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HAR - Harmony Gold Mining Company Limited - Results for the quarter ended
Release Date: 25/04/2007 08:00:08 Code(s): HAR HAR - Harmony Gold Mining Company Limited - Results for the quarter ended
March 2007
HARMONY GOLD MINING COMPANY LIMITED
Registration number 1950/038232/06
Incorporated in the Republic of South Africa
ISIN: ZAE000015228
JSE Share Code: HAR
RESULTS FOR THE QUARTER ENDED MARCH 2007
CHIEF EXECUTIVE`S REVIEW
March is usually the month when we at Harmony come together at our
leadership conference to realign our leaders to the strategic direction for
the company. The objective of these conferences is to spend time together
as the company`s leaders and recommit to our values, which include making
value creation a Harmony way of life.
Harmony continues to invest large sums of money on training and developing
our employees. We have a growing pool of talented individuals who have been
identified for managerial positions in line with our succession plans. I
believe that currently Harmony has a strong core of managers who will
unlock sustainable value for all our stakeholders. We also continue to be
able to attract quality people to fill vacancies in Harmony.
Our growth projects, which are the exciting component of the organic growth
within our portfolio of assets, will make our portfolio more profitable and
robust. These projects are on schedule and should begin contributing to our
bottom line within the 2008 financial year through to the end of 2010.
Harmony`s March quarter was marked by a steady operational performance with
sound cost control. The full benefits of the higher gold price and
improving flexibility through increasing development over the past 15
months are now being realised when comparing the current quarter with the
corresponding period for March 2006.
Headline earnings improved by 31.8% to 58 cents per share compared with 44
cents per share for the December 2006 quarter and a 48 cents per share loss
for the March 2006 quarter.
Total operating profit rose 15.1% to R869 million (R755 million) quarter on
quarter and is up by 184.0% from R306 million compared with the
corresponding period ended March 2006.
The March 2007 net profit was up 6.5% to R247 million compared with the
December 2006 quarter considering that the December 2006 had an accounting
profit of R236 million which arose from the conversion of Western Areas
shares to Gold Fields shares. A loss of R174 million was reported for March
2006.
Despite the lower production and considering that the operations generally
have fewer production shifts in the March quarter, the Quality and Leverage
operations reported a solid performance with strong cost control and
improved grades.
Fewer total tonnes were milled for the quarter under review. The 6.2% drop
in tonnes - from the SA underground operations - to 3 152 000 tonnes
compares with 3 361 000 tonnes previously. This was partially countered by
the 4.2% higher grades of 5.0g/t from the SA underground operations, which
resulted in gold production being only 2.5% lower at 15 655kg (16 066kg). A
higher Rand gold price received of R151 833/kg and a steady USD/ZAR
exchange rate of R7.24 translated into a pleasing cash operating profit of
R868.5 million, an increase of 15.1% quarter on quarter.
Total cash operating costs were marginally down at R103 608/kg from R104
132/kg previously. The SA underground operations showed strong cost
containment with a 2.1% cost reduction to R101 868/kg (R104 056/kg).
Excellent progress was made with the work at all the Growth projects and it
is anticipated that the Tshepong Sub 66 Decline and Doornkop`s new mine
should begin their first production within the next six months. The grade
performance from the current old sections at both Elandsrand as well as
Doornkop for the March quarter was disappointing.
A number of significant company events took place during the quarter.
Firstly, we welcome the precedent-setting judgment by the South African
Competition Tribunal in our case against Mittal Steel SA regarding their
excessive pricing of flat steel. The Tribunal found that Mittal had in fact
abused its dominant position by engaging in excessive pricing. In the next
few months the Competition Tribunal will hear further evidence before
imposing remedies.
Secondly, Harmony signed an agreement with Rio Tinto Limited to purchase
the royalty rights from Rio Tinto for the Hidden Valley and Kerimenge
deposits in Papua New Guinea. The transaction will afford Harmony the
benefit of reducing the cash costs of Hidden Valley by US$13 per ounce. One
suspensive condition is still outstanding.
Lastly, during the quarter Harmony refinanced its R1 billion debt owing to
Rand Merchant Bank. We also sold 1.2 million Gold Fields Limited shares in
the open market realising R156.8 million and incurred an accounting profit
of R1.0 million. We will continue to dispose of the remainder of our GFI
shares in an orderly manner.
