Harmony Gold Mining Company Limited - Chief executive"s review for the quarterlyRelease Date: 28/04/2004 08:14:23 Code(s): HAR Harmony Gold Mining Company Limited - Chief executive"s review for the quarterly
ended 31 March 2004
Harmony Gold Mining Company Limited
(Incorporated in the Republic of South Africa)
ISIN ZAE000015228
(Registration number 1950/038232/06)
TRADING SYMBOLS: Ordinary
Shares: JSE Securities Exchange: HAR,
New York Stock Exchange: HMY,
London Stock Exchange: HRM,
Euronext Paris: HG,
Euronext Brussels: HMY,
Berlin Stock Exchange: HAM1
Chief executive"s review for the quarterly ended 31 March 2004
Key indicators
* Christmas break impacts on production volumes
* restructuring process underway at loss-making shafts
* CONOPS benefits start to show
* convertible bonds issued offshore to raise R1 700 million
* growth projects on schedule and within budget
* acquisition of 42,1% of Avgold from ARM. Offer to minorities underway
following Competition Tribunal and shareholders" approval
* restructuring of Australian hedge book continues as 365 000 ounces were
closed out
Quarterly financial highlights
31 March 30 December
2004 2003
Cash operating
profit - Rand 134 million 271 million
- US$ 20 million 40 million
Cash earnings - SA cents per share 52 105
- US cents per share 8 15
Basic earnings - SA cents per share (31) 92
- US cents per share (5) 14
Headline earnings - SA cents per share (16) (66)
- US cents per share (2) (10)
Fully diluted
earnings - SA cents per share (31) 92
- US cents per share (5) 14
Gold produced - Kg 24 735 29 294
- Oz 795 239 941 826
Cash costs - R/Kg 82 852 75 888
- $/Oz 382 350
SAFETY REPORT
We regretfully report that during the March 2004 quarter, eleven of our
employees lost their lives at our operations. We offer our sincere condolences
to the families, friends and relatives of the deceased.
Fatality injury rate (per million hours worked)
This information is illustrated in a graph form and can be viewed in the press.
THE PAST QUARTER IN REVIEW
The company reported cash operating profits down by 50% from R271,0 million to
R134,2 million.
The performance of the company is highlighted in the following table:
March December Percentage
2004 2003 variance
Production - kg 24 735 29 294 (16)
Production - oz 795 239 941 826 (16)
Revenue - R/kg 88 277 85 139 4
Revenue - US$/oz 406 393 3
Cash cost - R/kg 82 852 75 888 (9)
Cash cost - US$/oz 382 350 (9)
Exchange rate - R/US$ 6,77 6,75 -
The impact of the reduced working days in South Africa over Christmas is evident
from the reduction in volumes. A 3% increase in the US Dollar gold price saw us
receive a R/kg gold price which, measured quarter on quarter, was only 5% higher
at R88 277/kg. Cash working costs were well controlled, decreasing by 8% or R174
million to R2 049 million. This is well in line with the reduction in working
days during the quarter. Underground cash costs in
R/tonne terms increased by 3% from R414/tonne to R428/tonne mainly as a result
of the 12% reduction in tonnage treated. In US Dollar terms our cash operating
profit margin decreased from US$43/oz (12%) to US$25/oz (7%). In R/kg terms,
cash working costs increased from R75 888/kg to R82 852/kg. This increase was
mainly due to the 16% reduction in gold produced.
Four shafts, Welkom 1, Orkney 6, Eland (which is part of Free Gold) and
Merriespruit 3 are nearing the end of their economical life and have been
earmarked for closure.
We are in consultations with the respective unions on the restructuring plans.
At a meeting held on 16 April 2004, Harmony and the various unions agreed to
support the establishment of a multi-party process. This joint task team has
subsequently met to evaluate the financial situation of the shafts and will soon
report back to their principals.
OUR GROWTH STORY CONTINUES - UPGRADING THE QUALITY OF OUR PRODUCTION BASE
Harmony successfully acquires Avmin"s stake in Avgold
On 7 April 2004 we announced that the parties concerned (Harmony/ ARMI/Avmin)
had received approval from the Competition Tribunal to proceed with the range
of indivisible transactions announced on 13 November 2003.
Subsequently at a general meeting of Avmin shareholders held on Thursday, 15
April 2004, the shareholders approved the disposal of its entire shareholding of
286 305 263 ordinary shares in Avgold, representing 42,1% of Avgold"s issued
share capital to Harmony. In a share exchange agreement, ARM will receive 1
Harmony share for every 10 Avgold shares held.
