HAR - Harmony Gold Mining Company Limited - Financial review for the fourth Release Date: 17/08/2009 08:00:04 Code(s): HAR HAR - Harmony Gold Mining Company Limited - Financial review for the fourth
quarter and year ended 30 June 2009
HARMONY
Incorporated in the Republic of South Africa
Registration Number 1950/038232/06
("Harmony" or "Company")
JSE Share code: HAR
NYSE Share code: HMY
ISIN Code: ZAE 000015228
Financial review for the fourth quarter and year
ended 30 June 2009
Highlights for the quarter
* 5% improvement in LTIFR
* Stable production
* Most operations have shown improvement
* Hidden Valley pours first gold, on schedule
* R2 bn in cash
- re-payment of Nedbank loan
- repaid convertible bond
* Two-year wage agreement
... and for the financial year
* R2.9 bn net profit - highest profit ever
* Healthy balance sheet
- cash of R2 bn
- net debt free
* 108% improvement in headline earnings per share
* Strategic objectives met
- stabilised company
- turned losses into profits
* Positioned for growth
* Several exploration opportunities
* Dividend of 50 SA cents per share
- first dividend declared in 5 years
Financial summary
for the fourth quarter and year ended 30 June 2009
Quarter Quarter Q-on-Q
Jun-09 Mar-09 % change
Gold produced - kg 11 003 10 880 1.1%
- oz 353 752 349 801 1.1%
Gold sold - kg 10 829 10 247 5.7%
- oz 348 160 329 447 5.7%
Cash costs - R/kg 179 074 171 361 (4.5%)
- US$/oz 661 537 (23.1%)
Cash operating - R million 743 1 175 (36.8%)
profit - US$ million 88 118 (25.4%)
Net profit/(loss) - R million 238 972 (75.5%)
- US$ million 28 98 (71.4%)
Headline earnings - SA cents 107 123 (13.0%)
per share - US cents 13 12 8.3%
FY09 FY08
Gold produced - kg 45 437 49 761
- oz 1 460 831 1 599 854
Gold sold - kg 45 833 50 625
- oz 1 473 562 1 627 624
Cash costs - R/kg 168 661 139 544
- US$/oz 583 598
Cash operating - R million 3 839 2 644
profit - US$ million 427 366
Net profit/(loss) - R million 2 927 (245)
- US$ million 325 (30)
Headline earnings - SA cents 262 126
per share - US cents 29 17
Harmony`s Annual Report, Notice of Meeting, Sustainable Development Report and
its Annual Report filed on a Form 20F with the United States` Securities and
Exchange Commission for the year ended 30 June 2008 are available on our
website at www.harmony.co.za.
Chief Executive Officer`s Review
Harmony is refocused, revitalised, re-organised and renewed. A lot of the hard
work has been done and we are now starting to see the fruits of our
`Back-to-Basics` philosophy, although we are the first to acknowledge that more
remains to be done. Our business is gold and we will continue to spend time
ensuring that we achieve our targets and deliver value to shareholders."
Graham Briggs, Chief Executive Officer
Overview
During the past quarter we planned for the year ahead - reflecting on our
achievements and disappointments and taking into account the needs of our
shareholders and stakeholders - to ensure that Harmony remains sustainable. We
understand our business and are close to the detail, which allows us to make
quick decisions if necessary. We continue to seek the best from our existing
operations and to invest in our major projects to secure our gold reserves for
the future.
Our plans for 2010 are detailed, comprehensive and - importantly - based on
what we believe is achievable in the current gold environment. While we are
well positioned to take immediate action should there be a decrease in the R/kg
gold price, our project planning is in place to take advantage of a higher gold
price. At a gold price of R250 000/kg our plans support strong cash flows,
covering both on-going and growth capital.
Harmony`s balance sheet is in excellent health. Both our Nedbank loan and
convertible bond were paid off during the quarter. With cash in the bank, we
are in an exciting and advantageous position to pursue acquisition
opportunities, invest in our organic growth projects and/or to pay a dividend.
Underground development was part of `Back-to-Basics`, and considerable time and
effort has been spent in ensuring that operations meet their development
targets. Most have performed well in this respect and we have created
sufficient flexibility.
Safety
We are deeply saddened by the death of nine of our colleagues in seven separate
incidents and extend our heartfelt condolences to their families, friends and
colleagues.
Those who died were: Frans Majake, a plant supervisor at Central Plant;
Fuzile Ntlebi, a stope team leader at Brand 2; Legotla Nkhatho, a team leader
at Target; Ntshumayelo Blayi, an underground assistant, and Dumisani Magagulu,
an engineering service assistant, both at Evander 9; Tsibolane Khoso, a winch
operator, Tello Tsoke, a rock drill operator, and Makoatsa Raletooana, a
development team leader, all at Tshepong; and Vukile Bhomane, a stope team
member at Masimong 5.
