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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): HAR
Harmony 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                                             
                                                                                
                                                                                
                                                                                



                                        
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