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HAR - Harmony Gold Mining Company - Financial Review For The Second

Release Date: 15/02/2008 09:00:03      Code(s): HAR
HAR - Harmony Gold Mining Company - Financial Review For The Second             
                                  Quarter Ended 31 December 2007                
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                                               
NASDAQ                        HMY                                               
London Stock Exchange plc     HRM                                               
Euronext Paris                HG                                                
Euronext Brussels             HMY                                               
Berlin Stock Exchange         HAM1                                              
FINANCIAL REVIEW FOR THE SECOND QUARTER ENDED 31 DECEMBER 2007                  
SALIENT FEATURES                                                                
- Harmony signs agreement on establishing a separate uranium company            
- Total operating costs down by 8.1%                                            
- Cash operating profit up by 43.0%                                             
- Elandsrand repaired and back in production                                    
- Financial results for six months ended 31 December 2007 reviewed by external  
 auditors                                                                       
FINANCIAL SUMMARY FOR THE SECOND QUARTER ENDED 31 DECEMBER 2007                 
(All results exclude Discontinued Operations unless otherwise indicated)        
                                        Quarter*      Quarter       Q-on-Q      
                                        Sep 2007     Dec 2007     % change      
Gold produced               - kg           13 523       12 403        (8.3)     
- oz          434 773      398 764        (8.3)      
Cash costs                  - R/kg        132 920      133 234        (0.2)     
                           - $/oz            582          613        (5.3)      
Cash operating profit       - Rm              315          450         43.0     
- US$m             44           66         50.0      
Cash earnings               - SA c/s           79          113         43.0     
                           - US c/s           11           17         54.6      
Basic (loss)/earnings       - SA c/s        (129)         (49)         62.0     
- US c/s         (18)          (7)         61.1      
Headline (loss)/earnings    - SA c/s         (30)         (43)       (43.3)     
                           - US c/s          (4)          (6)       (50.0)      
Fully diluted                                                                   
(loss)/earnings             - SA c/s        (128)         (48)         62.5     
                           - US c/s         (18)          (7)         61.1      
                                               Quarter*     Financial year      
                                               Dec 2006               2007      
Gold produced                      - kg           13 515             25 926     
                                  - oz          434 515            833 537      
Cash costs                         - R/kg        102 382            133 053     
                                  - $/oz            435                597      
Cash operating profit              - Rm              568                764     
                                  - US$m             78                110      
Cash earnings                      - SA c/s          143                192     
                                  - US c/s           20                 28      
Basic (loss)/earnings              - SA c/s          116              (178)     
                                  - US c/s           16               (26)      
Headline (loss)/earnings           - SA c/s           43               (73)     
                                  - US c/s            6               (11)      
Fully diluted (loss)/earnings      - SA c/s          114              (176)     
                                  - US c/s           16               (25)      
*The figures were adjusted to exclude further discontinued operations. See      
financial statements.                                                           
CHIEF EXECUTIVE`S REVIEW                                                        
In this, my first report to Harmony shareholders as Chief Executive Officer, I  
would firstly like to thank the selection panel and the board of directors for  
their confidence in my leadership to take Harmony forward and I look forward to 
working closely with them in the years ahead.                                   
Harmony will continue to focus on creating shareholder value and, over time, to 
out-perform the market. One of my priorities for the company is to outline a    
long-term strategy. Harmony has in the past few years been focusing on organic  
growth and these projects are now mines under construction, most building up in 
production from now to 2010. All of these mines will have longer life with      
generally higher grades. These production units are larger and we will be       
expecting more consistent results, both in tonnes and grade. These long life    
mines, together with those already in production, will be the core of Harmony   
in the future. They make up the bulk of Harmony`s reserves and will have lower  
cash costs.                                                                     
Management time will continue to be focused on striving to achieve desired      
returns by reducing the planning gap and continually reviewing to squeeze the   
best from the orebodies. Some short life assets will remain within the Harmony  
stable, operations which under certain circumstances, possibly with a capital   
injection, could have their lives vastly extended. These assets will continue   
to have high cash cost, however, at today`s high gold prices these assets could 
deliver significant profits. Management will endeavour to explore ways and      
means of obtaining good value for shareholders from these assets by             
investigating ways of recapitalising them.                                      
Harmony is thus moving to a producer with a higher focus on quality. Our        
aspirations are to have sustainable growth, a culture of achievement, a buoyant 
and rising stock price, to be a responsible corporate citizen, have             
professional business practice and have inspired, enthusiastic and competent    
employees.                                                                      
Turning to the second quarter`s financial results for the period ended 31       
December 2007, I draw your attention to changes made to this quarter`s          
reporting format. The previous structure of quality, growth, leverage and       
international assets has been replaced with South African underground, surface  
and international assets. We believe that it had become essential to re-assess  
our company structure as four of our projects have begun to contribute to       
turnover and as Harmony begins its transformation to a quality producer.        
In addition to the company structure changes, and in accordance with the new    
accounting regulations, we highlight the fact that four of Harmony`s            
operations, Orkney shafts 1 - 7, St Helena, Cooke shafts and plant in           
Randfontein, and Mt Magnet and South Kal in Australia, are now being reported   
as discontinued operations in the income statement.                             
