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Harmony Gold Mining Company Limited - Review For The Interim Period Ended 31
Release Date: 16/02/2006 17:22:26 Code(s): HARHarmony Gold Mining Company Limited - Review For The Interim Period Ended 31
December 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
NASDAQ HMY
REVIEW FOR THE INTERIM PERIOD ENDED 31 DECEMBER 2005
Further to the publication of the quarterly results on Monday, 13 February 2006
Harmony is now publishing interim results of the six months ended 31 December
2005.
TOTAL OPERATIONS - INTERIM FINANCIAL RESULTS (Rand/metric) (unaudited)
Year to date Year to date
31 December 31 December
2005 2004
(restated)
Ore milled t"000 9 457 12 480
Gold produced kg 39 535 50 426
Gold price received R/kg 97 256 83 528
Cash operating costs R/kg 84 406 77 658
R million R million
Revenue 3 845 4 212
Cash operating costs (1) 3 337 3 601
Cash operating profit 508 611
Amortisation and depreciation of
mining properties, mine
development costs and mine plant
facilities (1) (493) (553)
Corporate, administration and other
expenditure (128) (79)
Provision for rehabilitation costs (5) (28)
Operating loss (118) (49)
Amortisation and depreciation other
than mining properties,
mine development costs and mine
plant facilities (21) (15)
Employment termination and
restructuring costs 86 (180)
Care and maintenance cost (115) (83)
Share-based compensation (63) (30)
Exploration expenditure (50) (44)
306 -
Profit on sale of investment in Gold
Fields 43 -
Mark-to-market of listed investments
Interest paid (194) (204)
Interest received 100 63
Other expenses - net (15) (15)
Loss on financial instruments (298) (28)
(Loss)/Gain on foreign exchange (1) 13
Loss on sale of listed investments
and subsidiaries (1) -
Profit on Australian-listed
investments - 4
Loss before tax (341) (568)
Current tax - (expense)/benefit (4) 39
Deferred tax - benefit (1) 43 46
Net loss (302) (483)
(1) The change in accounting policy
on capitalisation of mine
development costs had the following
effect:
- Cash operating costs - decrease 297 315
- Amortisation and depreciation of
mining properties, mine
development costs and mine plant
facilities (146) (112)
- Deferred tax - expense (31) (38)
- Net effect of change in accounting
policy 120 165
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 - INTERIM FINANCIAL RESULTS (Rand/metric) (unaudited)
Year to date Year to date
31 December 31 December
2005 2004
(restated)
Loss per share - cents*
- Basic loss (77) (145)
- Headline loss (162) (157)
- Fully diluted loss** *** (77) (145)
Dividends per share - (cents)
- Interim - -
- Proposed final - -
* Calculated on weighted average number of shares in issue for six months to
December 2005: 392.6 million (December 2004: 332.9 million).
** Calculated on weighted average number of diluted shares in issue for six
months to December 2005:
396.7 million (December 2004: 332.8 million).