QUARTERLY OPERATING AND FINANCIAL RESULTS (Rand/Metric) (unaudited)
Underground production - South Africa
Quality Growth Leveraged
Ounces Projects Ounces Sub-total
Ore milled
- t`000 Mar-07 1 496 379 1 277 3 152
Dec-06 1 561 399 1 401 3 361
Gold Produced
- kg Mar-07 8 158 1 757 5 740 15 655
Dec-06 7 953 2 228 5 885 16 066
Yield
- g/tonne Mar-07 5.45 4.64 4.49 4.97
Dec-06 5.09 5.58 4.20 4.78
Cash Operating Costs
- R/kg Mar-07 91 055 121 289 111 291 101 868
Dec-06 99 318 106 782 109 427 104 056
Cash Operating Costs
- R/tonne Mar-07 497 562 500 506
Dec-06 506 596 460 497
Working Revenue
(R`000) Mar-07 1 239 333 267 601 873 832 2 380 766
Dec-06 1 147 318 322 362 847 812 2 317 492
Cash Operating Costs
(R`000) Mar-07 742 825 213 105 638 811 1 594 741
Dec-06 789 877 237 910 643 976 1 671 763
Cash Operating Profit
(R`000) Mar-07 496 508 54 496 235 021 786 025
Dec-06 357 441 84 452 203 836 645 729
Capital Expenditure
(R`000) Mar-07 192 856 221 492 119 162 533 510
Dec-06 178 951 189 203 101 355 469 509
South South
Africa Africa Harmony
Surface Total Australia PNG Total
Ore milled
- t`000 Mar-07 1 268 4 420 694 - 5 114
Dec-06 1 097 4 458 777 - 5 235
Gold Produced
- kg Mar-07 747 16 402 1 608 - 18 010
Dec-06 770 16 836 1 888 - 18 724
Yield
- g/tonne Mar-07 0.59 3.71 2.32 - 3.52
Dec-06 0.70 3.78 2.43 - 3.58
Cash Operating Costs
- R/kg Mar-07 104 299 101 979 120 225 - 103 608
Dec-06 79 000 102 910 115 024 - 104 132
Cash Operating Costs
- R/tonne Mar-07 61 378 279 - 365
Dec-06 55 389 279 - 372
Working Revenue
(R`000) Mar-07 113 198 2 493 964 240 556 - 2 734 520
Dec-06 110 451 2 427 943 277 089 - 2 705 032
Cash Operating Costs
(R`000) Mar-07 77 911 1 672 652 193 321 - 1 865 973
Dec-06 60 830 1 732 593 217 166 - 1 949 759
Cash Operating Profit
(R`000) Mar-07 35 287 821 312 47 235 - 868 547
Dec-06 49 621 695 350 59 923 - 755 273
Capital Expenditure
(R`000) Mar-07 390 533 900 61 567 114 769 710 236
Dec-06 769 470 278 42 391 58 583 571 252
Quality Ounces - Evander Shafts, Randfontein Cooke Shafts, Target,
Tshepong, Masimong
Growth Projects - Doornkop shaft and South Reef Project, Elandsrand shaft
and New Mine Project, Phakisa shaft, Tshepong Decline Project
Leveraged Ounces - Bambanani, Joel, West, St Helena 8, Harmony 2,
Merriespruit 1 and 3, Unisel, Brand 3, Orkney 2, 4 and 7.
TOTAL OPERATIONS - QUARTERLY FINANCIAL RESULTS (Rand/metric) (unaudited)
Quarter ended Quarter ended Quarter ended
31 March 2007 31 December 2006 31 March 2006
Ore milled - t`000 5 114 5 235 4 466
Gold produced - kg 18 010 18 724 17 464
Gold price received -
R/kg 151 833 144 467 110 399
Cash operating costs -
R/kg 103 608 104 132 92 914
R million R million R million
Revenue 2 735 2 705 1 928
Cash operating costs 1 866 1 950 1 622
Cash operating profit 869 755 306
Amortisation and
depreciation of mining
properties,
mine development costs
and mine plant
facilities (308) (287) (264)
Corporate,
administration and
other expenditure (50) (62) (6)
Provision for
rehabilitation costs (3) (3) (1)
Operating profit 508 403 35
Amortisation and
depreciation, other
than mining
properties, mine
development costs and
mine plant facilities (17) (16) (17)
Care and maintenance
costs (13) (19) (30)
Share-based
compensation (14) (14) (26)
Exploration expenditure (68) (60) (21)
Profit from associates - 30 -
(Loss)/Gain on
financial instruments (24) 17 (260)
Profit on sale of
property, plant and
equipment 4 73 13
Other
income/(expenses) -
net 15 (36) (9)
Mark-to-market of
listed investments 29 27 22
Profit on sale of
listed investment 10 - -
Profit on sale of
investment in
associate - 236 -
Interest received 36 42 71
Interest paid (106) (103) (96)
Profit/(Loss) before
tax 360 580 (318)
Current tax - expense (3) (2) (1)
Deferred tax -
(expense)/reversal (110) (110) 145
Net profit/(loss) 247 468 (174)
Earnings/(Loss) per
share - cents *
- Basic earnings/(loss) 62 118 (44)
- Headline
earnings/(loss) 58 44 (48)
- Fully diluted
earnings/(loss) ** *** 61 116 (44)
Dividends per share -
(cents)
- Interim - - -
- Proposed final - - -
Prepared in accordance with International Financial Reporting Standards.