The company`s operational results for the second quarter 2008 were negatively   
affected by the 44 days of stoppage time at Elandsrand after a shaft incident,  
in order to carry out the investigation into the mine incident of 3 October     
2007. Elandsrand accounted for 67.1% or 1 177 kg loss of production in the      
December quarter. The one-day national strike called by the National Union of   
Mineworkers in support of safety also impacted on production. However, both the 
Elandsrand accident and the one- day strike has resulted in increased safety    
focus and we are hopeful that this will result in positive safety behaviour and 
a renewed safety effort from all Harmony employees.                             
Harmony`s total production for its underground continuing operations decreased  
by 1.3% to 4 445 000 tonnes resulting in an 8.3% decrease in kilograms produced 
to 12 403 kg and a 3.9% drop in grade to 4.87g/t. Cash operating costs remained 
almost unchanged at R133 234/kg.                                                
The gold price received at R169 502/kg was 8.5% higher than the September       
quarter but the Rand/US dollar exchange rate was 4.7% stronger at 677 cents.    
Harmony`s operating profit from continuing operations improved 43.0% to R449.8  
million.                                                                        
Capital expenditure increased during the quarter under review to R808 million,  
this is mainly due to the ramp up in expenditure at Hidden Valley in Papua New  
Guinea.                                                                         
The benefits of Harmony`s intensive cost control measures that commenced early  
in October 2007 will only materialise in the next half of the financial year.   
Measures implemented included the termination of 2 827 external contractors and 
the voluntary retrenchments and natural attrition of 2 123 and transfer to more 
efficient shafts of 4 859 employees. The transfers were mainly service staff    
from Randfontein central offices and from non-productive to productive areas.   
St Helena Nos. 4 and 8 shafts were placed on care and maintenance and its 650   
employees have been redeployed at other Harmony operations. The transfer of the 
centralised staff at Randfontein to the operations is part of the company`s     
decentralisation process to compel operations to take ownership of their costs. 
Our total complement now stands at 43 800 employees and 5 700 contractors       
compared with 47 431 employees and 7 019 contractors at 30 June 2007.           
During the quarter, the internal due diligences on the effectiveness of the     
continuous mining (Conops) method were completed at the Tshepong, Elandsrand,   
Masimong, Evander No. 8 and Winkelhaak shafts, as well as Cooke 2 operations.   
These operations and Target are the only Harmony shafts that operate on Conops. 
The review revealed that Conops was not an effective mining method at Masimong  
and it has subsequently been terminated and the majority of the workforce       
transferred to Phakisa. Conops will be reviewed continually and it is our       
intention to phase out Conops at those operations that do not deliver on our    
objectives.                                                                     
The costs savings drive have had effects of positively decreasing the working   
cost from R1 798 million to R1 652 million and hence despite producing less     
gold (mainly due to the Elandsrand accident) the cash cost remained virtually   
unchanged.                                                                      
All conditions precedent relating to South Kal disposal were met on 30 November 
2007, with Dioro Exploration NL taking over operations on that date and the     
purchase price of A$25 million cash paid and A$20 million of shares issued to   
Harmony. Harmony also signed the sales contract with Australian-based junior    
miner Monarch Gold Mining Company Limited for the sale of Mount Magnet. The     
Mount Magnet operations completed mining during December 2007 and consequently  
the last tonnages for Harmony`s account from this operation have been milled in 
January 2008.                                                                   
Harmony believes that partnerships may be one of the primary vehicles through   
which we will enhance our growth strategy in the south-east Asian region. We    
are thus pursuing alliances with interested parties with technical mining       
skills and capital to equally share the Hidden Valley Gold and Silver Mine, the 
Wafi/Golpu projects and the extensive exploration licenses in Papua New Guinea. 
We will only consider transactions that are of good value to Harmony`s          
shareholders.                                                                   
To this end, we have progressed to a shortlist of leading international mining  
companies with whom we are in discussions. We are confident that we will be in  
a position to finalise this process in April 2008, with a partner to be         
introduced thereafter. This new partnership will build on the excellent         
relationships Harmony enjoys with the local government and contribute           
significantly to the domestic economic growth.                                  
Shareholders were advised on 19 December 2007 that a significant decision had   
been made with regard to the future of Harmony`s Cooke shafts and its uranium   
assets in the Randfontein area. Several proposals from interested parties were  
considered but only the offer from Pamodzi Resources Fund was in line with      
Harmony`s strategy of realising value for its shareholders.                     
In essence, the signed agreement proposes that certain uranium and gold assets  
of the Randfontein Cooke Section be sold into a new company (Newco). The        
purchase price payable by the still to be named Newco for these assets amounts  
to US$420 million. In addition, Pamodzi Resources Fund will acquire a 60%       
shareholding in Newco from Investco, the subsidiary of ArmGold/Harmony Joint    
Investment Company, for a purchase consideration of US$252 million, with        
Harmony retaining a 40% shareholding in Newco.                                  
Both parties are currently in the process of meeting conditions precedent and   
we are confident that these will be completed by 31 March 2008. A new dedicated 
executive management team will assume responsibility for developing the project 
and we will soon be appointing a chief executive officer to manage Newco.       