*** The effect of the share options is anti-dilutive.
Reconciliation of headline loss:
Net loss (302) (483)
Adjustments:
- Profit on sale of assets (27) (34)
- Profit on Australian-listed investments - (4)
- Loss on disposal of Sangold investment 1 -
- Profit on disposal of investment in Gold
Fields (306) -
Headline loss (634) (521)
ABRIDGED BALANCE SHEET AT 31 DECEMBER 2005 (Rand)
At 31 December At 30 September At 31 December
2005 2005 2004
R million R million R million
(Unaudited) (Unaudited) (Unaudited)
(restated)
ASSETS
Non-current assets
Property, plant and
equipment 22 735 22 633 23 520
Intangible assets 2 268 2 268 2 268
Investments 2 191 4 709 6 364
27 194 29 610 32 152
Current assets
Inventories 560 552 550
Receivables 744 597 383
Income and mining
taxes 24 27 -
Cash and cash
equivalents 2 914 971 296
4 242 2 147 1 229
Total assets 31 436 31 757 33 381
EQUITY AND LIABILITIES
Share capital and
reserves
Issued capital 25 689 25 645 25 500
Fair value and other
reserves (717) (257) (2 061)
Deferred share-based
compensation (185) (215) (128)
(Accumulated
loss)/Retained
earnings (1 708) (1 729) 1 222
23 079 23 444 24 533
Non-current
liabilities
Long-term borrowings 2 506 2 464 2 861
Net deferred taxation
liabilities 2 122 2 128 2 762
Net deferred
financial liabilities 498 436 529
Long-term provisions 943 938 825
6 069 5 966 6 977
Current liabilities
Accounts payable 892 995 870
Accrued liabilities 309 298 362
Short-term portion of
long-term borrowings 1 079 1 046 602
Income and mining
taxes - - 27
Shareholders for
dividends 8 8 10
2 288 2 347 1 871
Total equity and
liabilities 31 436 31 757 33 381
Number of ordinary
shares in issue 394 161 367 393 341 194 392 993 004
Net asset value per
share (cents) 5 853 5 960 6 243
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
development costs.
CONDENSED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 31 DECEMBER 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)
Issue of share capital 44 - -
Currency translation
adjustment and other - (47) -
Adoption of IFRS 2,
share-based payments - - 63
Net loss - - -
Balance at
31 December 2005 25 689 (717) (185)
(restated)
Balance at 1 July 2004 20 945 (1 186) (27)
Issue of share capital 4 424 - -
Currency translation
adjustment and other - (875) -
Adoption of IFRS 2,
share-based payments 131 - (101)
Net loss - - -
Dividends paid - - -
Balance at 31 December 2004 25 500 (2 061) (128)
Retained
earnings Total
R million R million
Balance at 1 July 2005 (1 406) 23 321
Issue of share capital - 44
Currency translation
adjustment and other - (47)
Adoption of IFRS 2,
share-based payments - 63
Net loss (302) (302)
Balance at
31 December 2005 (1 708) 23 079
(restated)
Balance at 1 July 2004 1 801 21 533
Issue of share capital - 4 424
Currency translation
adjustment and other - (875)
Adoption of IFRS 2,
share-based payments - 30
Net loss (483) (483)
Dividends paid (96) (96)
Balance at 31 December 2004 1 222 24 533
Issued Fair value Deferred
share and other share-based
capital reserves compensation
US$ million US$ million US$ million
Balance at 1 July 2005 4 051 (106) (39)
Issue of share capital 7 - -
Currency translation
adjustment and other - (7) -
Adoption of IFRS 2,
share-based payments - - 10
Net loss - - -
Balance at
31 December 2005 4 058 (113) (29)
(restated)
Balance at 1 July 2004 3 721 (211) (5)
Issue of share capital 786 - -
Currency translation
adjustment and other - (155) -
Adoption of IFRS 2,
share-based payments 23 - (18)
Net loss - - -
Dividends paid - - -
Balance at 31 December 2004 4 530 (366) (23)
Retained
earnings Total
US$ million US$ million
Balance at 1 July 2005 (222) 3 684
Issue of share capital - 7
Currency translation
adjustment and other - (7)
Adoption of IFRS 2,
share-based payments - 10
Net loss (48) (48)
Balance at
31 December 2005 (270) 3 646
(restated)
Balance at 1 July 2004 320 3 825
Issue of share capital - 786
Currency translation
adjustment and other - (155)
Adoption of IFRS 2,
share-based payments - 5
Net loss (86) (86)
Dividends paid (17) (17)
Balance at 31 December 2004 217 4 358
Balances translated at closing rates of: December 2005: US$1 = R6.33
(December 2004: US$1 = R5.63).