* Calculated on weighted average number of shares in issue at quarter end
31 March 2007: 398.4 million (31 December 2006: 397.7 million) (31 March
2006: 393.4 million).
** Calculated on weighted average number of diluted shares in issue at
quarter end 31 March 2007: 403.3 million (31 December 2006: 403.7 million)
(31 March 2006: 400.5 million).
*** The effect of the share options is anti-dilutive.
Reconciliation of
headline
profit/(loss):
Net profit/(loss) 247 468 (174)
Adjustments:
- Profit on sale of
property, plant and
equipment (4) (73) (13)
- Profit on sale of
GBS investment (9) - -
- Profit on disposal
of investment in Gold
Fields Limited (1) - -
- Profit on sale of
Western Areas
investment - (220) -
Headline profit/(loss) 233 175 (187)
ABRIDGED BALANCE SHEET AT 31 MARCH 2007 (Rand) (unaudited)
At At At
31 March 2007 31 December 2006 31 March 2006
R million R million R million
ASSETS
Non-current assets
Property, plant and
equipment 24 472 23 973 22 513
Intangible assets 2 270 2 270 2 268
Investment financial
assets 4 430 4 491 2 223
Investments in
associates - - 2 012
Trade and other
receivables 42 41 36
31 214 30 775 29 052
Current assets
Inventories 722 742 598
Trade and other
receivables 1 180 934 775
Income and mining taxes 25 28 28
Cash and cash
equivalents 985 904 1 781
2 912 2 608 3 182
Total assets 34 126 33 383 32 234
EQUITY AND LIABILITIES
Share capital and
reserves
Share capital 25 590 25 588 25 346
Other reserves (79) (186) (625)
Accumulated loss (1 023) (1 270) (1 963)
24 488 24 132 22 758
Non-current liabilities
Borrowings * 3 494 2 687 2 549
Net deferred taxation
liabilities 2 663 2 541 1 954
Deferred financial
instruments 448 484 679
Provisions for other
liabilities and
charges 1 001 984 943
7 606 6 696 6 125
Current liabilities
Trade and other
payables 1 037 1 245 1 036
Accrued liabilities 586 301 316
Borrowings * 401 1 001 1 981
Shareholders for
dividends 8 8 18
2 032 2 555 3 351
Total equity and
liabilities 34 126 33 383 32 234
Number of ordinary
shares in issue 398 736 629 398 678 495 394 369 190
Net asset value per
share (cents) 6 141 6 053 5 771
* The Group has refinanced the RMB bridging loan. A portion of the
refinanced was effected before 31 March 2007. The balance of the refinanced
was concluded on 5 April 2007. The effect of the refinanced was the
conversion of the R1 billion short-term liability to a long-term liability.
CONDENSED STATEMENT OF CHANGES IN EQUITY FOR THE NINE MONTHS ENDED
31 MARCH 2007 (Rand) (unaudited)
Issued share Other Retained
capital reserves earnings Total
R million R million R million R million
Balance at 1 July 2006 25 489 (271) (2 015) 23 203
Issue of share capital 101 101
Currency translation
adjustment and other 192 192
Net earnings 992 992
Balance at 31 March 2007 25 590 (79) (1 023) 24 488
Balance at 1 July 2005 25 289 (586) (1 484) 23 219
Issue of share capital 57 57
Currency translation
adjustment and other (39) (39)
Net loss (479) (479)
Balance at 31 March 2006 25 346 (625) (1 963) 22 758
SUMMARISED CASH FLOW STATEMENT FOR THE PERIOD ENDED 31 MARCH 2007
(Rand) (unaudited)
Nine months Nine months Quarter Quarter
ended ended ended ended
31 March 31 March 31 March 31 December
2007 2006 2007 2006
R million R million R million R million
Cash flow from
operating activites
Cash generated/(utilised)
by operations 1 469 (88) 511 487
Interest and dividends
received 117 176 36 42
Interest paid (143) (143) (48) (50)
Income and mining taxes
paid (3) (8) 3 (6)
Cash generated/(utilised)
by operating activities 1 440 (63) 502 473
Cash flow from
investing activities
Net proceeds on
disposal of listed
investments 229 2 461 199 -
Acquisition of
investment in associate - (2 012) - -
Net additions to
property, plant and
equipment (1 765) (1 164) (706) (497)
Other investing
activities (66) (18) (52) (15)
Cash utilised by
investing activities (1 602) (733) (559) (512)
Cash flow from
financing activities
Long-term loans raised 151 615 152 -
Ordinary shares issued
- net of expenses 101 55 2 66
Dividends paid - - - -
Cash generated by
financing activities 252 670 154 66
Foreign currency
translation adjustments (11) 77 (16) 9
Net increase/(decrease)
in cash and equivalents 79 (49) 81 36
Cash and equivalents -
beginning of period 906 1 830 904 868
Cash and equivalents -
end of period 985 1 781 985 904
NOTES TO THE RESULTS FOR THE QUARTER ENDED 31 MARCH 2007 (unaudited)
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.