Abelle Limited (83% Harmony)
On 15 March 2004 we announced an offer to holders of ordinary shares, listed
options and unlisted options in Abelle Limited that we do not already own.
The acquisition of the Abelle minorities is valued at approximately R620 million
or A$125 million. An amount of approximately A$177 million is estimated to be
needed to finance the development of the first of these prospective projects in
PNG. These assets are a natural fit with our pipeline of quality growth projects
which we are currently developing in South Africa.
We remain on track with our strategy of delivering growth in Harmony"s
international production base.
"A closer analysis of a breakdown of our quarterly production shows that the
gold price of R88 277/kg achieved during the quarter, 66% of 16 359 kg were
minded profitably. The remaining 34% pr 8 376 kg were mined at a loss of R64,3
million. Deelkraal and the leveraged ounces of the Free State region
contributed R56,0 mil- lion towards the loss."
Cash
Tonnes Production operating
Operations ("000) (kg) Grade (g/t) profit
Free State growth 1 066 6 677 6.27 123 305
Free State leverage 796 3 197 4.02 (23 537)
Elandsrand 317 1 938 6.12 1 950
Deelkraal 114 523 4.58 (17 880)
Randfontein 623 2 828 4.54 12 990
Evander 482 2 448 5.08 (4 416)
Welkom 373 1 720 4.60 (14 573)
Orkney 325 1 676 5.15 23 527
Kalgold opencast 315 488 1.55 (3 904)
Total 4 411 21 495 4.87 97 462
SA Surface 2 298 945 0.41 10 244
Total SA Operations 6 709 22 440 3.34 107 706
Australian Operations 1 061 2 295 2.16 26 491
Total Harmony 7 770 24 735 3.18 134 197
RESTRUCTURING OUR BALANCE SHEET
Harmony announced on 1 April 2004 that it intends to raise R1 700 million by way
of a specific issue of convertible bonds to international investors which will
reduce our South African interest payments by approximately R85 million per year
(R21,25 million per quarter).
OUR GROWTH STRATEGY AND PROJECTS CONTINUE REGARDLESS
We continue to aggressively deliver on our organic growth projects. Five
projects with a total capital cost of R3,1 billion are in various stages of
completion, on schedule and within budget.
This information is illustrated in a graph form and can be viewed in the press.
The approved projects which are undertaken are in South Africa and will see the
company increase its production base by approximately 1,6 million ounces per
annum. Of these ounces, 1,2 million will be replacement ounces and the remainder
will allow for growth in excess of the current annualised 4 million
ounces. If the projects in PNG are included, the production profile of the
company increases further.
HARMONY PROJECT AND ACQUISITION PRODUCTION PROFILES
The above production profile includes the projects which currently reside within
Abelle, i.e. Hidden Valley and Wafi. The Golpu Copper - gold porphyry project
has been excluded for the purposes of this illustration. These projects in PNG,
if approved, have the potential to increase the company"s production profile by
an additional 500 000 to 600 000 ounces within the next four years.
This will see us produce approximately 5 million ounces per annum by 2009/2010,
even with no further acquisitions. This is a healthy position to be in at a time
when producers are paying excessive prices for growth and replacement ounces.
This information is illustrated in a graph form and can be viewed in the press.
Total Operations - quarterly financial results
(Rand/metric) (unaudited)
Quarter ended Quarter ended Quarter ended
31 March 31 December 31 March
2004 2003 2003
Ore milled - t"000 7 770 8 183 7 070
Gold produced - kg 24 735 29 294 22 211
Gold price received - R/kg 88 277 85 139 94 687
Cash operating costs - R/kg 82 852 75 888 73 150
R million R million R million
Gold sales 2 183 2 494 2 103
Cash operating costs 2 049 2 223 1 625
Cash operating profit 134 271 478
Other income - net 62 65 40
Employment termination and
restructuring costs (14) (20) (8)
Corporate, marketing,
new business expenditure (34) (43) (32)
Exploration expenditure (14) (35) (23)
Income/(loss) from associates 33 (34) 24
Profit on sale of listed investments - 522 -
Interest paid (97) (107) (63)
Cash profit 70 619 416
Depreciation and amortisation (251) (246) (132)
Provision for rehabilitation costs (12) (18) (13)
Gain on financial instruments 48 11 133
Loss on listed investments - - (17)
Loss on foreign exchange (11) (50) (49)
(Loss)/income before tax (156) 316 338
Current tax - benefit/(expense) 11 (84) (30)
Deferred tax - benefit/(expense) 67 10 (73)
Net (loss)/income before
minority interests (78) 242 235
Minority interests (3) (6) -
Net (loss)/income (81) 236 235
Earnings per share - cents*
- Basic (loss)/earnings (31) 92 130
- Headline (loss)/earnings (16) (66) 126
- Fully diluted (loss)/earnings** (31) 92 129
Dividends per share - (cents)
- Interim 40 - 125
Prepared in accordance with International Financial Reporting Standards.