SUMMARISED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 31 DECEMBER 2005 (unaudited)
Six Six
months months
ended ended
31 December 31 December
2004 2005
US$ million US$ million
Cash flow from operating activities
Cash utilised by operations (11) (49)
Interest and dividends received 10 15
Interest paid (19) (14)
Income and mining taxes paid - -
Cash utilised by operating activities (20) (48)
Cash flow from investing activities
Net proceeds on disposal/(additions)
of listed investments (9) 365
Net additions to property, plant and
equipment (116) (121)
Other investing activities - 1
Cash generated/(utilised) by
investing activities (125) 245
Cash flow from financing activities
Long-term loans (repaid)/raised 3 (45)
Ordinary shares issued - net of expenses (6) 7
Dividends paid (15) -
Cash utilised by financing activities (18) (38)
Foreign currency translation adjustments (1) 26
Net increase/(decrease) in cash
and equivalents (164) 185
Cash and equivalents - 1 July 217 275
Cash and equivalents - 31 December 53 460
Six Six
months months
ended ended
31 December 31 December
2005 2004
R million R million
Cash flow from operating activities
Cash utilised by operations (320) (67)
Interest and dividends received 100 63
Interest paid (94) (120)
Income and mining taxes paid (2) -
Cash utilised by operating activities (316) (124)
Cash flow from investing activities
Net proceeds on disposal/(additions)
of listed investments 2 461 (57)
Net additions to property, plant and
equipment (786) (722)
Other investing activities 4 1
Cash generated/(utilised) by
investing activities 1 679 (778)
Cash flow from financing activities
Long-term loans (repaid)/raised (295) 18
Ordinary shares issued - net of expenses 45 (36)
Dividends paid - (95)
Cash utilised by financing activities (250) (113)
Foreign currency translation adjustments (29) (103)
Net increase/(decrease) in cash
and equivalents 1 084 (1 118)
Cash and equivalents - 1 July 1 830 1 414
Cash and equivalents - 31 December 2 914 296
Operating activities translated at average rates of: December 2005: US$1 =
R6.51 (December 2004:US$1 = R6.21).
Closing balance translated at closing rates of: December 2005: US$1 = R6.33
(December 2004:US$1 = R5.63).
NOTES TO THE RESULTS FOR THE PERIOD ENDED 31 DECEMBER 2005
1. Basis of accounting
The unaudited results for the six months have been prepared using accounting
policies that comply with International Financial Reporting Standards (IFRS).
These consolidated interim 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 Notes 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 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 profit/(loss) is an expense of
R63 million for the December 2005 year to date (December 2004 year to date:
R30 million) (December 2005 quarter: R30 million) (September 2005 quarter:
R33 million) (December 2004 quarter: R19 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
(a) Capitalisation of mine development costs
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 profit/(loss) is as follows:
- A decrease in the cash operating costs of R297 million for the December 2005
year to date (December 2004 year to date: R315 million) (December 2005 quarter:
R161 million) (September 2005 quarter: R136 million) (December 2004 quarter:
R156 million).
- Additional amortisation charges of R146 million for the December 2005 year to
date (December 2004 year to date: R112 million) (December 2005 quarter:
R75 million) (September 2005 quarter: R71 million) (December 2004 quarter:
R57 million).
- Taxation effect of the capitalised development costs and additional
amortisation charges of R31 million for December 2005 year to date (December
2004 year to date: R38 million) (December 2005 quarter: R18 million) (September
2005 quarter: R13 million) (December 2004 quarter: R19 million).
4. Derivative financial instruments
Commodity contracts
The Harmony Group"s outstanding commodity contracts against future production,
by type at 31 December 2005 are indicated below. The total net delta of the
hedge book at 31 December 2005 was 455,379 oz (14,164 kg).
