HARMONY GOLD MINING COMPANY LIMITED - HARMONY GOLD MINING COMPANY LIMITED Release Date: 04/11/2004 12:34:31 Code(s): HAR HARMONY GOLD MINING COMPANY LIMITED - HARMONY GOLD MINING COMPANY LIMITED
("HARMONY") DETAILS OF EFFICIENCY GAINS AT GOLD FIELDS LIMITED ("GOLD FIELDS")
Harmony Gold Mining Company Limited
(Incorporated in the Republic of South Africa)
(Registration number 1950/038232/06)
Share code: HAR ISIN: ZAE000015228
("Harmony")
Harmony Gold Mining Company Limited ("Harmony") Details of Efficiency Gains at
Gold Fields Limited ("Gold Fields")
Harmony today announced details of its proposed cost saving measures, which will
deliver at least ZAR1billion per annum in improved pre-tax operating profit at
Gold Fields" South African operations.
Harmony Chief Executive, Bernard Swanepoel said:
"Now that we have seen the detail of Gold Fields defence, we are providing
detail of our own cost savings proposals - we wouldn"t have wanted to give Gold
Fields a route map to success prior to the launch of their defence.
"Last week Gold Fields announced new cost savings initiatives of ZAR 200 to 300
million in South Africa, though given the circumstances one has to treat this
with a pinch of salt. However, it does confirm the potential for cost savings
that Harmony has identified. The key difference between Harmony and Gold Fields
is that while Gold Fields has spent 6 years thinking about efficiency
improvements, Harmony has a track record of delivering such improvements time
and time again."
Harmony has stated that it can achieve sustainable cost reductions equivalent to
15% per annum in Gold Fields" South African cost structure, over and above Gold
Fields current efficiency initiatives. Harmony will do this through applying
the `Harmony Way", which has been so effective at other mines in South Africa,
including mines previously owned by Gold Fields.
Specifically for Gold Fields current operations, Harmony sees opportunities to
improve the cost structure as follows:
Planned Savings at Gold Fields Previously Achieved Savings
Total Harmony Cost Evander St Randfontein Elandsrand
Cost Cost Savings Helena
2004 Reduction as a %
(ZAR Target of
m) (ZAR m) total
Head Office 140 98 1.45%
Total 6589
Operations
Cost
Labour cost 330 5% 20% 18% 8% 8%
Synergies:
Stores 264 4% 4% 8% 13% 2%
Electricity 132 2% 2% 5% 3% 2%
& Water
Other cost, 297 4.5% 7% (2%) (3%) 7%
incl G&A,
Services
Contractors 66 1% 1% 2% 4% (1%)
Total 6729 1185 17.95% 33% 32% 35% 17%
Savings from
operations
Capital 880 66
Optimisation
Additional (150)
Development
Total Cost 1101 16.36%
Savings
"We have based these targets on our previous experience so this is not just
wishful thinking, even without full due diligence. The Harmony Way is to reduce
overall costs and to increase the proportion of jobs actually at the mining
level. Our history shows that we are job preservers in that we are able to
extend the life of the mines we acquire.
"In the case of Gold Fields, any jobs lost will be at the head office, senior
management and service level," said Bernard.
The development of the Gold Fields" mines is another key aspect of Harmony"s
proposal. While Gold Fields has effectively put these mines in harvest mode,
Harmony intends to invest in their future. Again, Harmony has done this in the
past, turning previously abandoned reserves into growth projects. When these
projects are completed, abandoned reserves from previous Harmony acquisitions
will produce an aggregate of over 1.5 million higher-grade, lower cost
additional ounces per annum.
"Gold Fields is condemning its South African assets to a lingering death.
Harmony will enhance their life. As Ian Cockerill said at the presentation of
Gold Fields" formal defence, `The Harmony Way works in South Africa.....",""
commented Bernard.
