|
Harmony Gold Mining Company Limited - Review For The Quarter Ended 30 September
Release Date: 31/10/2005 08:00:04 Code(s): HARHarmony Gold Mining Company Limited - Review For The Quarter Ended 30 September
2005
HARMONY GOLD MINING COMPANY LIMITED
Registration number 1950/038232/06
Incorporated in the Republic of South Africa
ISIN: ZAE000015228
Trading Symbols
JSE Limited HAR
New York Stock Exchange, Inc . HMY
London Stock Exchange plc HRM
Euronext Paris HG
Euronext Brussels HMY
Berlin Stock Exchange HAM1
REVIEW FOR THE QUARTER ENDED 30 SEPTEMBER 2005
CHIEF EXECUTIVE"S REVIEW - SEPTEMBER 2005
Dear shareholder
We continue to make good progress in all areas of our business, although it
might not reflect in the operational performance of the company at this time.
The past 18 months has been a difficult period, during which we undertook a
number of initiatives:
* initiating the restructuring of our operations to deal with a low R/kg gold
price environment. This process, which started in April 2004, has had its
hiccups and the time required for the conclusion thereof went way beyond what
was anticipated at the commencement of the process. During August 2005, we
managed to conclude the process, and for the first time in more than a year, we
are looking forward to a normalised operating environment.
We have always valued our relationship with the various unions and have
initiated processes to re-establish a co-operative relationship.
* the placing of a number of shafts on care and maintenance as part of our
restructuring initiatives, has also been completed. We have significantly
reduced the number of our employees and stopped the mining of unprofitable
reserves to enhance our cashflows. To date we have not seen the planned higher
volumes and recovery grades. The benefit of being able to increase the volumes
from our profitable shafts, through CONOPS and the higher gold price, will
begin to show during the December 2005 quarter.
* our focus on delivering our growth projects remains. Some shareholders and
analysts have expressed their concern regarding our ability to fund our growth
plans, and we have noted them. We do however recognise the value and
contribution that these projects will make to our future cost structure and
production profile. Harmony is in a transformation phase, from a previously
marginal producer to one with high margin, quality assets. These assets will
provide a solid phase from which we will continue to create value for our
shareholders.
* the company was ideally structured to facilitate the restructuring phase,
which is now completed. The management structure has now been streamlined for
the recovery phase. All of our South African operations are consolidated under
the focus of one integrated management team.
The future of Harmony is dependent upon our ability to deliver on projects and
a comprehensive and professional structure has been put in place company wide
under the guidance of our most experienced engineers and managers.
As your management team we have never blamed external factors for
underperformance. We have now addressed the impact of the external factors and
remain committed to deliver on our promise to make Harmony a high margin,
quality operation!
Bernard
Analysis of earnings per share
Quarter ended Quarter ended
Earnings per share (SA cents) 30 September 2005 30 June 2005
(restated)
Cash earnings 30 47
Basic loss (82) (283)
Headline loss (86) (94)
Fully diluted loss (82) (283)
Adjusted headline loss* (63) (94)
* Excludes all unrealised gains/(losses) in financial instruments as well as
the tax implications
Reconciliation between basic and headline loss
Quarter ended
Headline earnings in cents per share (SA cents) September 2005
Basic loss (82)
Profit on sale of mining assets (4)
Headline loss (86)
Cash earnings for the year to date total 30 cents per share. Fully diluted loss
per share for the financial year to date totals 82 cents per share.
CAPITALISING OUR MINE DEVELOPMENT COST
Harmony has changed its accounting policy on the capitalisation of mine
development costs.
This change has the following benefits:
- Harmony better aligns its policy with those of its global industry peers.
- It allows for a more direct link between revenue and associated
expenditure.
- Harmony would be able to institute systems that would allow the shaft teams
to make better business decisions.
- All development that provides access to proven and probable reserves is
capitalised.
- Development, which is purely for exploration purposes, is considered to be
a working cost.
- Development that previously qualified as capital is still regarded as
capital.
