
- SA cents per share         130         133        (2)                         
- US cents per share         18          17         1                           
Basic earnings per share                                                        
excluding mark to market of                                                     
financial instruments and                                                       
impairment charges                                                              
- SA cents per share         44          19         132                         
- US cents per share         6           2          200                         
Basic earnings per share                                                        
including mark to market of                                                     
financial instruments and                                                       
impairment charges                                                              
- SA cents per share         (24)        (134)      82                          
- US cents per share         (3)         (17)       82                          
As a result of the increase in the US Dollar price of gold the negative mark to 
market value of the hedge book, increased by R166 million quarter on quarter.   
This hedgebook was inherited by Harmony through the acquisition of New Hampton  
and Hill 50 in Australia.                                                       
When measured in cash earnings per share, earnings decreased by 2% from 133     
cents per share to 130 cents per share.                                         
RESTRUCTURING TO DEAL WITH THE STRONG SA RAND                                   
Harmony has, over the past seven years, had to deal with the volatile cycles in 
the US Dollar gold price as well as the SA Rand.                                
The current low R/kg gold price scenario has again presented the company with   
the challenge to restructure its operations and as in the past, position itself 
to deal with its changing environment. The company has demonstrated on many     
occasions its ability to deal pro-actively with the adverse situations.         
This restructuring exercise will see more focus being placed on the operational 
and financial performance of the company without neglecting areas of growth and 
marketing.                                                                      
Operating and financial results (Rand/metric)                                   
Underground production - South Africa                                           
Free                     Rand-       Elands-    
                                State       Evander      fontein     kraal      
Ore milled            Sep-03    1 156       538          694         491        
- t"000               Jun-03    1 098       471          649         480        
Gold produced         Sep-03                                                    
                                4 850       3 015        3 391       2 641      
- kg                  Jun-03    4 570       2 943        3 024       2 221      
Yield                 Sep-03    4.20        5.60         4.89        5.38       
- g/t                 Jun-03    4.16        6.25         4.66        4.63       
Cash operating        Sep-03    85 499      73 337       75 018      88 284     
costs - R/kg          Jun-03    82 587      69 873       70 037      95 752     
Cash operating        Sep-03    359         411          367         475        
costs -  R/ton        Jun-03    344         437          326         443        
Working revenue       Sep-03    419 027     259 722      292 601     227 545    
(R"000)               Jun-03    380 584     243 341      249 194     182 144    
Cash operating        Sep-03    414 668     221 110      254 388     233 158    
costs (R"000)         Jun-03    377 424     205 637      211 792     212 665    
Cash operating        Sep-03    4 359       38 612       38 214      (5 613)    
profit (R"000)        Jun-03    3 160       37 704       37 402      (30 521)   
Operating and financial results (Rand/metric)                                   
Underground production - South Africa                                           
                                 Free        ARM              Sub               
                                 Gold        gold             Total             
Ore milled            Sep-03    1 254        560              4 693             
- t"000               Jun-03     1 222        581             4 501             
Gold produced         Sep-03    7 864        3 117            24 878            
- kg                  Jun-03     8 184        3 494           24 436            
Yield                 Sep-03    6.27         5.56             5.30              
- g/t                 Jun-03    6.70         6.01             5.43              
Cash operating        Sep-03    67 492       76 321            76 050           
costs - R/kg          Jun-03    64 343       73 129           73 237            
Cash operating        Sep-03     423          424              403              
costs -  R/ton        Jun-03    431          440              398               
Working revenue       Sep-03    680 764      270 724          2 150 384         
(R"000)               Jun-03     707 766      302 445         2 065 474         
Cash operating        Sep-03    530 758      237 890          1 891 971         
costs (R"000)         Jun-03     526 580      255 514         1 789 612         
Cash operating        Sep-03     150 006      32 835           258 412          
profit (R"000)        Jun-03    181 186      46 931           275 862           
Operating and financial results (Rand/metric)                                   
Surface production - South Africa                                               
                                    Free                         Rand-          
                                    State        Evander         fontein        
Ore milled           Sep-03         227          47              546            
- t"000              Jun-03         215          54              535            
Gold produced        Sep-03         133               31         141            
- kg                 Jun-03         123          35              145            
Yield                Sep-03         0.59         0.66            0.26           
- g/t                Jun-03         0.57         0.65            0.27           
Cash operating       Sep-03         70 238       58 903          72 182         
costs - R/kg         Jun-03         76 959       59 771          65 679         
Cash operating       Sep-03         41           39              19             
costs -  R/ton       Jun-03         44           39              18             
Working revenue      Sep-03         11 458       2 713           12 214         
(R"000)              Jun-03         10 254       2 905           12 118         
Cash operating       Sep-03         9 342        1 826           10 178         
costs (R"000)        Jun-03         9 466        2 092           9 524          
Cash operating       Sep-03         2 117        887             2 037          
profit (R"000)       Jun-03         788          813             2 595          
Operating and financial results (Rand/metric)                                   
Surface production - South Africa                                               
                                    Elands-         Free           Sub          
                                    kraal           Gold           Total        
Ore milled           Sep-03         296             1 102          2 218        
- t"000              Jun-03         299              1 188         2 291        
Gold produced        Sep-03         118             742            1 165        
- kg                 Jun-03         98               762           1 163        
Yield                Sep-03         0.40            0.67           0.53         
- g/t                Jun-03         0.33            0.64           0.51         
Cash operating       Sep-03         93 102           65 736         69 620      
costs - R/kg         Jun-03         107 224         62 094         67 847       
Cash operating       Sep-03         37               44             37          
costs -  R/ton       Jun-03         35              40             34           
Working revenue      Sep-03         10 135          64 242         100 763      
(R"000)              Jun-03         8 409            66 296        99 982       
Cash operating       Sep-03         10 986          48 776         81 107       
costs (R"000)        Jun-03         10 508           47 316        78 906       
Cash operating       Sep-03         (851)            15 466         19 656      
profit (R"000)       Jun-03         (2 099)         18 980         21 077       
Operating and financial results (Rand/metric)                                   