Attached: Note to Editors - The Harmony Way
Harmony will host a conference call at 1630hrs (South Africa) 0930hrs (EST)
today. Slides for this call will be available at 1530hrs (South Africa) 0830hrs
(EST) on www.harmony.co.za
South Africa UK
Toll: 011 535 3600 Toll Free: 0800 917 7042
Toll Free: 0800 200 648
USA Canada
Toll: 1 412 858 4600 Toll Free: 1 866 519 5086
Toll Free: 1800 860 2442
Australia Europe and Other
Toll Free: 1800 350 100 Toll: +41 916 105 600
Toll Free: +800 246 78 700
Issued by (direct line, mobile):
Harmony Gold
Ferdi Dippenaar +27 11 684 0140 +27 82 807 3684
Corne Bobbert +27 11 684 0146 +27 83 380 6614
South Africa - Beachhead Media & Investor Relations
Jennifer Cohen +27 (0)11 214 2401 +27 (0)82 468 6469
Patrick Lawlor +27 (0)11 214 2410 +27 (0)82 459 6709
United States - Financial Dynamics Business Communications
Hollis Rafkin-Sax +1 212 850 5789 +1 917 509 0255
Torie Pennington +1 212 850 5629 +1 917 838 1369
United Kingdom - Financial Dynamics Business Communications
Nic Bennett +44(0)207 269 7115 +44(0)7979 536 619
Charles Watenphul +44(0)207 269 7216 +44(0)7866 438 013
In connection with the proposed acquisition of Gold Fields, Harmony has filed a
registration statement on Form F-4, which includes a preliminary prospectus and
related exchange offer materials, to register the Harmony ordinary shares
(including Harmony ordinary shares represented by Harmony American Depositary
Shares (ADSs)) to be issued in exchange for Gold Fields ordinary shares held by
Gold Fields shareholders located in the US and for Gold Fields ADSs held by Gold
Fields shareholders wherever located, as well as a Statement on Schedule TO.
Investors and holders of Gold Fields securities are strongly advised to read the
registration statement and the preliminary prospectus, the related exchange
offer materials and the final prospectus (when available), the Statement on
Schedule TO and any other relevant documents filed with the Securities and
Exchange Commission (SEC), as well as any amendments and supplements to those
documents, because they will contain important information. Investors and
holders of Gold Fields securities may obtain free copies of the registration
statement, the preliminary and final prospectus (when available), related
exchange offer materials and the Statement on Schedule TO, as well as other
relevant documents filed or to be filed with the SEC, at the SEC"s web site at
www.sec.gov. The preliminary prospectus and other transaction-related documents
may be obtained for free from MacKenzie Partners, Inc., the information agent
for the U.S. offer, at the following address: 105 Madison Avenue, New York, New
York 10016; telephone 1 (212) 929 5500 (call collect) or 1 (800) 322 2885 (toll-
free call); e-mail proxy@mackenziepartners.com. Investors and security holders
may obtain a free copy of the Form 20-F filed with the SEC on October 5, 2004,
as amended, and any other documents filed with or furnished to the SEC by
Harmony at www.sec.gov.
This communication is for information purposes only. It shall not constitute an
offer to purchase or exchange or the solicitation of an offer to sell or
exchange any securities of Gold Fields or an offer to sell or exchange or the
solicitation of an offer to buy or exchange any securities of Harmony, nor shall
there be any sale or exchange of securities in any jurisdiction in which such
offer, solicitation or sale or exchange would be unlawful prior to the
registration or qualification under the laws of such jurisdiction. The
distribution of this communication may, in some countries, be restricted by law
or regulation. Accordingly, persons who come into possession of this document
should inform themselves of and observe these restrictions. The solicitation of
offers to buy Gold Fields ordinary shares (including Gold Fields ordinary shares
represented by Gold Fields ADSs) in the United States will only be made pursuant
to a prospectus and related offer materials that Harmony expects to send to
holders of Gold Fields securities. The Harmony ordinary shares (including
Harmony ordinary shares represented by Harmony ADSs) may not be sold, nor may
offers to buy be accepted, in the United States prior to the time the
registration statement becomes effective. No offering of securities shall be
made in the United States except by means of a prospectus meeting the
requirements of Section 10 of the United States Securities Act of 1933, as
amended.
Forward-looking Statements
Statements in this announcement include "forward-looking statements" that
express or imply expectations of future events or results. Forward-looking
statements are statements that are not historical facts. These statements
include financial projections and estimates and their underlying assumptions,
statements regarding plans, objectives and expectations with respect to future
operations, products and services, and statements regarding future performance.