Effect of the change
There is a direct impact on the operating cost profile of the company. The
operating cost of Harmony was reduced by R136 million for the September 2005
quarter. This equates to 8% of total cost or R7 075 per kilogram. Capital
expenditure has increased with a similar amount, as indicated in the capital
expenditure table on page 6 (June 2005: R140 million/ R7 017 per kg).
The capitalised cost will be amortised over the estimated life of the
proven and probable reserve to which it gives access.
Information on the restatement of our financial results for the quarter
ending June 2005 as well as the corresponding period, i.e. September 2004
has been included in the financial section.
OPERATING AND FINANCIAL RESULTS (Rand/metric) (unaudited)
Underground production - South Africa
Leve-
Quality Growth raged
Ounces Projects Ounces Sub total
Ore milled
- t"000 Sep-05 1 464 315 1 218 2 997
Jun-05 1 508 331 1 095 2 934
Gold produced
- kg Sep-05 8 719 1 995 5 380 16 094
Jun-05 9 073 1 933 5 181 16 187
Yield - g/tonne Sep-05 5.96 6.33 4.42 5.37
Jun-05 6.02 5.84 4.73 5.52
Cash operating
costs - R/kg Sep-05 76 896 91 253 100 158 86 453
Jun-05 69 419 88 210 104 320 82 833
Cash operating
costs - R/tonne Sep-05 458 578 442 464
Jun-05 418 515 494 457
Working revenue
(R"000) Sep-05 798 188 183 850 492 960 1 474 998
Jun-05 816 768 172 999 468 577 1 458 344
Cash operating
costs (R"000) Sep-05 670 457 182 050 538 852 1 391 359
Jun-05 629 835 170 510 540 480 1 340 825
Cash operating
profit (R"000) Sep-05 127 731 1 800 (45 892) 83 639
Jun-05 186 933 2 489 (71 903) 117 519
Capital
expenditure
(R"000) Sep-05 108 833 140 184 45 597 294 614
Jun-05 119 288 117 099 40 157 276 544
Quality Ounces - Evander Shafts, Randfontein Cooke Shafts, Target, Tshepong,
Masimong
Growth Projects - Doornkop shaft & South Reef Project, Elandsrand shaft and
New Mine Project, Phakisa shaft, Tshepong Decline Project
Leveraged Ounces - Deelkraal, Bambanani, Joel, Eland, Kudu/Sable, West, Nyala,
St Helena, Harmony 2, Merriespruit 1
and 3, Unisel, Brand 3 and 5, Saaiplaas 3, Evander 9, Orkney 2 and 4, Welkom 1
OPERATING AND FINANCIAL RESULTS (Rand/metric) (unaudited)
South Africa South Africa Australia Harmony
Surface Total Total Total
Ore milled - t"000 Sep-05 838 3 835 765 4 600
Jun-05 1 415 4 349 849 5 198
Gold produced - kg Sep-05 1 228 17 322 1 897 19 219
Jun-05 1 536 17 723 2 163 19 886
Yield - g/tonne Sep-05 1.47 4.52 2.48 4.18
Jun-05 1.09 4.08 2.55 3.83
Cash operating Sep-05 87 029 86 493 78 643 85 718
costs - R/kg Jun-05 70 815 81 792 69 398 80 444
Cash operating Sep-05 128 391 195 358
costs - R/tonne Jun-05 77 333 177 308
Working revenue Sep-05 112 361 1 587 359 178 821 1 766 180
(R"000) Jun-05 135 789 1 594 133 190 463 1 784 596
Cash operating Sep-05 106 872 1 498 231 149 186 1 647 417
costs (R"000) Jun-05 108 773 1 449 598 150 108 1 599 706
Cash operating Sep-05 5 489 89 128 29 635 118 763
profit (R"000) Jun-05 27 016 144 535 40 355 184 890
Capital expenditure Sep-05 0 294 614 71 389 366 003
(R"000) Jun-05 0 276 544 65 514 342 058
TOTAL OPERATIONS - QUARTERLY FINANCIAL RESULT (Rand/metric) (unaudited)
Quarter ended Quarter ended Quarter ended
30 September 30 June 30 September
2005 2005 2004
(restated) (restated)
Ore milled t"000 4 600 5 198 6 564
Gold produced kg 19 219 19 886 25 822
Gold price
received R/kg 91 888 89 711 83 023
Cash operating
costs R/kg 85 718 80 444 71 722
R million R million R million
Revenue 1 766 1 784 2 144
Cash operating costs (1) 1 647 1 599 1 852
Cash operating profit 119 185 292
Amortisation and
depreciation of mining
properties,
mine development costs
and mine plant facilities (1) (244) (233) (2860)
Corporate, administration
and other expenditure (56) (81) (38)
Provision for
rehabilitation costs (3) (6) (14)
Operating loss (184) (135) (46)
Amortisation and
depreciation other than
mining properties,
mine development costs
and mine plant facilities (11) (10) (9)
Employment termination
and restructuring costs 13 (217) (154)
Share-based compensation (33) (30) (11)
Exploration expenditure (18) (16) (24)
Loss on sale of