*Calculated on weighted number of shares in issue at quarter-end March 2004:
258.4 million (December 2003: 257.9 million) ( March 2003: 180.6 million).
**Calculated on weighted average number of diluted shares in issue at
quarter-end March 2004: 257.0 million (December 2003: 256.5 million) (March
2003: 182.5 million).
Reconciliation of headline earnings:
Net (loss)/earnings (81) 236 235
Adjustments:
- Profit on sale of assets (2) (3) (7)
- Profit on sale of Highland
& High River - net of tax - (444) -
- Amortisation on goodwill 42 41 -
Headline (loss)/earnings (41) (170) 228
Total Operations - year to date financial results
(Rand/metric) (unaudited)
Year to date Year to date Year to date
31 March 31 March 31 March
2004 2003 2004
Including
ARMgold
in
September
2003 Quarter
Ore milled - t"000 22 809 21 011 24 547
Gold produced - kg 76754 71 063 84 174
Gold price received - R/kg 86 481 100 657 86 500
Cash operating costs - R/kg 78 370 69 811 77 731
R million R million R million
Gold sales 6 638 7 153 7 281
Cash operating costs 6 015 4 961 6 543
Cash operating profit 623 2 192 738
Other income - net 199 141 250
Employment termination
and restructuring costs (41) (35) (49)
Corporate, marketing,
new business expenditure (104) (90) (115)
Exploration expenditure (63) (80) (63)
(Loss)/income from associates (8) 24 (12)
Profit on sale of listed
investments 522 469 522
Interest paid (259) (182) (287)
Cash profit 869 2 439 984
Depreciation and amortisation (639) (403) (663)
Provision for rehabilitation costs (35) (34) (42)
(Loss)/gain on financial
instruments (113) 210 (113)
Loss on listed investments - (523) -
Loss on foreign exchange (93) (49) (93)
(Loss)/income before tax (11) 1 640 73
Current tax - expense (90) (275) (108)
Deferred tax - benefit/(expense) 162 (246) 153
Net income before minority
interests 61 1 119 118
Minority interests (25) - (25)
Net income 36 1 119 93
Earnings per share - cents*
- Basic (loss)/earnings 15 636 39
- Headline (loss)/earnings (141) 623 (118)
- Fully diluted (loss)/earnings** 15 629 39
Dividends per share - (cents)
- Interim 40 125 40
Prepared in accordance with International Financial Reporting Standards.
*Calculated on weighted number of shares in issue at year to date end
March 2004: 240.5 million (March 2003: 175.9 million).
**Calculated on weighted average number of diluted shares in issue
year to date end March 2004: 239.2 million (March 2003: 177.9 million).
Reconciliation of headline earnings:
Net (loss)/earnings 36 1 119 93
Adjustments:
- Profit on sale of assets (15) (23) (16)
- Profit on sale of listed
investments - net of tax (444) - (444)
- Amortisation on goodwill 84 - 84
Headline (loss)/earnings (339) 1 096 (283)
Abridged balance sheet at 31 March 2004 (Rand)
At 31 March At 31 December At 30 June
2004 2003 2003
R million R million R million
(unaudited) (unaudited) (audited)
ASSETS
Non-current assets
Property, plant and equipment 14 821 14 911 9 969
Investments 1 130 1 098 868
Investments in associates 2 604 2 564 1 398
Intangible assets 2 761 2 803 -
21 316 21 376 12 235
Current assets
Inventories 455 463 454
Receivables 452 551 771
Cash and cash equivalents 2 337 2 888 1 687
3 244 3 902 2 912
Total assets 24 560 25 278 15 147
EQUITY AND LIABILITIES
Share capital and reserves
Issued capital 14 678 14 673 6 874
Fair value and other reserves (376) (243) (242)
Retained earnings 1 637 1 821 1 996
15 939 16 251 8 628
Minority interest 147 155 120
Non-current liabilities
Long-term borrowings 2 795 2 863 2 415
Net deferred taxation
liabilities 2 706 2 779 1 534
Net deferred financial
liabilities 299 432 283
Long-term provisions 852 860 633
6 652 6 934 4 865
Current liabilities 1 822 1 938 1 534
Total equity and liabilities 24 560 25 278 15 147
Number of ordinary shares
in issue 258 469 684 258 350 934 184 854 115
Net asset value per share
(cents) 6 217 6 350 4 732
Basis of accounting
The unaudited results for the quarter have been prepared on the International
Financial Reporting Standards ("IFRS") basis. These consolidated quarterly state
ments are prepared in accordance with IFRS 34, Interim Financial
Reporting. The accounting policies are consistent with those applied in the
previous financial year.