2. Derivative financial instruments
Commodity Contracts:
The Harmony Group`s outstanding commodity contracts against future
production, by type at 31 March 2007 are indicated below. The total net
delta of the hedge book at 31 March 2007 was 220 000 oz (6 834 kg)
30 June 30 June 30 June
Year 2007 2008 2009 Total
Australian
Dollar Gold:
Forward contracts Kilograms 622 3 110 3 110 6 843
Ounces 20 000 100 000 100 000 220 000
AUD per oz 518 518 518 518
Total commodity
contracts Kilograms 622 3 110 3 110 6 843
Ounces 20 000 100 000 100 000 220 000
Total net gold ** Delta (kg) 622 3 109 3 104 6 834
Delta (oz) 20 000 99 949 99 784 219 732
These contracts are classified as speculative and the marked-to-market
movement is reflected in the income statement.
The marked-to-market movement for the quarter of these contracts was a
positive R49.8 million (positive USD6.9 million) at 31 March 2007 (at 31
December 2006: positive R100.5 million or positive USD13.7 million).
Harmony closed out 10 000oz of forward positions during the quarter and the
settlement of these close outs will occur during the quarter ended 30 June
2007. During the quarter under review, Harmony settled 42 000oz of forward
contracts, which were closed out during the quarter ended 31 December 2006,
at a cost of R69.5 million (USD9.6 million).
The marked-to-market value of the hedge book was a negative AUD78.6 million
on 31 March 2007 (at 31 December 2006: negative AUD87.3 million). The
values at 31 March 2007 were based on a gold price of USD663 (AUD821) per
ounce, exchange rates of USD/ZAR7.24 and AUD/USD0.8144 and prevailing
market interest rates at that date. These valuations were provided by
independent risk and treasury management experts.
At 20 April 2007, the marked-to-market value of the hedge book was a
negative AUD78.2 million (negative USD65.4 million), based on a gold price
of USD686 (AUD825) per ounce, exchange rate of AUD/USD0.8347 and prevailing
market interest rates 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.
** 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.
Forward exchange commitment
Abelle entered into a contract for the purchase of the mining fleet in
November 2006. The contract is in four different currencies and the
estimated value is R241.7 million (AUD41 million at a closing rate of
AUD/ZAR5.8962). The delivery date for the equipment has been split into
two, with the first lot expected in April 2007 and the second lot in
November 2007.
The underlying cash flows that will be required by the contract will
therefore be modified in accordance with movements in the foreign exchange
rates to which the contract is linked. The embedded derivative relating to
the exchange rates were calculated based on the adjusted price at 31 March
2007 based on the Price Retail Index (PRI) movements since September 2005.
The marked-to-market movement for the quarter on the embedded derivative
was a negative R6.1 million (negative AUD1.068 million, at an exchange rate
of AUD/ZAR5.7023).
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
Amelia Soares
Investor Relations Manager
Telephone: +27 11 684 0146
Fax: +27 11 684 0188
Cell: +27 (0) 82 654 9241
E-mail: amelia.soares@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
South Africa
PO Box 4844
Johannesburg, 2000
South Africa
Telephone: +27 11 832 2652
Fax: +27 11 834 4398
United Kingdom Registrars
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
United Kingdom
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
NASDAQ HMY
London Stock Exchange plc HRM
Euronext Paris HG
Euronext Brussels HMY
Berlin Stock Exchange HAM1
Issuer code HAPS
Registration number 1950/038232/06
Incorporated in the Republic of South Africa
ISIN: ZAE000015228
Date: 25/04/2007 08:00:08 Supplied by www.sharenet.co.za
Produced by the JSE SENS Department .