investment in Goldfields - (372) -
Mark-to-market of listed
investments 21 13 -
Interest paid (96) (134) (100)
Interest received 52 45 36
Other (expenses)/income -
net (20) 9 1
(Loss)/gain on financial
instruments (115) (7) 1
Gain/(loss) on foreign
exchange 20 (18) (1)
Loss on sale of listed
investments and
subsidiaries - (73) -
Profit on
Australian-listed
investments - - 4
Permanent diminution in
carrying value of ARM
investment - (337) -
Provision for
post-retirement benefits - (57) -
Loss before tax (371) (1 339) (303)
Current tax - expense - (110) (17)
Deferred tax - benefit (1) 48 338 53
Net loss (323) (1 111) (267)
(1) The change accounting
policy on capitalisation
of mine
development costs had the
following effect:
- Cash operating costs -
decrease 137 140 159
- Amortisation and
depreciation of mining
properties,
mine development costs
and mine plant facilities (71) (66) (56)
- Deferred tax - expenses (13) (14) (19)
- Net effect of change in
accounting policy 53 60 84
The effects of the change in policy are in the process of being audited.
The company does not expect any material change to arise from the audit.
TOTAL OPERATIONS - QUARTERLY FINANCIAL RESULTS (Rand/metric) (unaudited)
Quarter ended Quarter ended Quarter ended
30 September 30 June 30 September
2005 2005 2004
(restated) (r estated)
Loss per share -
cents *
- Basic loss (82) (283) (83)
- Headline loss (86) (94) (88)
- Fully diluted loss
** *** (82) (283) (83)
Dividends per share -
(cents)
- Interim - - -
- Proposed final - - -
* Calculated on weighted average number of shares in issue at quarter end
September 2005: 392.3 million (June 2005: 392.2 million) (September 2004: 320.8
million).
** Calculated on weighted average number of diluted shares in issue at quarter
end September 2005:
392.3 million (June 2005: 392.2 million) (September 2004: 320.9 million).
*** The effect of the share options is anti-dilutive.
Reconciliation of headline loss:
Net loss (323) (1 111) (267)
Adjustments:
- Profit on sale of assets (15) (26) (10)
- Mark-to-market of listed
investments - 4 -
- Profit on Australian-listed
investments - - (4)
- Loss on sale and dilution of
investment in ARM Limited - 103 -
- Profit on disposal of
investment Bendigo NL - (30) -
- Loss on disposal of
investment in Goldfields - 372 -
- Loss on disposal of
subsidiaries - 1 -
- Impairment of fixed
assets - net of tax - (19) -
- Diminution in carrying
value of listed investments - 337 -
Headline loss (338) (369) (281)
ABRIDGED BALANCE SHEET AT 30 SEPTEMBER 2005 (Rand) (unaudited)
At 30 September At 30 June At 30 September
2005 2005 2004
R million R million R million
(restated) (restated)
ASSETS
Non-current assets
Property, plant and
equipment 22 633 22 626 23 519
Intangible assets 2 268 2 268 2 268
Investments 4 709 4 154 2 795
29 610 29 048 28 582
Current assets
Inventories 552 578 518
Receivables 597 632 401
Income and mining taxes 27 27 -
Cash and cash
equivalents 971 1 830 1 013
2 147 3 067 1 932
Total assets 31 757 32 115 30 514
EQUITY AND LIABILITIES
Share capital and
reserves
Issued capital 25 645 25 645 21 076
Fair value and other
reserves (257) (670) (963)
Deferred share-based
compensation (215) (248) (147)
(Accumulated
loss)/retained earnings (1 729) (1 406) 1 438
23 444 23 321 21 404
Non-current liabilities
Long-term borrowings 2 464 2 422 2 801
Net deferred taxation
liabilities 2 128 2 192 2 842
Net deferred financial
liabilities 436 386 573
Long-term provisions 938 939 817
5 966 5 939 7 033
Current liabilities
Payables and accrued
liabilities 1 293 1 514 1 448
Short-term portion of
long-term borrowings 1 046 1 333 595
Income and mining taxes - - 26
Shareholders for
dividends 8 8 8
2 347 2 855 2 077
Total equity and
liabilities 31 757 32 115 30 514
Number of ordinary
shares in issue 393 341 194 393 341 194 320 819 739
Net asset value per
share (cents) 5 960 5 929 6 672
The balance sheet at 30 June 2005 is in accordance with the audited balance
sheet except for the effects of the adoption of IFRS 2, share-based payments,
and the change in the accounting policy relating to the capitalisation of mine
development cost.