The past two years have been an eye-opener not only for us, but for the
industry as a whole. There has been a huge emphasis on safety by the Department
of Mineral Resources, its shaft closures in the wake of mining accidents
forcing all companies to re-assess their safety strategies, identify potential
risk areas and re-focus on getting things right.
Behaviour-based safety within Harmony was first addressed at management level
to ensure our leadership understood that leading from the front results in
improved behaviour, and at every operation the concept has been rolled downward
through each operation committing to their own set of aspirations and targets.
Criminal mining
We do everything reasonably practicable to ensure that access to restricted
areas is barred. The deaths of 90 criminal miners at our Eland Shaft in the
Free State during May 2009 was of enormous concern to us. These men died as a
result of a fire allegedly caused by their own unsafe mining practices.
Criminal mining is regarded as an organised crime that requires the input and
assistance of all stakeholders - on national and international levels - to
ensure that an incident such as the one at Eland Shaft is not repeated. Harmony
has been addressing criminal mining activities at operational level
pro-actively and continues to do so in co-operation with the South African
Police Services (SAPS) and the Department of Justice. Measures we have taken
are aimed mainly at the criminal miners and those of our employees who are
found to aid and abet them. To get to the heart of criminal mining - the large,
well-organised syndicates operating multi-nationally - requires resources
beyond ours, which is why we are extremely pleased that the Minister of Mineral
Resources has intervened and established a multi- stakeholder forum to address
the issue, to which we have committed our whole-hearted support.
Operations and costs
During the past quarter, total gold production increased by 1%. Each of the
operations, with the exception of Tshepong, Virginia, Kalgold and Evander,
recorded production improvements. The average underground grade was 3% lower,
reflecting grade under-performance at Tshepong, Masimong and Bambanani. Total
cash operating costs increased by 6% due to higher volumes, one month of higher
winter electricity tariffs and stores costs.
Overall throughput and grade were both disappointing in the past year and have
been addressed as part of our planning for FY2010. Doornkop and Elandsrand, as
examples, have not met their targets and will only reach full production in
2013. Focused, accelerated development will continue
to be a major priority, particularly at the new projects, increasing average
grade and lowering unit costs.
During the past quarter, the Hamata Plant in Papua New Guinea (PNG) received
its first tonnage and a small amount of gravity concentrate was recovered,
which was smelted during partial commissioning of the refinery in June 2009.
Full commissioning is progressing well and will be completed during the
forthcoming quarter.
Labour and electricity remain Harmony`s biggest cost items, with labour
representing 56% and electricity 12% of our total costs for FY09.
Wage settlement
Negotiations with the various unions on wage increases were concluded at the
end of July 2009. To absorb this additional cost, our focus on productivity and
efficiency improvements continue in earnest.
The wage settlement provides for:
- a 10.5% wage increase for employees in category 3;
- a 10% wage increase for employees in categories 4 to 8; and
- a 9% increase for all other employees in the bargaining unit.
Also agreed was that the minimum wage be increased to R4 000 a month with
effect from July 2010 for category 3 employees. The wage increases are
supplemented by non-contributory medical aid, as well as a living-out allowance
or free accommodation and food, as has been practice in the South African
mining industry.
A guaranteed wage increase of 7.5%, or Consumer Price Index (CPI) plus 1%,
whichever is the higher of the two, was agreed for the second year of the
two-year settlement agreement.
Electricity
Greater volumes of electricity were consumed at our operations during June
2009. During the past quarter winter tariffs came into effect, resulting in a
R40 million increase in electricity costs.
The recent electricity tariff increase of 34.6%, effective from 1 July 2009,
will result in electricity costs increasing from 12% to 16% of Harmony`s total
cash operating costs.
Healthy balance sheet
Our motivation to re-establish a healthy balance sheet was two-fold:
to reduce our debt levels and to fund our major capital programme. Two
successful share issues and the proceeds from the Hidden Valley and Rand
Uranium transactions during the year enabled us to repay the R1.7 billion
convertible bond and the Nedbank loan of R2 billion, leaving us with debt of
R362 million. We have approximately R2 billion in the bank to consider a range
of options, such as further organic growth, acquisitions and paying dividends.
Acquisitions
We have looked at a number of potential acquisitions - our main criteria being
good returns and the adding of value to Harmony`s portfolio of assets. Harmony
has been rigorous in applying its acquisition criteria filters, and has not
found many assets worth buying. Most operations for sale require substantial
capital to bring them to an acceptable level of profitability and the few
projects available would incur enormous developmental costs.