The revenues from the Randfontein Cooke shafts will be equity accounted and the 
profit from associates will be reflected in the income statement.               
No material changes were made to Harmony`s Mineral Resources and Ore Reserves   
for the quarter ended December 2007. Taking into account the last six months`   
depletion of reserves, the Harmony Mineral Resources and Ore Reserves as stated 
in the Harmony 2007 annual report are an accurate reflection of the company`s   
current position. The Mineral Resources and Ore Reserves are comprehensively    
audited by a team of internal competent persons that operate independently      
from the operating units.                                                       
In the light of Eskom`s electricity supply disruptions and with mines operating 
only at 90% of Harmony`s previous power supply, the company`s production for    
the March 2008 quarter could decrease.                                          
Harmony`s management is devising new strategies on optimising operations to     
produce at 90% of electricity to ensure that we deliver returns on our          
shareholders` investments.                                                      
THE SECOND QUARTER ENDED 31 DECEMBER 2007 UNDER REVIEW                          
Harmony`s SA underground operations, excluding the discontinued operations,     
delivered a steady operational performance for the second quarter of financial  
year 2008.                                                                      
Tonnes Milled                                                                   
Tonnes milled from the company`s underground operations, excluding discontinued 
operations, decreased by 6.5% to 2 297 000 tonnes (2 457 000 tonnes). This      
decrease in tonnes milled is mainly attributed to Elandsrand`s loss of          
production for the quarter. The quarter saw Bambanani and Joel mine back in     
production but the closure of St Helena and the restructuring at Masimong       
impacted negatively on the company`s underground production.                    
Recovery Grades                                                                 
Gold production dropped by 10.3% on lower recovery grade from SA underground    
mines but mainly due to Elandsrand`s 1 177 kg loss of production. This impacted 
on recovery grades which fell by 3.9% when compared with the previous quarter   
to 4.87g/t (5.07g/t).                                                           
Cost Control                                                                    
Cash operating costs were well contained with Target, Bambanani, Joel and       
Virginia being the main contributors. Elandsrand`s costs impacted on an         
otherwise cost-conscious quarter. Cash operating costs increased by 2.0% to     
R138 531/kg (R135 776/kg).                                                      
The performance of the company is best highlighted in the following table*:     
Q-on-Q                   
                         Sep 2007     Dec 2007     % Variance     Dec 2006      
Production  - kg            13 523       12 403          (8.3)       13 515     
Production  - oz           434 773      398 764          (8.3)      434 515     
Revenue     - R/kg         156 187      169 502            8.5      144 416     
Revenue     - US$/oz           684          779           13.9          614     
Cash cost   - R/kg         132 920      133 234          (0.2)      102 382     
Cash cost   - US$/oz           582          613          (5.3)          435     
Exchange                                                                        
rate        - USD/ZAR         7.10         6.77            4.7         7.32     
Cash Operating Profit and Margin*                                               
                                                       Q-on-Q                   
Sep 2007     Dec 2007     % Variance     Dec 2006      
Cash operating profit (Rm)     315          450           43.0          568     
Cash operating profit                                                           
margin (%)                    14.9         21.4           43.6         29.1     
* Continuing Operations only                                                    
Quarter-on-quarter cash operating profit variance analysis (Continuing          
Operations)                                                                     
Cash operating profit - September 2007                                          
R314.6 million*   
- volume change                                     (118.7)                     
- working cost change                                 145.0                     
- recovery grade change                              (56.5)                     
- gold price change                                   165.4                     
- net variance                                        135.2                     
Cash operating profit - December 2007                          R449.8 million   
*The figure was adjusted to exclude further discontinued operations. See        
financial statements.                                                           
Analysis of earnings per share from continuing operations                       
Earnings per share (SA cents)                                                   
                         Quarter ended     Quarter ended     Quarter ended      
September 2007     December 2007     December 2006      
Cash earnings                        79               113               143     
Basic (loss)/earnings             (129)              (49)               116     
Headline (loss)/earnings           (30)              (43)                43     
Fully diluted                                                                   
(loss)/earnings                   (128)              (48)               114     
Reconciliation between basic loss and headline loss from continuing operations  
Headline earnings/(loss) per share (SA cents)                                   
Quarter ended     Quarter ended      
                                          September 2007     December 2007      
Basic loss                                          (129)              (49)     
Loss on sale of property, plant and                                             
equipment                                             (1)               (7)     
Profit on disposal of investment in Gold                                        
Fields Limited                                        100                 -     
Provision for doubtful debt                             -                13     
Headline loss                                        (30)              (43)     
CONDENSED CONSOLIDATED INCOME STATEMENT (Rand)                                  
                                            For the quarter ended               
                                  December       September        December      
2007            2007            2006      
                               (Unaudited)     (Unaudited)     (Unaudited)      
                     Notes                     (restated)*     (restated)*      
                                 R million       R million       R million      
Continuing operations Revenue         2 102           2 112           1 952     
Production cost                     (1 652)         (1 798)         (1 384)     
Amortisation and                                                                
depreciation                          (228)           (201)           (130)     
Corporate expenditure                  (68)            (72)            (60)     
Exploration                                                                     
expenditure                            (42)            (44)            (51)     
Care and maintenance                                                            
costs of restructured shafts           (10)             (9)            (16)     
Employment                                                                      
termination and                                                                 
restructuring costs       2            (75)               -               -     
Share-based                                                                     
compensation                            (9)            (10)            (12)     
(Loss)/gain on                                                                  
financial instruments                  (14)               4              17     
Provision for                                                                   
doubtful debt             3            (75)               -               -     
Other                                                                           
(expenses)/income - net                 (6)            (19)              41     
Operating                                                                       
(loss)/profit                          (77)            (37)             357     
Profit/(loss) from                                                              
associates                                -               -              30     
Mark-to-market of                                                               
listed investments                        -              33              27     
Loss on sale of                                                                 