CONDENSED STATEMENT OF CHANGES IN EQUITY
FOR THE THREE MONTHS ENDED 30 SEPTEMBER 2005 (unaudited)
Issued Fair value Deferred
share and other share-based
capital reserves compensation
R million R million R million
Balance at 1 July 2005 25 645 (670) (248)
Currency translation
adjustment and other - 413 -
Adoption of IFRS 2,
share-based payments - - 33
Net earnings - - -
Balance at 30 September 2005 25 645 (257) (215)
Balance at 1 July 2004 20 945 (1 186) (27)
Currency translation
adjustment and other - 223 -
Adoption of IFRS 2,
share-based payments 131 - (120)
Net earnings - - -
Dividends paid - - -
Balance at
30 September 2004 (restated) 21 076 (963) 147
Retained
earnings Total
R million R million
Balance at 1 July 2005 (1 406) 23 321
Currency translation
adjustment and other - 413
Adoption of IFRS 2,
share-based payments - 33
Net earnings (323) (323)
Balance at 30 September 2005 (1 729) 23 444
Balance at 1 July 2004 1 801 21 533
Currency translation
adjustment and other - 223
Adoption of IFRS 2,
share-based payments - 11
Net earnings (32) (32)
Dividends paid (395) (395)
Balance at
30 September 2004 (restated) 1 438 21 404
Issued Fair value Deferred
share and other share-based
capital reserves compensation
US$ million US$ million US$ million
Balance at 1 July 2005 4 039 (106) (39)
Currency translation
adjustment and other - 65 -
Adoption of IFRS 2,
share-based payments - - 5
Net earnings - - -
Balance at 30 September 2005 4,039 (41) (34)
Balance as 1 July 2004 3 233 (183) (4)
Currency translation
adjustment and other - 34 -
Adoption of IFRS2,
share-based payments 21 - (19)
Net earnings - - -
Dividends paid - - -
Balance at
30 September 2004 (restated) 3 254 (149) (23)
Retained
earnings Total
US$ million US$ million
Balance at 1 July 2005 (221) 3 673
Currency translation
adjustment and other - 65
Adoption of IFRS 2,
share-based payments - 5
Net earnings (51) (51)
Balance at 30 September 2005 (272) 3 692
Balance as 1 July 2004 278 3 324
Currency translation
adjustment and other - 34
Adoption of IFRS2,
share-based payments - 2
Net earnings 5 5
Dividends paid (61) (61)
Balance at
30 September 2004 (restated) 222 3 304
Balances translated at closing rates of: September 2005: US$1 = R6.35
(September 2004: US$1 = R6.48).