Kalgold    South                                      
                          Open-      Africa      Australia    Harmony           
                          Cast       Total       Total        Total             
Ore milled      Sep-03    367        7 278       1 316        8 594             
- t"000         Jun-03    315        7 107       1 907        9 014             
Gold produced   Sep-03    779        26 822      3 323        30 145            
- kg            Jun-03    554        26 153      3 806        29 959            
Yield           Sep-03    2.12       3.69        2.53         3.51              
- g/t           Jun-03    1.76       3.68        2.00         3.32              
Cash operating  Sep-03    69 199     75 572      73 280       75 319            
costs - R/kg    Jun-03    66 711     72 859      77 747       73 480            
Cash operating  Sep-03    147        278         185          264               
costs -  R/ton  Jun-03    117        268         155          244               
Working         Sep-03    67 227     2 318 374   285 059      2 603 433         
revenue                                                                         
(R"000)         Jun-03    47 685     2 213 141   318 605      2 531 746         
Cash operating  Sep-03    53 906     2 026 985   243 511      2 270 496         
costs (R"000)   Jun-03    36 958     1 905 476   295 906      2 201 382         
Cash operating  Sep-03    13 321     291 389     41 548       332 937           
profit (R"000)  Jun-03    10 727     307 666     22 699       330 365           
Total Operations - quarterly financial results (Rand/metric)                    
                                       Quarter        Quarter                   
                                       ended          ended                     
                                       30 September   30 June                   
Excluding ARMgold                      2003           2003                      
Ore milled - t"000                     6 856           7 228                    
Gold produced - kg                     22 725          21 992                   
Gold price received - R/kg             86 258          83 770                   
Cash operating costs - R/kg            76 693          75 433                   
                                       R million       R million                
                                       (unaudited)    (reviewed)                
Gold sales                             1 960           1 842                    
Cash operating costs                   1 743          1 659                     
Cash operating profit                  217            183                       
Income from associates                  (7)            33                       
Amortisation                            (142)          (140)                    
Impairment of mining assets             -              (598)                    
Mark to market of financial             (172)          220                      
instruments                                                                     
Rehabilitation cost                     (10)           30                       
(provision)/reversal                                                            
Employment termination costs            (12)           (11)                     
Other income - net                      70             61                       
Interest paid                           (55)           (86)                     
Corporate, marketing and new business   (31)           (38)                     
expenditure                                                                     
Exploration expenditure                 (14)           (24)                     
Foreign exchange losses                 (31)           (133)                    
Profit before taxation                 (187)           (503)                    
South African normal taxation                                                   
- Current tax                          (18)            (28)                     
- Deferred tax                         86              53                       
Net earnings                           (119)           (478)                    
Earnings per share - cents *                                                    
- Basic earnings                       (62)           (259)                     
- Basic earnings before impairment     (62)            65                       
- Headline earnings                     (67)           44                       
- Fully diluted earnings **             (63)           (259)                    
Dividends per share - cents                                                     
- Proposed final                       -               150                      
Prepared in accordance with International Financial Reporting Standards.        
* Calculated on weighted number of shares in issue at                           
  quarter end September 2003:  192.3 million                                    
  (June 2003: 184.3 million)                                                    
** Calculated on weighted average number of diluted shares in issue             
   at quarter end September 2003: 190.9 million                                 
  (June 2003: 184.3 million)                                                    
Reconciliation of headline earnings                                             
Net earnings                        (119)              (478)                    
Adjustments:                                                                    
- Profit on sale of assets          (9)                (38)                     
- Impairment of mining assets       -                  598                      
Headline earnings                   (128)               82                      
Total Operations - proforma quarterly financial results                         
(Rand/metric) (unaudited)                                                       
                                    Quarter            Quarter                  
ended              ended                    
                                    30 September       30 June                  
Including ARMgold                   2003               2003                     
Ore milled - t"000                   8 594              9 014                   
Gold produced - kg                   30 145             29 959                  
Gold price received - R/kg           86 364            84 507                   
Cash operating costs - R/kg          75 319             73 480                  
                                     R million          R million               
Gold sales                           2 603              2 531                   
Cash operating costs                 2 270              2 201                   
Cash operating profit                333                330                     
Income from associates              (11)               29                       
Amortisation                         (166)              (140)                   
Impairment of mining assets          -                  (598)                   
Mark to market of financial          (172)             221                      
instruments                                                                     
Rehabilitation cost                  (17)               30                      
(provision)/reversal                                                            
Employment termination costs         (20)               (11)                    
Other income - net                   121               65                       
Interest paid                        (83)               (86)                    
Corporate, marketing and new         (42)               (38)                    
business expenditure                                                            
Exploration expenditure              (14)               (25)                    
Foreign exchange losses              (31)               (133)                   
Profit before taxation               (102)             (356)                    
South African normal taxation                                                   
- Current tax                        (35)               (28)                    
- Deferred tax                       76                 53                      
Net earnings                         (61)              (331)                    
Earnings per share - cents *                                                    
- Basic earnings                     (24)              (134)                    
- Basic earnings before impairment  (24)               108                      
- Headline earnings                  (28)              92                       
- Fully diluted earnings **          (24)              (134)                    
The proforma quarterly financial results are for information purposes only.     