listed investments        4               -           (459)               -     
Profit on sale of                                                               
investment in                                                                   
associate                 4               -               -             236     
Investment income                        74              67              42     
Finance cost**                        (138)           (121)            (97)     
(Loss)/profit before                                                            
taxation                              (141)           (517)             595     
Taxation                               (54)               2           (134)     
Net (loss)/profit                                                               
from continuing                                                                 
operations                            (195)           (515)             461     
Discontinued                                                                    
operations                5                                                     
Profit/(loss) from                                                              
discontinued                                                                    
operations                              226            (44)              10     
Loss on the sale of the                                                         
South Kal operations                   (51)               -               -     
Profit/(loss) from                                                              
measurement to                                                                  
fair value less cost                                                            
to sell                                  66             (7)               -     
Net profit/(loss)                        46           (566)             471     
(Loss)/earnings per                                                             
share from                                                                      
continuing operations                                                           
attributable                                                                    
to the equity holders                                                           
of the company                                                                  
during the year (cents)   6                                                     
- Basic                                                                         
(loss)/earnings                        (49)           (129)             116     
- Headline                                                                      
(loss)/earnings                        (43)            (30)              43     
- Fully diluted                                                                 
(loss)/earnings                        (48)           (128)             114     
Earnings/(loss) per                                                             
share from                                                                      
discontinuing                                                                   
operations                                                                      
attributable                                                                    
to the equity holders                                                           
of the company                                                                  
during the year (cents)    6                                                    
- Basic                                                                         
earnings/(loss)                          60            (13)               3     
- Headline                                                                      
earnings/(loss)                          57            (11)               2     
- Fully diluted                                                                 
earnings/(loss)                          59            (13)               2     
                                                  For the six months ended      
                                                  December        December      
2007            2006      
                                                               (restated)*      
                                                 R million       R million      
Continuing operations                                                           
Revenue                                               4 214           4 003     
Production cost                                     (3 450)         (2 736)     
Amortisation and depreciation                         (429)           (351)     
Corporate expenditure                                 (140)           (116)     
Exploration expenditure                                (86)            (85)     
Care and maintenance costs of restructured shafts      (19)            (32)     
Employment termination and restructuring costs         (75)               -     
Share-based compensation                               (19)            (23)     
(Loss)/gain on financial instruments                   (10)              36     
Provision for doubtful debt                            (75)               -     
Other (expenses)/income - net                          (25)              71     
Operating (loss)/profit                               (114)             767     
Profit/(loss) from associates                             -            (18)     
Mark-to-market of listed investments                     33              51     
Loss on sale of listed investments                    (459)               -     
Profit on sale of investment in associate                 -             236     
Investment income                                       141              78     
Finance cost**                                        (259)           (184)     
(Loss)/profit before taxation                         (658)             930     
Taxation                                               (52)           (262)     
Net (loss)/profit from continuing operations          (710)             668     
Discontinued operations                                                         
Profit/(loss) from discontinued operations              182              85     
Loss on the sale of the                                                         
South Kal operations                                   (51)               -     
Profit/(loss) from measurement to                                               
fair value less cost to sell                             59               -     
Net profit/(loss)                                     (520)             753     
(Loss)/earnings per share from                                                  
continuing operations attributable                                              
to the equity holders of the company                                            
during the year (cents)                                                         
- Basic (loss)/earnings                               (178)             168     
- Headline (loss)/earnings                             (73)              92     
- Fully diluted (loss)/earnings                       (176)             166     
Earnings/(loss) per share from                                                  
discontinuing operations attributable                                           
to the equity holders of the company                                            
during the year (cents)                                                         
- Basic earnings/(loss)                                  47              21     
- Headline earnings/(loss)                               46              21     
- Fully diluted earnings/(loss)                          46              21     
*  The comparative figures were adjusted to exclude further discontinued        
  operations. See Note 3.                                                       
** The comparative figures were adjusted to exclude interest capitalised. See   
  Note 1b.                                                                      
CONDENSED CONSOLIDATED BALANCE SHEET (Rand)                                     
                                        At              At              At      
December       September            June      
                                      2007            2007            2007      
                     Notes                     (Unaudited)       (Audited)      
                                 R million       R million       R million      
ASSETS                                                                          
Non-current assets                                                              
Property, plant and                                                             
equipment                            25 133          25 015          24 506     
Intangible assets                     2 307           2 308           2 307     
Restricted cash                          81               5               5     
Investments in                                                                  
financial assets          7           1 402           1 461           1 387     
Investments in                                                                  