SUMMARISED CASH FLOW STATEMENT
FOR THE THREE MONTHS ENDED 30 SEPTEMBER 2005 (unaudited)
Three Three
months months
ended ended
30 September 30 September
2004 2005
US$ million US$ million
Cash flow from operating activities
Cash utilised by operations 18 (28)
Interest and dividends received 6 8
Interest paid (9) (7)
Income and mining taxes paid - -
Cash utilised by operating activities 15 (27)
Cash flow from investing activities
Net additions to property, plant and
equipment (60) (54)
Other investing activities - -
Cash utilised by investing activities (60) (54)
Cash flow from financing activities
Long-term loans repaid - (45)
Ordinary shares issued - net of expenses - -
Dividends paid (15) -
Cash utilised by financing activities (15) (45)
Foreign currency translation
adjustments (1) 4
Net decrease in cash and equivalents (61) (122)
Cash and equivalents - 1 July 217 275
Cash and equivalents - 30 September 156 153
Three Three
months months
ended ended
30 September 30 September
2005 2004
R million R million
Cash flow from operating activities
Cash utilised by operations (184) 115
Interest and dividends received 52 36
Interest paid (47) (56)
Income and mining taxes paid - -
Cash utilised by operating activities (179) 95
Cash flow from investing activities
Net additions to property, plant and
equipment (350) (383)
Other investing activities - 1
Cash utilised by investing activities (350) (382)
Cash flow from financing activities
Long-term loans repaid (295) -
Ordinary shares issued - net of expenses - -
Dividends paid - (96)
Cash utilised by financing activities (295) (96)
Foreign currency translation
adjustments (35) (17)
Net decrease in cash and equivalents (859) (400)
Cash and equivalents - 1 July 1 830 1 413
Cash and equivalents - 30 September 971 1 013
Operating activities translated at average rates of: September 2005:
US$1 = R6.50 (September 2004:US$1 = R6.38).
Closing balance translated at closing rates of: September 2005:
US$1 = R6.35 (September 2004:US$1 = R6.48).
SUMMARISED CASH FLOW STATEMENT
FOR THE THREE MONTHS ENDED 30 SEPTEMBER 2005 (unaudited)
Three Three
months months
ended ended
30 June 30 September
2005 2005
US$ million US$ million
Cash flow from operating activities
Cash utilised by operations (16) (28)
Interest and dividends received 7 8
Interest paid (12) (7)
Income and mining taxes paid (1) -
Cash utilised by operating activities (22) (27)
Cash flow from investing activities
Cash held by subsidiaries at acquisition 1 -
Net proceeds on disposal of listed investments 382 -
Net additions to property, plant and equipment (44) (54)
Other investing activities (2) -
Cash (utilised)/generated by investing
activities 337 (54)
Cash flow from financing activities
Long-term loans repaid 18 (45)
Ordinary shares issued - net of expenses (4) -
Dividends paid - -
Cash (utilised)/generated by financing
activities 14 (45)
Foreign currency translation adjustments (16) 4
Net (decrease)/increase in cash and equivalents 313 (122)
Cash and equivalents - beginning of quarter (38) 275
Cash and equivalents - end of quarter 275 153
Three Three
months months
ended ended
30 September 30 June
2005 2005
R million R million
Cash flow from operating activities
Cash utilised by operations (184) (97)
Interest and dividends received 52 45
Interest paid (47) (77)
Income and mining taxes paid - (4)
Cash utilised by operating activities (179) (133)
Cash flow from investing activities
Cash held by subsidiaries at acquisition - 5
Net proceeds on disposal of listed investments - 2 362
Net additions to property, plant and equipment (350) (276)
Other investing activities - (13)
Cash (utilised)/generated by investing activities (350) 2 078
Cash flow from financing activities
Long-term loans repaid (295) 110
Ordinary shares issued - net of expenses - (24)
Dividends paid - (2)
Cash (utilised)/generated by financing activities (295) 84
Foreign currency translation adjustments (35) 34
Net (decrease)/increase in cash and equivalents (859) 2 063
Cash and equivalents - beginning of quarter 1 830 (233)
Cash and equivalents - end of quarter 971 1 830
Operating activities translated at average rates of: September 2005 quarter:
US$1 = R6.50 (June 2005 quarter: US$1 = R6.41).