However, during June 2009, we reported that the provisional liquidators for
Pamodzi Gold Free State (Proprietary) Limited (Pamodzi Free State) had chosen
Harmony as the preferred bidder of Pamodzi`s Free State`s assets (Pamodzi Free
State Assets). These consist of President Steyn 1 and 2 Shafts, Loraine 3
Shaft, Freddies 7 Shaft and Freddies 9 Shaft, a metallurgical gold plant and a
dormant tailings storage facility. A due diligence investigation was completed
and indicates that the Pamodzi Free State Assets are a good fit with Harmony`s
Free State assets.
The reasons are several, and include:
- their potential to generate recovered grades of approximately 5g/t in the
medium term. This will enhance Harmony`s recovered grade in the Free State;
- their potential, in the longer term, to add 150 000 higher quality ounces per
year to Harmony`s production;
- Loraine 3 Shaft and Freddies 9 Shaft, respectively, have an estimated life of
mine in excess of 10 years;
- Loraine 3 Shaft (including Loraine 1 Shaft) has similar geology to that of
Harmony`s Target mine (Target);
Loraine 3 Shaft and Target can be managed as one unit due to geological
similarities and geographical proximity; ore body and mining synergies exist
between Freddies 7 Shaft and
- Freddies 9 Shaft and Harmony`s Tshepong Mine;
- Harmony`s Target metallurgical gold plant is 10 kilometres from
- Loraine 3 Shaft, which will have cost benefits;
the President Steyn 2 Shaft pillar can only be extracted optimally from
Harmony`s West Mine shaft (currently on care and maintenance) and part of
Harmony`s Bambanani mine;
- Harmony`s management is very familiar with Pamodzi Free State`s ore bodies;
- Pamodzi Free State`s dormant tailings storage facility can be processed
cost-effectively through Harmony`s Phoenix Plant or through Harmony`s St Helena
Plant (when completed);
- cash flow can be generated at an early stage from the President Steyn 2 Shaft
pillar, as well as from the demolition of Pamodzi Free State`s metallurgical
gold plant;
- Harmony is familiar with the infrastructure challenges of the
Pamodzi Free State Assets and will implement the same standards as those
implemented in respect of its own assets to ensure the safety of its employees.
Some capital expenditure will be required to make the operations safe for
employees and to optimise the ability to operate the Pamodzi Free State Assets;
and
- by purchasing the Pamodzi Free State Assets, Harmony will be able to better
control potential issues which may affect its own mines, such as fires,
flooding and restricting illegal miners gaining access to Harmony`s shafts.
The Pamodzi Free State Assets will be purchased free from all liabilities, save
for all associated rehabilitation and environmental liabilities. The purchase
consideration for these assets is R405 million.
Harmony`s offer was accepted, following approval from the Industrial
Development Corporation of South Africa and the relevant trade unions. The only
remaining condition to the final acceptance of the offer is the conclusion of
definitive written sale agreements. One of the essential conditions precedent
to the transaction would be the conversion of Pamodzi Free State`s mining
rights and the consent to the transfer thereof by the Minister of Mines.
Harmony, together with the provisional liquidators, has agreed to give this
condition precedent their urgent attention.
Newcrest Mining Limited (Newcrest)
During the last quarter Newcrest continued to fund all the capital costs in
Hidden Valley and achieved its final milestone of owning 50% of the Morobe
Joint Venture.
Rand Uranium
Harmony has a 40% holding in Rand Uranium (Pty) Ltd (Rand Uranium). Rand Uranium
operates as an independent company with an independent management
team. It produces approximately 220 000 ounces of gold per year at a cash cost
in the region of R185 000/kg.
The underground ore resources are being assessed for gold/uranium potential and
a definitive feasibility study for a 450 000t/month uranium plant should be
completed by the end of calendar year 2009. The primary ore feed for the plant
will be the Cooke Dump and secondary feed will come from underground sources,
while gold production will continue.
Organic growth
We are now well embarked upon our organic growth strategy. We have a number of
exciting organic growth projects such as the Wafi open pit mine and Golpu block
cave as well as exploration opportunities in Papua New Guinea, while in South
Africa there are the St Helena tailings, St Helena 10 Shaft and Evander South
projects. Not all have been approved by the Board as yet, but we have started
scoping studies and, in some instances, pre-feasibility studies to establish
whether these projects could deliver optimal returns in future.
Dividend
We believe that paying a dividend is a sign of a healthy company.