associates                                7               7               7     
Deferred income tax                   2 462           2 396           2 321     
Trade and other                                                                 
receivables                              39             100              95     
                                    31 431          31 292          30 628      
Current assets                                                                  
Inventories                             709             790             742     
Investments in                                                                  
financial assets          7               -               -           2 484     
Trade and other                                                                 
receivables                             851             778             918     
Income and mining                                                               
taxes                                    41              26              16     
Restricted cash                           -               -             274     
Cash and cash                                                                   
equivalents                             425           1 567             711     
                                     2 026           3 161           5 145      
Non-current assets                                                              
classified as held                                                              
for sale                  5           2 001           1 383           1 284     
                                     4 027           4 544           6 429      
Total assets                         35 458          35 836          37 057     
EQUITY AND LIABILITIES                                                          
Share capital and                                                               
reserves                                                                        
Share capital                        25 677          25 652          25 636     
Other reserves                           84              20           (349)     
Accumulated loss                    (2 124)         (2 175)         (1 604)     
                                    23 637          23 497          23 683      
Non-current                                                                     
liabilities                                                                     
Borrowings                8           1 878           3 842           1 743     
Deferred income tax                   5 191           5 119           5 031     
Provisions for other                                                            
liabilities and                                                                 
charges                               1 082           1 231           1 216     
                                     8 151          10 192           7 990      
Current liabilities                                                             
Trade and other                                                                 
payables                                981           1 421           1 755     
Borrowings                8           1 995              15           2 855     
Bank overdraft                            -               -             220     
Shareholders for                                                                
dividends                                 7               7               7     
                                     2 983           1 443           4 837      
Liabilities directly                                                            
associated with                                                                 
non-current assets                                                              
classified as held                                                              
for sale                  5             687             704             547     
                                     3 670           2 147           5 384      
Total equity and                                                                
liabilities                          35 458          35 836          37 057     
Number of ordinary                                                              
shares in issue                 400 196 978     400 011 182     399 608 384     
Net asset value per                                                             
share (cents)                         5 906           5 874           5 927     
The accompanying notes are an integral part of these condensed consolidated     
financials statements.                                                          
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Rand)                    
                                                Issued share         Other      
                                                     capital      reserves      
                                                   R million     R million      
Balance - 30 June 2007 (as previously reported)        25 636         (349)     
Change in accounting policy for the capitalisation                              
of interest on assets under construction                    -             -     
Balance - 30 June 2007 (restated)                      25 636         (349)     
Issue of share capital                                     41             -     
Currency translation adjustment and other                   -           433     
Net loss                                                    -             -     
Balance as at 31 December 2007                         25 677            84     
Balance - 30 June 2006 (as previously reported)        25 489         (271)     
Change in accounting policy for the capitalisation                              
of interest on assets under construction                    -             -     
Balance - 30 June 2006 (restated)                      25 489         (271)     
Issue of share capital                                     99             -     
Currency translation adjustment and other                   -            85     
Net profit                                                  -             -     
Balance as at 31 December 2006                         25 588         (186)     
Accumulated                    
                                                        loss         Total      
                                                   R million     R million      
Balance - 30 June 2007 (as previously reported)       (1 681)        23 606     
Change in accounting policy for the capitalisation                              
of interest on assets under construction                   77            77     
Balance - 30 June 2007 (restated)                     (1 604)        23 683     
Issue of share capital                                      -            41     
Currency translation adjustment and other                   -           433     
Net loss                                                (520)         (520)     
Balance as at 31 December 2007                        (2 124)        23 637     
Balance - 30 June 2006 (as previously reported)       (2 015)        23 203     
Change in accounting policy for the capitalisation                              
of interest on assets under construction                   48            48     
Balance - 30 June 2006 (restated)                     (1 967)        23 251     
Issue of share capital                                      -            99     
Currency translation adjustment and other                   -            85     
Net profit                                                753           753     
Balance as at 31 December 2006                        (1 214)        24 188     
CONDENSED CONSOLIDATED CASH FLOW STATEMENT (Rand)                               
Three months ended         
                                                  December       September      
                                                      2007            2007      
                                     Notes     (Unaudited)     (Unaudited)      
R million       R million      
Cash flow from operating activities                                             
Cash (utilised)/generated by operations               (376)              54     
Interest and dividends received                          76              69     
Interest paid                                         (118)            (59)     
Income and mining taxes paid                            (9)            (12)     
Cash (utilised)/generated by                                                    
operating activities                                  (427)              52     
Cash flow from investing activities                                             
(Increase)/decrease in restricted cash                 (71)             274     
Net proceeds on disposal of listed                                              
investments                               4               -           1 310     
Net additions to property, plant and                                            
equipment                                             (734)           (833)     
Other investing activities                               65            (51)     
Cash (utilised)/generated by                                                    
