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Harmony - Review for quarter and year ended 30 June 2006
Release Date: 07/08/2006 08:00:03 Code(s): HARHarmony - Review for quarter and year ended 30 June 2006
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
Issuer code HAPS
REVIEW FOR QUARTER AND YEAR ENDED 30 JUNE 2006
QUARTERLY HIGHLIGHTS
- Higher gold price clearly demonstrates the gearing that Harmony has
- Cash operating profit at R645 million (+ 111%)
- Tonnes milled improve by 11%
- Costs remained at similar levels, resulting in a positive impact on
R/t unit cost
- Successful implementation of CONOPS at Tshepong
- Australian hedge book reduced by 75 000 oz
- Upgrade of Golpu/Wafi resource by more than 20%
FINANCIAL SUMMARY FOR THE JUNE QUARTER
June 2006 March 2006
Gold produced kg 17 243 17 464
oz 554 373 561 477
Cash costs R/kg 93 968 92 914
$/oz 452 470
Cash operating profit Rand 645 million 306 million
US$ 100 million 50 million
Cash earnings SA cents per share 163 78
US cents per share 25 13
Basic loss SA cents per share (11) (46)
US cents per share (2) (8)
Headline loss SA cents per share (52) (50)
US cents per share (8) (8)
Fully diluted loss SA cents per share (11) (46)
US cents per share (2) (8)
CHIEF EXECUTIVE"S REVIEW JUNE 2006
"Harmony once again demonstrated that we offer to our shareholders significant
upside potential when the gold price rises. We have stepped up our development
rates to give us more mining flexibility which in turn will allow us to take
advantage of the higher gold price. This is a process that will continue for
the next 18 months, but we expect to start reaping the benefits by the end of
the fiscal year."
Analysis of earnings per share (SA cents)
Quarter ended Quarter ended
EARNINGS PER SHARE (SA Cents) June 2006 March 2006
Cash earnings 163 78
Basic loss (11) (46)
Headline loss (52) (50)
Fully diluted loss (11) (46)
The net loss for the current quarter was R41 million (basic loss per share of
11 cents) compared to the net loss of R178 million (basic loss per share of 46
cents) for the previous quarter.
RECONCILIATION BETWEEN BASIC AND HEADLINE LOSS
Quarter ended
HEADLINE LOSS IN CENTS PER SHARE June 2006
Basic loss (11)
Reversal of impairments (38)
Profit on sale of mining assets (3)
Headline loss (52)
Our cash earnings for the year to date was 371 cents per share.
TOTAL OPERATIONSQUARTERLY FINANCIAL RESULTS (Rand/metric) (unaudited)
Quarter ended Quarter ended Quarter ended
30 June 31 March 30 June
2006 2006 2005
(restated)
Ore milled t"000 4 957 4 466 5 198
Gold produced kg 17 243 17 464 19 886
Gold price received R/kg 131 358 110 399 89 711
Cash operating costs R/kg 93 968 92 914 80 207
R million R million R million
Revenue 2 265 1 928 1 784
Cash operating costs (1) 1 620 1 622 1 595
Cash operating profit 645 306 189
Amortisation and
depreciation of mining
properties, mine
development costs and
mine plant facilities (1) (267) (264) (238)
Corporate, administration
and other expenditure (53) (6) (81)
Reversal/(Provision) for
rehabilitation costs 18 (1) (6)
Operating profit/(loss) 343 35 (136)
Amortisation and
depreciation other than
mining properties, mine
development
costs and mine plant
facilities (19) (17) (7)
Employment termination
and restructuring costs (205)
Care and maintenance costs (37) (30) (12)
Share based compensation (10) (30) (27)
Exploration expenditure (35) (21) (16)
Loss on sale of
investment in Goldfields (372)
Mark-to-market of listed
investments 22 22 13
Interest paid (180) (96) (134)
Interest received 48 71 45
Other income - net 10 5 9
Gain/(Loss) on financial
instruments 35 (260) (7)
Loss on foreign exchange (1) (18)
Loss on sale of listed
investments and
subsidiaries (73)
Diminution in carrying
value of ARM investment (337)
Loss from associates (105)
Provision for
post-retirement benefits (7) (57)
Reversal of impairment of
fixed assets 216
Profit/(Loss) before tax 281 (322) (1 334)
Current tax expense (5) (1) (110)
Deferred tax
(expense)/benefit (1) (317) 145 337
Net loss (41) (178) (1 107)
TOTAL OPERATIONSQUARTERLY FINANCIAL RESULTS (Rand/metric) (unaudited)
Quarter ended Quarter ended Quarter ended
30 June 31 March 30 June
2006 2006 2005
(restated)
(1) The change in
accounting policy on
capitalisation of mine
development costs
had the following effect:
Cash operating costs
decrease 200 160 139
Amortisation and
depreciation of mining
properties, mine
development costs and
mine plant facilities (99) (82) (68)
Deferred tax expense (23) (18) (15)
Net effect of change
in accounting policy 78 60 56
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.