* Calculated on weighted number of shares in issue at quarter end               
  September 2003: 256.0 million (June 2003: 248.0 million)                      
** Calculated on weighted average number of diluted shares in issue             
   at quarter end September 2003: 254.6 million                                 
(June 2003: 246.6 million)                                                    
Reconciliation of headline earnings                                             
Net earnings                   (61)                    (331)                    
Adjustments:                                                                    
- Profit on sale of assets    (11)                     (38)                     
- Impairment of mining assets -                        598                      
Headline earnings             (72)                     229                      
Abridged balance sheet (Rand)                                                   
At*                At                         
                                  30 September 2003  30 June 2003               
                                  R million          R million                  
                                  (unaudited)        (audited)                  
Employment of capital                                                           
Mining assets after amortisation   14 729             9 969                     
Intangible assets                  2 843             -                          
Investments                        1 260              868                       
Investments in associates          2 896              1 398                     
Net current liabilities                                                         
(excluding cash)                  (1 300)            (309)                      
Cash                               2 561              1 687                     
Total assets                       22 989             13 613                    
Capital employed                                                                
Shareholders" equity               15 937             8 628                     
Loans                              2 881              2 415                     
Long-term provisions               840                632                       
Minority interest                 139                120                        
Unrealised hedging loss            450                284                       
Deferred tax                       2 742              1 534                     
Total equity and liabilities       22 989             13 613                    
Basis of accounting                                                             
The unaudited results for the quarter have been prepared on the International   
Financial Reporting Standards (IFRS) basis. These consolidated quarterly        
statements are prepared in accordance with IFRS 34, Interim Financial Reporting.
The accounting policies are consistent with those applied in the previous       
financial year.                                                                 
Issued share capital: 257.9 million ordinary shares of 50 cents each. (June     
2003: 184.9 million shares)                                                     
*    The amounts in the balance sheet have changed significantly as a result of 
the inclusion of ARMgold.                                                       
Condensed statement of changes in shareholders" equity (unaudited)              
At        At         At         At         
                                     30 Sept.  30 Sept.   30 Sept.   30 Sept.   
                                     2003      2002       2003       2002       
                                     R         R          US$        US$        
million   million    million    million    
Balance as at the beginning of the                                              
financial year                        8 628     7 963      1 240      758       
Currency translation adjustment and                                             
other                                 (104)     (10)       (15)       (1)       
Issue of share capital                7 823     210        1 124      20        
Net earnings                          (119)     426        (17)       41        
Dividends paid                        (291)     (741)      (42)       (71)      
Balance as at the end of September                                              
                                      15 937   7 848       2 290      747       
Prepared in accordance with International Financial Reporting Standards.        
Abridged cashflow statements (unaudited)                                        
3 Months     3 Months                     3 Months    3 Months                  
ended        ended                        ended       ended                     
30 Sept.     30 Sept.                     30 Sept.    30 Sept.                  
2002         2003                         2003        2002                      
US$ million  US$ million                  R million   R million                 
                          Cash flow from                                        
                          operating                                             
84           76           activites       565         869                       
Cash utilised                                         
                          in investing                                          
(11)         68           activities      505         (114)                     
                          Cash utilised                                         
in financing                                          
(55)         (26)         activities        (196)     (570)                     
                          Translation                                           
(2)          (25)         adjustment      -           -                         
Increase in                                           
                          cash and                                              
16           143          equivalents     874         185                       
                          Opening cash                                          
139          225          and             1 687       1 441                     
                          equivalents                                           
                          Closing cash                                          
155          368          and             2 561       1 626                     
equivalents                                           
Prepared in accordance with International Financial Reporting Standards.        
Operating activities translated    September 2003: US$1 = R7.42                 
at average rates of:                                                            
(September 2002: US$1 = R10.39)              
Closing balances translated at     September 2003: US$1 = R6.96                 
closing rates of :                                                              
                                   (September 2002: US$1 = R10.51)              
Date: 27/10/2003 08:00:28 AM Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                                             
                                                                                
                                                                                
                                                                                



                                        
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