investing activities                                  (740)             700     
Cash flow from financing activities                                             
Long-term loans raised                    8              10           2 088     
Long-term loans repaid                    8               -         (1 802)     
Ordinary shares issued - net of expenses                  5              19     
Cash generated by financing activities                   15             305     
Foreign currency translation adjustments                 16              20     
Net (decrease)/increase in cash and equivalents     (1 136)           1 077     
Cash and equivalents - beginning of period            1 571             494     
Cash and equivalents - end of period      9             435           1 571     
                                                        Six months ended        
                                                    December      December      
2007          2006      
                                                   R million     R million      
Cash flow from operating activities                                             
Cash (utilised)/generated by operations                 (322)           958     
Interest and dividends received                           145            81     
Interest paid                                           (177)          (95)     
Income and mining taxes paid                             (21)           (6)     
Cash (utilised)/generated by operating activities       (375)           938     
Cash flow from investing activities                                             
(Increase)/decrease in restricted cash                    203             -     
Net proceeds on disposal of listed investments          1 310            30     
Net additions to property, plant and equipment        (1 567)       (1 058)     
Other investing activities                                 14          (14)     
Cash (utilised)/generated by investing activities        (40)       (1 042)     
Cash flow from financing activities                                             
Long-term loans raised                                  2 098             -     
Long-term loans repaid                                (1 802)           (1)     
Ordinary shares issued - net of expenses                   24            98     
Cash generated by financing activities                    320            97     
Foreign currency translation adjustments                   36             5     
Net (decrease)/increase in cash and equivalents          (59)           (2)     
Cash and equivalents - beginning of period                494           906     
Cash and equivalents - end of period                      435           904     
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER        
AND SIX MONTHS ENDED 31 DECEMBER 2007                                           
1. Accounting policies                                                          
(a) Basis of accounting                                                         
The condensed consolidated interim financial statements for the period ended 31 
December 2007 have been prepared using accounting policies that comply with     
International Financial Reporting Standards (IFRS), which are consistent with   
the accounting policies used in the audited annual financial statements for the 
year ended 30 June 2007, except for accounting policy changes made after the    
date of the annual financial statements. These condensed consolidated interim   
financial statements are prepared in accordance with IAS 34, Interim Financial  
Reporting, and should be read in conjunction with the financial statements for  
the year ended 30 June 2007.                                                    
New accounting standards and IFRIC interpretations                              
Certain new accounting standards and IFRIC interpretations have been published  
that are mandatory for accounting periods beginning on or after 1 January 2008. 
These new standards and interpretations have not been early adopted by the      
Group and a reliable estimate of the impact of the adoption thereof for the     
Group cannot yet be determined for all of them, as management are still in the  
process of determining the impact thereof on future financial statements.       
At the date of finalising of these financial statements, the following          
Standards and Interpretations were in issue but not yet effective:              
Title                               Effective date                              
New Statement                                                                   
-  IFRS 8 - Operating Segments       ^ Financial year commencing on or after    
1 January 2009                              
Amendments                                                                      
-  IAS 1 (Revised) - Presentation of                                            
Financial Statements                ^ Financial year commencing on or after     
1 January 2009                              
-  IAS 27 (Revised) - Consolidated                                              
and Separate                        # Financial year commencing on or after     
Financial Statements                1 July 2009                                 
-  IFRS 3 (Revised) - Business                                                  
Combination                         # Financial year commencing on or after     
                                    1 July 2009                                 
New Interpretation                                                              
- IFRIC 12 - Service Concession                                                 
Arrangements                        * Financial year commencing on or after     
                                    1 January 2008                              
- IFRIC 13 - Customer Loyalty                                                   
Programmes                          * Financial year commencing on or after     
                                    1 July 2008                                 
- IFRIC 14 - IAS 19 The Limit on a                                              
Defined Benefit Asset,              # Financial year commencing on or after     
Minimum Funding Requirements and                                                
their Interactions                  1 January 2008                              
^ Affects disclosure                                                            
* Will not impact materially                                                    
# Not yet assessed                                                              
(b) Implementation of accounting policy                                         
IAS 23 (Revised) - Borrowing Costs: The company early adopted IAS 23 (Revised)  
- Borrowing Costs, retrospectively as of 1 July 2000, which requires that       
management capitalise borrowing costs directly attributable to the acquisition  
and construction of qualifying assets. Qualifying assets are assets that take a 
substantial time to get ready for their intended use.                           
The impact of this adjustment was as follows:                                   
Quarter ended                   
                                  December       September        December      
                                      2007            2007            2006      
                               (Unaudited)     (Unaudited)     (Unaudited)      
R million       R million       R million      
Effect on net loss:                                                             
Decrease in interest expense             21               8               6     
Income tax                              (6)             (2)             (2)     
Decrease in net loss                     15               6               4     
Effect on opening accumulated                                                   
loss:                                                                           
Decrease in interest expense            116             108              74     
Income tax                             (33)            (31)            (22)     
Decrease in accumulated loss             83              77              52     
                                                 Six months ended               
                                                    December      December      
2007          2006      
                                                   R million     R million      
Effect on net loss:                                                             
Decrease in interest expense                               29            12     
Income tax                                                (8)           (3)     
Decrease in net loss                                       21             9     
Effect on opening accumulated loss:                                             
Decrease in interest expense                              108            68     
Income tax                                               (31)          (20)     
Decrease in accumulated loss                               77            48     
The borrowing costs are capitalised to the cost of those assets, until such     
time as the assets are substantially ready for their intended use.              