Loss per share cents *
Basic loss (11) (46) (282)
Headline loss (52) (50) (93)
Fully diluted loss ** *** (11) (46) (282)
Dividends per share (cents)
Interim
Proposed final
* Calculated on weighted average number of shares in issue at
quarter end June 2006: 394.9 million (March 2006: 393.4 million)
(June 2005: 392.2 million).
** Calculated on weighted average number of diluted shares in issue
at quarter end June 2006: 401.1 million (March 2006: 400.5 million)
(June 2005: 392.2 million).
*** The effect of the share options is anti-dilutive.
Reconciliation of headline loss:
Net loss (41) (178) (1 107)
Adjustments:
Profit on sale of assets (12) (13) (26)
Mark-to-market of
listed investments 4
Loss on sale of ARM Ltd
net of tax 103
Loss on disposal of
investment in Goldfields 372
Loss on disposal of
subsidiaries 1
Impairment of fixed
assets net of tax (151) (19)
Profit on disposal of
investment in Bendigo NL (30)
Diminution in carrying
value of listed
investments 337
Headline loss (204) (191) (365)
TOTAL OPERATIONS ANNUAL FINANCIAL RESULTS (Rand/metric)(Reviewed)
Year ended Year ended
30 June 2006 30 June 2005
(restated)
Ore milled t"000 18 880 23 283
Gold produced kg 74 242 92 230
Gold price received R/kg 108 268 84 799
Cash operating costs R/kg 88 629 75 388
R million R million
Revenue 8 038 7 821
Cash operating costs (1) 6 580 6 953
Cash operating profit 1 458 868
Amortisation and depreciation of mining
properties, mine development costs and
mine plant facilities (1) (1 032) (1 010)
Corporate, administration and other
expenditure (187) (206)
Reversal/(Provision) for rehabilitation costs 13 (48)
Operating profit/(loss) 252 (396)
Amortisation and depreciation other than
mining properties, mine development
costs and mine plant facilities (57) (32)
Employment termination and restructuring costs 78 (562)
Care and maintenance costs (174) (76)
Share based compensation (103) (67)
Exploration expenditure (106) (73)
Profit/(Loss) on sale of investment in
Goldfields 306 (372)
Mark-to-market of listed investments 87 17
Interest paid (470) (434)
Interest received 224 132
Other expenses net (6) (25)
(Loss)/Gain on financial instruments (523) 16
Gain on foreign exchange 20
Loss on sale of listed investments and
subsidiaries (184)
Loss from associates (105)
Diminution in carrying value of ARM investment (337)
Provision for post-retirement benefits (7) (57)
Reversal of impairment/(impairment) of fixed
assets 216 (1 513)
Loss before tax (388) (3 943)
Current tax expense (10) (76)
Deferred tax (expense)/benefit (1) (128) 805
Net loss (526) (3 214)
TOTAL OPERATIONS ANNUAL FINANCIAL RESULTS (Rand/metric)(Reviewed)
Year ended Year ended
30 June 2006 30 June 2005
(restated)
(1) The change in accounting policy on
capitalisation of mine development
costs had the following effect:
Cash operating costs decrease 659 590
Amortisation and depreciation of mining
properties, mine development costs and
mine plant facilities (314) (213)
Deferred tax expense (74) (74)
Net effect of change in accounting policy 271 303
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.
Loss per share cents *
Basic loss (133) (890)
Headline loss (263) (342)
Fully diluted loss ** *** (133) (890)
Dividends per share (cents)
Interim
Proposed final
* Calculated on weighted average number
of shares in issue for 12 months to June 2006: 392.7 million
(June 2005: 361.8 million).
** Calculated on weighted average number of diluted shares in issue for
12 months to June 2006: 398.6 million (June 2005: 361.8 million).