Closing balance translated at closing rates of: September 2005:
US$1 = R6.35 (June 2005: US$1 = R6.67).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED 30 SEPTEMBER 2005
1. Basis of accounting
The unaudited results for the quarter have been prepared using accounting
policies that comply with International Financial Reporting Standards
(IFRS). 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, except for
the adoption of the revised international accounting standards forthcoming
from the IAS improvements project and the changes which are described in
Note 2 and 3.
2. New accounting policies adopted
(a) Share-based payments (IFRS 2) On 1 July 2005, the company adopted the
requirements of IFRS 2, Share-based Payments. In accordance with the
transitional provisions, IFRS 2 has been applied to all grants of
equity-settled payments after 7 November 2002 that were unvested as at
1 January 2005. The company issues equity-settled instruments to
certain qualifying employees under an Employee Share Option Scheme to
purchase shares in the company"s authorised but unissued ordinary
shares. Equity share-based payments are measured at the fair value of
the equity instruments at the date of the grant. The total fair value
of the options granted is recorded as deferred share-based
compensation as a separate component of shareholders" equity with a
corresponding amount recorded as share premium.The deferred
share-based compensation is expensed over the vesting period, based on
the company"s estimate of the shares that are expected to eventually
vest. The company used the binominal option pricing model in
determining the fair value of the options granted.
The impact of this adjustment on the net loss is an expense of R33
million for the September 2005 quarter (June 2005 quarter: R30
million) (September 2004 quarter: R11 million).
(b) Determining whether an arrangement contains a lease (IFRIC 4)
On 1 July 2005, the company applied the requirements of IFRIC 4,
Determining whether an arrangement contains a lease. The objective of
the interpretation is to determine whether an arrangement contains a
lease that falls within the scope of IAS 17, Leases. The lease is then
accounted in accordance with IAS 17. The application of the
interpretation had no impact on the results of the quarter or any
prior reporting period.
3. Change in accounting policy
Capitalisation of mine development cost
Previously mine development costs were capitalised when the reef horizon was
intersected. Expenditure for all development that will give access to proven
and probable ore reserves will now be capitalised.
Capitalised costs are amortised over the estimated life of the proven and
probable reserves to which the costs give access.
The impact of this adjustment on the net loss is as follows:
- A decrease in the cash operating costs of R136 million for the September
2005 quarter (June 2005 quarter: R140 million) (September 2004 quarter: R159
million).
CONTACT DETAILS
Harmony Gold Mining Company Limited
Corporate Office
Suite No. 1
Private Bag X1
Melrose Arch, 2076
South Africa
First Floor
4 The High Street
Melrose Arch, 2196
Johannesburg
South Africa
Telephone: +27 11 684 0140
Fax: +27 11 684 0188
Website: http://www.harmony.co.za
Directors
P T Motsepe (Chairman)*
Z B Swanepoel (Chief Executive)
F Abbott*, J A Chissano*# ,F Dippenaar, V N Fakude*
T S A Grobicki, Dr D S Lushaba*, R P Menell*
M Motloba*, N V Qangule, C M L Savage*
(*non-executive) (# Mozambique)
Investor Relations
Ferdi Dippenaar
Director: Corporate Affairs
Telephone: +27 11 684 0140
Fax: +27 11 684 0188
Cell: +27 (0) 82 807 3684
E-mail: ferdi.dippenaar@harmony.co.za
Vusi Magadana
Investor Relations Officer
Telephone: +27 11 684 0149
Fax: +27 11 684 0188
Cell: +27 (0) 72 157 5986
E-mail: vusi.magadana@harmony.co.za
Marian van der Walt
Company Secretary
Telephone: +27 11 411 2037
Fax: +27 11 411 2398
Cell: +27 (0) 82 888 1242
E-mail: mvanderwalt@harmony.co.za
South African Share Transfer Secretaries
Ultra Registrars (Pty) Ltd
PO Box 4844
Johannesburg, 2000
Telephone: +27 11 832 2652
Fax: +27 11 834 4398
United Kingdom Registrars
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Telephone: +44 870 162 3100
Fax: +44 208 639 2342
ADR Depositary
The Bank of New York
101 Barclay Street
New York, NY 10286
United States of America
Telephone: +1888-BNY ADRS
Fax: +1 212 571 3050
Date: 31/10/2005 08:00:39 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department