All other borrowing costs are dealt with in the income statement in the period  
in which they are incurred.                                                     
2. Employment termination and restructuring costs                               
During the December 2007 quarter, a voluntary retrenchment process was          
commenced due to the decision to decentralise services.                         
3. Provision for doubtful debts                                                 
The full amount outstanding on the sale of the Deelkraal surface asset was      
provided for as there is uncertainty whether the consideration will be          
received. This does not take into account any amounts that may be recovered if  
the assets are salvaged.                                                        
4. Loss on sale of listed investments                                           
Harmony accounted for its 29.2% stake in Western Areas Limited through its      
subsidiary, ARMgold/Harmony Joint Investment Company Pty Ltd, on the equity     
basis of accounting until 1 December 2006. On this date Harmony accepted Gold   
Fields Limited`s (GFI) offer of 35 GFI shares for every 100 Western Area        
Limited shares held. The remaining investment in these GFI shares were sold     
during the September 2007 quarter for a loss of R459 million.                   
5. Non-current assets held for sale and discontinued operations                 
The assets and liabilities related to Mt Magnet and South Kal (operations in    
Australia), ARMgold Welkom and Orkney operations (operations in the Free State  
and Northwest areas), and Kudu and Sable (operations in the Free State area),   
have been presented as held for sale on 30 June 2007.                           
On 6 December 2007, the sale relating to the South Kal operation (operation in  
Australia) was concluded at a loss, net of tax, of R51 million and the assets   
were derecognised.                                                              
The assets and liabilities relating to the Cooke 1, Cooke 2, Cooke 3, Cooke     
plant and relating surface operations (operations in the Gauteng area) have     
been presented as held for sale following the approval of the Group`s           
management on 16 October 2007.                                                  
Underground operations at St Helena shaft were ceased during November 2007 and  
was classified as a discontinued operation.                                     
The comparative results have been restated due to these reclassifications.      
6. (Loss)/earnings per share                                                    
(Loss)/earnings per share is calculated on the weighted average number of       
shares in issue for the quarter ended 31 December 2007: 399.8 million (30       
September 2007: 399.5 million, 31 December 2006: 397.7 million) and the six     
months ended 31 December 2007: 399.7 million (31 December 2006: 397.7 million). 
The fully diluted (loss)/earnings per share is calculated on weighted average   
number of diluted shares in issue for the quarter ended 31 December 2007: 402.1 
million (30 September 2007: 402.8 million, 31 December 2006: 403.7 million) and 
the six months ended 31 December 2007: 402.4 million (31 December 2006: 403.7   
million). The effect of the share options is anti-dilutive.                     
                                               Quarter ended                    
                                  December       September        December      
2007            2007            2006      
                               (Unaudited)     (Unaudited)     (Unaudited)      
Total earnings/(loss) per share                                                 
(cents):                                                                        
Basic earnings/(loss)                    11           (142)             119     
Headline earnings/(loss)                 14            (41)              45     
Fully diluted earnings/(loss)            11           (141)             116     
                                 R million       R million       R million      
Reconciliation of headline                                                      
earnings/(loss):                                                                
Continued operations                                                            
Net (loss)/profit                     (195)           (515)             461     
Adjusted for, net of tax:                                                       
Profit on sale of property,                                                     
plant and equipment                    (29)             (2)            (71)     
Loss on sale of listed                                                          
investment (Gold Fields)                  -             392               -     
Profit on sale of associate                                                     
(Western Areas)                           -               -           (220)     
Provision for doubtful debt              53               -               -     
Headline (loss)/profit                (171)           (125)             170     
Discontinued operations                                                         
Net profit/(loss)                       241            (51)              10     
Adjusted for:                                                                   
(Profit)/loss on sale of                                                        
property,                                                                       
plant and equipment                      51               -             (2)     
Loss on sale of listed                                                          
investment                                                                      
(GBS investment)                          -               -               -     
Impairment of assets                   (66)               7               -     
Headline profit/(loss)                  226            (44)               8     
Total headline profit/(loss)             55           (169)             178     
                                                        Six months ended        
                                                    December      December      
                                                        2007          2006      
Total earnings/(loss) per share (cents):                                        
Basic earnings/(loss)                                   (131)           189     
Headline earnings/(loss)                                 (27)           113     
Fully diluted earnings/(loss)                           (130)           187     
R million     R million      
Reconciliation of headline earnings/(loss):                                     
Continued operations                                                            
Net (loss)/profit                                       (710)           668     
Adjusted for, net of tax:                                                       
Profit on sale of property, plant and equipment          (27)          (84)     
Loss on sale of listed investment (Gold Fields)           392             -     
Profit on sale of associate (Western Areas)                 -         (220)     
Provision for doubtful debt                                53             -     
Headline (loss)/profit                                  (292)           364     
Discontinued operations                                                         
Net profit/(loss)                                         190            85     
Adjusted for:                                                                   
(Profit)/loss on sale of property,                                              
plant and equipment                                        51           (2)     
Loss on sale of listed investment                                               
(GBS investment)                                            -             1     
Impairment of assets                                     (59)             -     
Headline profit/(loss)                                    182            84     
Total headline profit/(loss)                            (110)           448     
7. Investment in financial assets                                               
                                    December       September          June      
                                        2007            2007          2007      