Condensed statement of changes in equity for the nine months ended
31 March 2004 (unaudited)
Issued Fair value
share and other Retained
capital reserves earnings Total
R million R million R million R million
Balance as at 1 July 2003 6,874 (242) 1,996 8,628
Issue of share capital 7,804 - - 7,804
Currency translation
adjustment
and other - (134) - (134)
Net earnings - - 36 36
Dividends paid - - (395) (395)
Balance as at 31 March
2004 14,678 (376) 1,637 15,939
Balance as at 1 July 2002 5,547 88 2,328 7,963
Issue of share capital 1,305 - - 1,305
Currency translation
adjustment and other - (489) - (489)
Net earnings - - 1,118 1,118
Dividends paid - - (965) (965)
Balance as at 31 March
2003 6,852 (401) 2,481 8,932
Balances translated at closing rates of: March 2004: US$1 = R6.32
(March 2003: R8.03).
Summarised cash flow statement for the nine months ended 31 March 2004
(unaudited)
Nine Nine
months months
ended ended
31 March 31 March
2004 2003
R million R million
Cash flow from operating activities 65 1,687
Cash flow from investing activities
Cash held by subsidiaries at acquisition 729 -
Net proceeds on disposal of listed investments 994 564
Net additions to property, plant and equipment (598) (542)
Other investing activities - (59)
Cash generated/(utilised) by investing activities 1,125 (37)
Cash flow from financing activities
Long-term loans (repaid) (155) (59)
Ordinary shares issued - net of expenses 78 1,252
Dividends paid (395) (965)
Cash (utilised)/generated by financing
activities (472) 228
Foreign currency translation adjustments(68) (191)
Net increase in cash and equivalents 650 1,687
Cash and equivalents - 1 July 1,687 1,441
Cash and equivalents - 31 March 2,337 3,128
Operating activities translated at average rates of: March 2004: US$1 = R6,98
(March 2003: R9,52).
Closing balance translated at closing rates of: March 2004: US$1 = R6,32
(March 2003: R8,03).
Summarised cash flow statement for the three months ended 31 March 2004
(unaudited)
Three Three
months months
ended ended
31 March 31 December
2004 2003
R million R million
Cash flow from operating activities (68) (432)
Cash flow from investing activities
Cash held by subsidiaries at acquisition - -
Net proceeds on disposal of listed investments - 987
Net additions to property, plant and equipment (228) (223)
Other investing activities - -
Cash (utilised)/generated by investing activities (228) 764
Cash flow from financing activities
Long-term loans repaid (92) (61)
Ordinary shares issued - net of expenses 5 (25)
Dividends paid (103) (1)
Cash utilised by financing activities (190) (87)
Foreign currency translation adjustments (65) 82
Net (decrease)/increase in cash and equivalents (551) 327
Cash and equivalents - beginning of quarter 2,888 2,561
Cash and equivalents - end of quarter 2,337 2,888
Operating activities translated at average rates of: March 2004 quarter:
US$1 = R6.77 (December 2003 quarter: R6.75) Closing balance translated at
closing rates of: March 2004: US$1 = R6.32 (December 2003: R6.70)
Operating and financial results
(Rand/metric)
Underground production - South Africa
Free Rand-
State Evander fontein
Ore milled - t"000 Mar-04 1 051 482 623
Dec-03 1 145 483 716
Gold produced - kg Mar-04 4 509 2 448 2 828
Dec-03 5 078 2 768 3 244
Yield - g/t Mar-04 4,29 5,08 4,54
Dec-03 4,43 5,73 4,53
Cash operating Mar-04 89 173 89 919 82 825
costs - R/kg Dec-03 81 566 78 154 77 007
Cash operating Mar-04 383 457 376
costs - R/tonne Dec-03 362 448 349
Working revenue Mar-04 397 117 215 705 247 220
(R"000) Dec-03 435 492 237 494 276 427
Cash operating costs Mar-04 402 080 220 122 234 229