Year 30 June 30 June 30 June
2006 2007 2008
AUSTRALIAN DOLLAR GOLD
Forward contracts Kilograms 3,110 4,572 3,110
Ounces 100,000 147,000 100,000
AUD per oz 511 515 518
Call options sold Kilograms - 311 -
Ounces - 10,000 -
AUD per oz - 562 -
Total commodity
contracts Kilograms 3,110 4,883 3,110
Ounces 100,000 157,000 100,000
Total net gold* Delta (kg) 3,110 4,874 3,099
Delta (oz) 99,991 156,707 99,642
Year 30 June
2009 Total
AUSTRALIAN DOLLAR GOLD
Forward contracts Kilograms 3,110 13,903
Ounces 100,000 447,000
AUD per oz 518 515
Call options sold Kilograms - 311
Ounces - 10,000
AUD per oz - 562
Total commodity
contracts Kilograms 3,110 14,214
Ounces 100,000 457,000
Total net gold* Delta (kg) 3,080 14,164
Delta (oz) 99,039 455,379
* The Delta of the hedge position indicated above, is the equivalent gold
position that would have the same marked- to-market sensitivity for a small
change in the gold price. This is calculated using the Black-Scholes option
formula with the ruling market prices, interest rates and volatilities at 31
December 2005.
These contracts are classified as speculative and the marked-to-market movement
is reflected in the income statement.
The mark-to-market of these contracts was a negative R486 million (negative
USD77 million) at 31 December 2005 (at 30 September 2005: negative R345 million
or negative USD54 million). The values at 31 December 2005 were based on a gold
price of USD514 (AUD704) per ounce, exchange rates of USD1/R6.33 and
AUD1/USD0.73 and prevailing market interest rates and volatilities at that
date. These valuations were provided by independent risk and treasury
management experts.
At 27 January 2006, the marked-to-market value of the hedge book was a negative
R557 million (negative USD91 million), based on a gold price of USD559 (AUD741)
per ounce, exchange rates of USD1/R6.11 and AUD1/USD0.75 and prevailing market
interest rates and volatilities at that time.
These marked-to-market valuations are not predictive of the future value of the
hedge position, nor of the future impact on the revenue of the company. The
valuation represents the cost of buying all hedge contracts at the time of the
valuation, at market prices and rates available at the time.
Harmony closed out 10,000 oz call option contracts during the quarter ended 31
December 2005 at a cost of R3.3 million (USD500,000). During the quarter ended
30 September 2005, Harmony closed out 20,000 oz call option contracts and 8,000
oz forward contracts, at a cost of R4.3 million (USD680,000).
Interest rate swaps
The Group has interest rate swap agreements to convert R600 million of its R1,2
billion fixed rate bond to variable rate debt. The interest rate swap runs over
the term of the bond, interest is received at a fixed rate of 13% and the
Company pays floating rate based on JIBAR plus a spread ranging from 1.8% to
2.2%.
These transactions which mature in June 2006 are designated as fair value
hedges. The marked-to-market value of the transactions was a positive R11
million (USD2 million) at 31 December 2005, based on the prevailing interest
rates and volatilities at the time.
Currency contracts
Harmony inherited currency contracts with the acquisition of Avgold. These
currency contracts matured on 31 December 2005 and was closed out accordingly.
The contracts were classified as speculative and the mark- to-market movement
was reflected in the income statement.
The mark-to-market of these contracts was R NIL (USD NIL) at 31 December 2005
(30 September 2005: negative R64 million or negative USD10 million). These
values were based upon an exchange rate of USD1/R6.35 at 30 September 2005 and
prevailing market interest rates at the time. Independent risk and treasury
management experts provided these valuations.
Z B Swanepoel N V Qangule
Chief Executive Financial Director
Virginia
10 February 2006
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*# , V N Fakude*
Dr D S Lushaba*, R P Menell* M Motloba*,
N V Qangule, C M L Savage*
(*non-executive) (# Mozambique)
Investor Relations
Philip Kotze
Executive: Investor Relations
Telephone: +27 11 684 0147
Fax: +27 11 684 0188
Cell: +27 (0) 83 453 0544
E-mail: philip.kotze@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
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
NASDAQ HMY
Registration number 1950/038232/06
Incorporated in the Republic of South Africa
ISIN: ZAE000015228
Date: 16/02/2006 05:22:37 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department