Forward-looking statements are generally identified by the words "expect,"
"anticipates," "believes," "intends," "estimates" and similar expressions. All
forward-looking statements involve a number of risks, uncertainties and other
factors, and Harmony cannot give assurances that such statements will prove to
be correct. Risks, uncertainties and other factors that could cause actual
events or results to differ from those expressed or implied by the forward-
looking statements include, without limitation, the satisfaction of closing
conditions, the acceptance or rejection of any agreement by regulators, delays
in the regulatory processes, changes in the economic or political situation in
South Africa, the European Union, the United States of America and/or any other
relevant jurisdiction, changes in the gold industry within any such country or
area or worldwide and the performance of (and cost savings realised by) Harmony.
Although Harmony"s management believes that the expectations reflected in such
forward-looking statements are reasonable, investors and holders of Gold Fields
securities are cautioned that forward-looking information and statements are
subject to various risks and uncertainties, many of which are difficult to
predict and generally beyond the control of Harmony, that could cause actual
results and developments to differ materially from those expressed in, or
implied or projected by, the forward-looking information and statements. These
risks and uncertainties include those discussed or identified in the public
filings with the SEC made by Harmony and Gold Fields, including those listed
under "Cautionary Statement Concerning Forward-Looking Statements" and "Risk
Factors" in the preliminary prospectus included in the registration statement on
Form F-4 that Harmony filed with the SEC. Harmony does not undertake any
obligation to update any forward-looking information or statements. You may
obtain a free copy of the registration statement and preliminary and final
prospectus (when available) and other public documents filed with the SEC in the
manner described above.
The directors of Harmony accept responsibility for the information contained in
this announcement. To the best of the knowledge and belief of the directors of
Harmony (who have taken all reasonable care to ensure that such is the case),
the information contained in this announcement is in accordance with the facts
and does not omit anything likely to affect the import of such information.
NOTE TO EDITORS - THE HARMONY WAY
A fundamental aspect of Harmony "s success has been the application of the
unique "Harmony Way ",a set of management practices and philosophies that
essentially flatten the management structure and empower individuals and mine
management teams. Four cornerstones underlie this approach:
1.Creating value is about the business of gold mining
We spend money on what really counts -the business of gold mining -most
importantly it is an intense focus on the development and optimisation of the
value contained in the ore body. It is this scientific approach to ore body
optimisation and disciplined approach to cost reduction which has enabled
Harmony to successfully make money out of mines that other operators have
regarded as throwaway. These principles apply equally to existing long life
operations.
2.No frills
Our disciplined cost management approach enables us to reduce cut-offs, thereby
dramatically increasing the proportion of the ore body that is available to be
mined economically -thus increasing the number of ounces in the ore body,
extending the life of mines and saving jobs.
Some people criticise Harmony "s "no frills "approach. However, our people take
pride in the fact that we don "t spend money on anything that isn "t revenue
generating (like the thickness of the carpet, the neatness of the gardens, and
the smoothness of the roads).At Harmony the "garden "is underground, i.e.our ore
body. That "s where our focus and our future lie.
3.We believe in the ability of our people -all our people
We believe that it "s our crews operating underground that make the difference.
They are the key revenue generators in our business. The rest of us are actually
"costs "-which need to be justified as adding value or delivering a cost
efficient service to enable the crew at the rock face to perform the task of
extracting the ore body more efficiently.
4.We are lean
The management structures that outsiders see are a real demonstration of this
belief. We have a head office/corporate office, which accommodates no more than
eight executives. We have no mine related regional offices and extremely flat
management structures on our operations. We have forgone the convoluted
hierarchical structures that have traditionally dogged the mining industry and
are fundamentally based on the premise of supervisors to supervise supervisors.
Instead, Harmony has four levels of management on each shaft because that is
what we believe is needed to mine optimally. The 26 heads of individual mines
and plants report directly to the executive team. By creating an enabling and
empowering environment, the individual "s productivity improves and consequently
the efficiency and the overall performance of the entire business improve.
In summary, the Harmony Way is not rocket science ...anything but. It "s a back
to-basics approach which brings simple, yet dynamic, business thinking (cost,
value, focus and attention to detail)to the mining equation; a philosophy that
if you create the right environment, ordinary people will do extraordinary
things; all wrapped up in a belief that the right attitude can make ANYTHING
possible.
Date: 04/11/2004 12:34:37 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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