(R"000) Dec-03 414 190 216 330 249 812
Cash operating Mar-04 (4 963) (4 416) 12 990
profit (R"000) Dec-03 21 302 21 164 26 616
Elands- Free Orkney/ Sub-
kraal Gold Welkom total
Ore milled - t"000 431 1 107 402 4 096
Dec-03 506 1 259 538 4 647
Gold produced - kg 2 460 6 717 2 044 21 006
2 527 8 364 3 012 24 993
Yield - g/t 5,71 6,07 5,08 5,13
4,99 6,64 5,60 5,38
Cash operating 94 202 74 507 79 774 83 390
costs - R/kg 95 485 68 416 76 076 76 941
Cash operating 538 452 406 428
costs - R/tonne 477 455 426 414
Working revenue 215 807 594 888 182 322 1 853 059
(R"000) 215 283 708 578 255 506 2 128 780
Cash operating costs 231 737 500 466 163 059 1 751 693
(R"000) 241 290 572 230 229 141 1 922 992
Cash operating (15 929) 94 421 19 263 101 366
profit (R"000) (26 007) 136 349 26 365 205 788
Surface production - South Africa
Free Rand- Elands-
State Evander fontein kraal
Ore milled - t"000 765 0 557 0
Dec-03 422 45 530 114
Gold produced - kg 241 0 150 0
200 30 137 47
Yield - g/t 0,32 0,00 0,27 0,00
0,47 0,67 0,26 0,41
Cash operating 87 244 0 82 847 0
costs - R/kg 67 064 52 067 74 241 149 489
Cash operating 27 0 22 0
costs - R/tonne 32 35 19 62
Working revenue 21 220 0 13 113 0
(R"000) 16 907 2 498 11 804 3 964
Cash operating costs 21 026 0 12 427 0
(R"000) 13 413 1 562 10 171 7 026
Cash operating 195 0 686 0
profit (R"000) 3 495 936 1 633 (3 062)
Open
Free Sub- cast Africa
Gold total Kalgold Total
Ore milled - t"000 976 2 298 315 6 709
Dec-03 869 1 980 327 6 954
Gold produced - kg 554 945 488 22 439
558 972 643 26 608
Yield - g/t 0,57 0,41 1,55 3,34
0,64 0,49 1,97 3,83
Cash operating 72 240 77 748 95 777 83 422
costs - R/kg 63 614 69 620 70 628 76 521
Cash operating 41 32 148 279
costs - R/tonne 41 34 139 293
Working revenue 49 413 83 746 42 835 1 979 641
(R"000) 47 403 82 576 54 303 2 265 660
Cash operating costs 40 050 73 503 46 739 1 871 935
(R"000) 35 471 67 643 45 414 2 036 049
Cash operating 9 363 10 244 (3 904) 107 706
profit (R"000) 11 932 14 934 8 890 229 611
Australia Harmony
Total Total
Ore milled - t"000 1 061 7 770
Dec-03 1 229 8 183
Gold produced - kg 2 295 24 735
2 687 29 294
Yield - g/t 2,16 3,18
2,19 3,58
Cash operating 77 280 82 852
costs - R/kg 69 618 75 888
Cash operating 167 264
costs - R/tonne 152 272
Working revenue 203 879 2 183 519
(R"000) 228 414 2 494 074
Cash operating costs 177 387 2 049 322
(R"000) 187 034 2 223 083
Cash operating 26 491 134 197
profit (R"000) 41 379 270 991
This report was approved by the Board of directors and is signed on their
behalf by:
Z B Swanepoel F Abbott
Chief executive Financial director
Virginia
28 March 2004
Investor Relations
Ferdi Dippenaar
Marketing Director
Telephone: +27 11 684 0140
Fax: +27 11 684 0188
E-mail: fdippenaar@harmony.co.za
Corne(c) Bobbert Marian van der Walt
Investor Relations Officer Company Secretary
Telephone: +27 11 684 0146 Telephone: +27 11 411 2037
Fax: +27 11 684 0188 Fax: +27 11 411 2398
E-mail: cbobbert@harmony.co.za E-mail: mvanderwalt@harmony.co.za
Directors
P T Motsepe (Chairman), Z B Swanepoel (Chief Executive), F Abbott,
Dr M M M M Bakane-Tuoane, F Dippenaar, V N Fakude, T S A Grobicki, W M Gule,
M W King, D S Lushaba, M F Pleming, Lord Renwick of Clifton KCMG*,
C M L Savage, Dr S P Sibisi, D V Simelane, Dr R V Simelane, M V Sisulu,
*British
For the comprehensive set of results please visit our web site at
www.harmony.co.za or call Corne(c) Bobbert on +27 11 684 0146
e-mail: cbobbert@harmony.co.za
Date: 28/04/2004 08:14:45 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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