*** The effect of the share options is anti-dilutive.
Reconciliation of headline loss:
Net loss (526) (3 214)
Adjustments:
- Profit on sale of assets (52) (79)
- Profit on Australian listed investments
- Loss on sale of ARM ltd net of tax 214
- Loss on disposal of Sangold investment 1
- Profit/(Loss) on disposal of investment in
Goldfields (306) 372
- Loss on disposal of subsidiaries 1
- Impairment of fixed assets net of tax (151) 1 163
- Impairment of Bendigo (30)
- Diminution in carrying value of listed
investments 337
Headline loss (1 034) (1 236)
BALANCE SHEET AT 30 JUNE 2006 (Rand)(Reviewed)
At 30 June At 31 March At 30 June
2006 2006 2005
R million R million R million
(restated)
ASSETS
Non-current assets
Property, plant and equipment 23 318 22 513 22 511
Intangible assets 2 270 2 268 2 268
Available for sale financial
assets 2 333 2 259 4 154
Investments in associates 1 908 2 012
29 829 29 052 28 933
Current assets
Inventories 666 598 583
Trade and other receivables 750 775 632
Income and mining taxes 27 28 27
Cash and cash equivalents 906 1 781 1 830
2 349 3 182 3 072
Total assets 32 178 32 234 32 005
EQUITY AND LIABILITIES
Share capital and reserves
Share capital 25 489 25 346 25 289
Other reserves (271) (614) (586)
Accumulated loss (2 015) (1 974) (1 484)
23 203 22 758 23 219
Non-current liabilities
Borrowings 2 591 2 549 2 422
Net deferred taxation
liabilities 2 299 1 954 2 183
Net deferred financial
liabilities 631 679 386
Provisions for other
liabilities and charges 983 943 940
6 504 6 125 5 931
Current liabilities
Trade and other liabilities 1 118 1 036 1 138
Accrued liabilities 340 316 376
Borrowings 1 006 1 981 1 333
Shareholders for dividends 7 18 8
2 471 3 351 2 855
Total equity and liabilities 32 178 32 234 32 005
Number of ordinary shares in
issue 396 934 450 394 369 190 393 341 194
Net asset value per share
(cents) 5 846 5 771 5 903
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 YEAR ENDED 30 JUNE 2006
Share Other Retained
capital reserves earnings Total
(Reviewed) R million R million R million R million
Balance as 1 July 2005 25 289 (586) (1 484) 23 219
Issue of share capital 200 200
Currency translation
adjustment and other 212 212
Adoption of IFRS 2,
Share-based payments 103 103
Net loss (526) (526)
Dividends paid (5) (5)
Balance at 30 June 2006 25 489 (271) (2 015) 23 203
(Restated)
Balance as 1 July 2004 20 889 (1 168) 1 826 21 547
Issue of share capital 4 400 4 400
Currency translation
adjustment and other 515 515
Adoption of IFRS 2,
Share-based payments 67 67
Net loss (3 214) (3 214)
Dividends paid (96) (96)
Balance at 30 June 2005 25 289 (586) (1 484) 23 219
SUMMARISED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2006
Year Year
ended ended
30 June 30 June
2006 2005
R million R million
(Reviewed) (Restated)
Cash flow from operating activities
Cash generated/(utilised) by operations 378 (569)
Interest and dividends received 224 149
Interest paid (201) (261)
Income and mining taxes paid (12) (55)
Cash generated/(utilised) by
operating activities 389 (736)
Cash flow from investing activities
Net proceeds on disposal of listed
investments 2 461 2 546
Acquisition of investment in associate (2 012)
Net additions to property, plant
and equipment (1 635) (1 264)
Other investing activities (44) (100)
Cash (utilised)/generated by
investing activities (1 230) 1 182
Cash flow from financing activities
Long-term loans (repaid)/raised (393) 191
Ordinary shares issued net of expenses 183 (60)
Dividends paid (7) (97)
Cash (utilised)/generated by
financing activities (217) 34
Foreign currency translation adjustments 134 (64)
Net (decrease)/increase in cash
and equivalents (924) 416
Cash and equivalents 1 July 1 830 1 414
Cash and equivalents 30 June 906 1 830
SUMMARISED CASH FLOW STATEMENT
FOR THE THREE MONTHS ENDED 30 JUNE 2006 (Unaudited)
Three Three
months months
ended ended
30 June 31 March
2006 2006
R million R million
Cash flow from operating activities
Cash generated by operations 467 229
Interest and dividends received 48 76
Interest paid (59) (48)
Income and mining taxes paid (4) (5)
Cash generated by operating activities 452 252
Cash flow from investing activities
Acquisition of investment in associate (2 012)
Net additions to property, plant
and equipment (471) (378)
Other investing activities (26) (21)
Cash utilised by investing activities (497) (2 411)
Cash flow from financing activities
Long-term loans (repaid)/raised (1 008) 910
Ordinary shares issued net of expenses 128 10
Dividends paid (7)
Cash (utilised)/generated by financing
activities (887) 920
Foreign currency translation adjustments 57 106
Net decrease in cash and equivalents (875) (1 133)
Cash and equivalents beginning
of quarter 1 781 2 914
Cash and equivalents end of quarter 906 1 781
NOTES TO THE RESULTS FOR THE YEAR ENDED 30 JUNE 2006
1. Basis of accounting
The reviewed quarter and year-end results have been prepared using accounting
policies that comply with International Financial Reporting Standards (IFRS).