                                                 (Unaudited)     (Audited)      
R million       R million     R million      
Current                                                                         
Investment in African Rainbow                                                   
Minerals Limited (see Note 8)               -               -         1 051     
Investment in GoldFields Limited                                                
(see Note 4)                                -               -         1 433     
                                           -               -         2 484      
Non-current                                                                     
Environmental Trust Funds               1 233           1 368         1 332     
Other                                     169              93            55     
                                       1 402           1 461         3 871      
8. Borrowings                                                                   
December       September          June      
                                        2007            2007          2007      
                                                 (Unaudited)     (Audited)      
                                   R million       R million     R million      
Unsecured long-term borrowings                                                  
Convertible unsecured fixed rate                                                
bonds                                   1 583           1 562         1 541     
Africa Vanguard Resources                                                       
(Proprietary) Limited                      32              32            32     
                                       1 615           1 594         1 573      
Less: Short-term portion                    -               -             -     
Total unsecured long-term borrowings    1 615           1 594         1 573     
Secured long-term borrowings                                                    
Westpac Bank Limited(1)                   100              88             2     
Africa Vanguard Resources                                                       
(Doornkop) (Pty) Limited                                                        
(Nedbank Limited)                         181             175           170     
ARM Empowerment Trust 1                                                         
(Nedbank Limited)(2)                        -               -           450     
ARM Empowerment Trust 2                                                         
(Nedbank Limited)(2)                        -               -           601     
Rand Merchant Bank                          -               -         1 802     
Nedbank Limited                         2 000           2 000             -     
Less: Transaction costs                  (23)               -             -     
2 258           2 263         3 025      
Less: Short-term portion              (1 995)            (15)       (2 855)     
Total unsecured long-term borrowings      263           2 248           170     
Total long-term borrowings              1 878           3 842         1 743     
(1) The lease was entered into for the purchase of mining fleet to be used on   
the Hidden Valley project.                                                      
The future minimum lease payments are as follows:                               
                                    December       September          June      
2007            2007          2007      
                                                 (Unaudited)     (Audited)      
                                   R million       R million     R million      
Due within one year                        26              21             -     
Due between one and five years             97              83             -     
                                         123             104             -      
(2) The guarantees relating to the Nedbank loans were cancelled on 28 September 
2007 and consequently Harmony has no further obligations to Nedbank. The ARM    
investment and associated Nedbank loans were derecognised from this date.       
9. Cash and cash equivalents                                                    
Comprises:                                                                      
                                    December       September      December      
2007            2007          2006      
                                                 (Unaudited)                    
                                   R million       R million     R million      
Continuing operations                     425           1 567           904     
Discontinued operations                    10               4             -     
Total cash and cash equivalents           435           1 571           904     
10. Commitments and contingencies                                               
                                    December       September          June      
2007            2007          2007      
                                                 (Unaudited)     (Audited)      
                                   R million       R million     R million      
Capital expenditure commitments                                                 
Contracts for capital expenditure         819             462           352     
Authorised by the directors but not                                             
contracted for                          1 987           1 870         1 881     
                                       2 806           2 332         2 233      
This expenditure will be financed                                               
from existing resources                                                         
and where appropriate, borrowings.                                              
Contingent liabilities                                                          
Guarantees and suretyships                 18              18            18     
Environmental guarantees                  152             129           129     
                                         170             147           147      
11. Subsequent events                                                           
On 24 January 2008, ESKOM advised Harmony that it would be interrupting the     
power supply to the Company`s South African operations. As the safety of the    
miners could not be guaranteed, mining was halted for four days, after which    
shafts operated at between 60% - 80%. A meeting between ESKOM and its           
industrial consumers was held on 29 January 2008, whereby ESKOM committed to    
supplying 90% of the Company`s electricity demand prior to the shut down. This  
came into effect on 1 February 2008. Management is restructuring operating      
processes in order to gain the most effective and efficient use of the          
electricity allotted. At this stage, the effect of the interruption as well as  
the decreased power supply has not been quantified but will impact on the gold  
production.                                                                     
12. Segment report                                                              
The primary reporting format of the Company is by business segment. As there is 
only one business segment, being mining, extraction and production of gold, the 
relevant disclosures have been given in the condensed consolidated financial    
statements.                                                                     
13. Review report                                                               
The condensed consolidated financial statements for the six months ended 31     
December 2007 on pages 24 to 33 have been reviewed in accordance with           
International Standards on Review Engagements 2410 - "Review of interim         
financial information performed by the Independent Auditors of the entity" by   
PricewaterhouseCoopers Inc. Their unqualified review opinion is available for   
inspection at the Company`s registered office.                                  
Johannesburg                                                                    
15 February 2008                                                                
Sponsor                                                                         
Merrill Lynch South Africa (Pty) Limited                                        
Date: 15/02/2008 09:00:01 Supplied by www.sharenet.co.za                     
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