These consolidated quarterly statements are prepared in accordance with
international accounting standards IAS 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 (IAS) 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 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 profit/(loss) is an expense of R103
million for the June 2006 year to date (June 2005 year to date: R67 million)
(June 2006 quarter: R10 million) (March 2006 quarter: R30 million) (June 2005
quarter: R27 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 R659 million for the June 2006 year
to date (June 2005 year to date: R590 million) (June 2006 quarter: R200
million) (March 2006 quarter: R160 million) (June 2005 quarter: R139 million).
Additional amortisation charges of R314 million for the June 2006 year to
date (June 2005 year to date: R213 million) (June 2006 quarter: R99 million)
(March 2006 quarter: R82 million) (June 2005 quarter: R68 million).
Taxation effect of the capitalised development costs and additional
amortisation charges of R74 million for June 2006 year to date (June 2005
year to date: R74 million) (June 2006 quarter: R23 million) (March 2006 quarter:
R18 million) (June 2005 quarter: R15 million).
4. Commodity Contracts:
The Harmony Group"s outstanding commodity contracts against future production,
by type at 30 June 2006 are indicated below. The total net delta of the hedge
book at 30 June 2006 was 356 849 oz (11,099 kg).
Year 30 June 30 June 30 June
2007 2008 2009 Total
Australian Dollar Gold:
Forward contracts
Kilograms 4,572 3,110 3,110 10,793
Ounces 147,000 100,000 100,000 347,000
AUD per oz 515 518 518 516
Call options sold
Kilograms 311 311
Ounces 10,000 10,000
AUD per oz 562 562
Total commodity contracts
Kilograms 4,883 3,110 3,110 11,104
Ounces 157,000 100,000 100,000 357,000
Total net gold **
Delta (kg) 4,885 3,111 3,104 11,099
Delta (oz) 157,056 100,006 99,788 356,849
** 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
30 June 2006.
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 R631 million (negative
USD88 million) at 30 June 2006 (at 31 March 2006: negative R654 million or
negative USD106 million). The values at 30 June 2006 were based on a gold price
of USD600 (AUD808) per ounce, exchange rates of USD1/R7.17 and AUD1/USD0.74 and
prevailing market interest rates and volatilities at that date. These
valuations were provided by independent risk and treasury management experts.
At 25 July 2006, the marked-to-market value of the hedge book was a negative
R654 million (negative USD93 million), based on a gold price of USD622 (AUD823)
per ounce, exchange rates of USD1/R7.03 and AUD1/USD0.76 and prevailing market
interest rates and volatilities at that time. Harmony closed out 10,000oz call
options subsequent to 30 June 2006 at a cost of R14 million (USD2 million).
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 75,000oz forward contracts during the quarter ending 30 June
2006 at a cost of R143 million (USD23 million). During the quarter ended 31
March 2006, Harmony closed out 25,000oz call option contracts at a cost of
R63 million (USD10 million).
Interest Rate Swaps:
The Group had interest rate swap agreements to convert R600 million of its
R1,2 billion senior unsecured fixed rate bond (HAR1) to variable rate debt. The
interest rate swap ran over the term of the bond and interest was received at a
fixed rate of 13% and the company payed floating rate based on JIBAR plus a
spread ranging from 1.8% to 2.2%. The bond as well as the interest rate swaps
matured on 14 June 2006 and was settled in full.
These interest rate swaps were designated as fair value hedges. The
marked-to-market value of the transactions was a RNIL at 30 June 2006 (at
31 March 2006 positive R25 million or USD4 million, based on the prevailing
interest rates and volatilities at the time).
5. Audit review
The condensed year-end results have been reviewed in terms of the Listings
Requirements of the JSE Limited by the company"s auditors,
PricewaterhouseCoopers Inc. This unqualified review opinion is available
for inspection at the company"s registered office. The results for quarter
3 and 4 of the 2006 financial year presented in this document has not
been reviewed.
Z B Swanepoel N V Qangule
Chief Executive Financial Director
Virginia
4 August 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**,
Dr D S Lushaba*, F T de Buck*, 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
Lizelle du Toit
Investor Relations Officer
Telephone: +27 11 684 0149
Fax: +27 11 684 0188
Cell: +27 (0) 82 465 1244
E-mail: lizelle.dutoit@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: marian.vanderwalt@harmony.co.za
South African Share Transfer Secretaries
Link Market Services South Africa (Proprietary) Limited
(Registration number 2000/007239/07)
5th Floor, 11 Diagonal Street
Johannesburg, 2001
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
Issuer code HAPS
Registration number 1950/038232/06
Incorporated in the Republic of South Africa
ISIN: ZAE000015228
Date: 07/08/2006 08:00:23 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department