Harmony has recovered well and some of our shareholders have remained loyal
throughout the turmoil Harmony has experienced. As a result, the Board has
agreed to declare a 50 SA cents dividend. See page 8 for the notice of the
dividend payment.
Gold market
The main contributing factor to the negative variance in our cash operating
profit for the quarter was undeniably the lower average R/kg gold price
received, a consequence of a strong Rand which converts directly into
dramatically higher $/oz cash costs. Being unhedged, the company has always
focused on ounces which can be mined at total costs below the spot price of
gold.
For us, since the bulk of our production is from South Africa, the Rand`s
strength and the Rand gold price`s weakness is of considerable concern. While
we are bullish about gold reaching and holding at a level of $1 000/oz by the
end of calendar year 2009, general investment demand for the metal remains and
it continues as a store of wealth. It is prudent to assume that the South
African currency will continue to be attractive to speculators for as long as
it takes for real evidence of a global economic recovery to materialise.
For this reason, we have planned very conservatively for the year ahead - on
the basis of a gold price of R225 000/kg. Should the R/kg gold price continue
at lower levels, incremental cutbacks from marginal mining operations and
capital reduction can be expected.
Tomorrow`s gold
Our growth strategy taking us to 2.2 million ounces is intact. While continuing
to pursue production improvements at our existing operations, we are spending
capital on current projects, conducting scoping studies to establish the
possibility of a pipeline of others, growing reserves and resources and
strengthening the quality of our asset base.
Our challenge going forward is to meet our targets and objectives - more
specifically to deliver consistent production results and curb costs.
Through sound asset portfolio management and operational efficiency, we will
create the necessary platform to create more value from our growth assets, the
high-cost operations and our projects.
Thanks
We wish to express our sincere thanks to every Board member, employee,
shareholder and stakeholder who has supported Harmony to date. Thank you for
believing that Harmony could be stabilised. Constructive criticism and the
challenges we had to face made us stronger and we will continue to ensure that
Harmony is a company that provides sustainable growth and rewards shareholders.
Chief Executive Officer
Graham Briggs
Ore reserves
The declared Ore Reserves amounts to 48.2 million ounces with a year
on year negative variance of 2.3 million ounces. Table 1 shows more
detail of the year on year reserve variance.
Table 1. Ore reserve reconciliation: FY2008 to FY2009
Gold Gold
(tonnes) (Moz)
Balance as at June 2008 1 570 50.5
Reductions
Mined during FY2009 (50) (1.6)
Equity adjustment (PNG) (28) (0.9)
Geology and scope changes (87) (2.8)
Additions
Surface sources 34 1.1
Other adjustments 59 1.9
Balance as at 30 June 2009 1 499 48.2
As indicated in Table 1, Harmony`s Ore Reserves as at 30 June 2009 reflects a
year-on-year depletion of 1.6 million ounces. The equity adjustment at Papua New
Guinea from 69.9% to 50% attributable to Harmony resulted in a further decrease
of 0.9 million ounces. The net effect of other changes at the South African
operations accounts for an addition of 0.2 million ounces.
A gold price of US$750/oz was used for the conversion of Mineral Resources to
Ore Reserves at our South African and Papua New Guinea operations. An exchange
rate of USD/ZAR 9.33 for South Africa and AUD/USD 0.75 for Australia has been
used, resulting in a gold price of R225 000/kg and A$1 000/oz, respectively.
Notice of cash dividend
A dividend No. 80 of 50 cents per ordinary share, being the dividend for the
year ended 30 June 2009, has been declared payable on Monday, 21 September 2009
to those shareholders recorded in the books of the Company at the close of
business on Friday, 18 September 2009.
The dividend is declared in the currency of the Republic of South Africa.
Any change in address or dividend instruction to apply to this dividend must
be received by the company`s transfer secretaries or registrar not later than
Friday, 11 September 2009.
Last date to trade ordinary shares cum dividend Friday, 11 September 2009
Ordinary shares trade ex dividend and
currency conversion date for ADR holders Monday, 14 September 2009
Record date Friday, 18 September 2009
Payment date Monday, 21 September 2009
No dematerialisation or re-materialisation of share certificates may occur
between Monday, 14 September 2009 and Friday, 18 September 2009, both dates
inclusive, nor may any transfers between registers take place during this
period.
By order of the Board
NY Maluleke
Company Secretary
Randfontein
Financial review for the fourth quarter and year
ended 30 June 2009
CONDENSED CONSOLIDATED INCOME STATEMENT (Rand)
Quarter ended
June March (1) June (1)
2009 2009 2008
(Unaudited) (Unaudited) (Unaudited)
Notes R million R million R million
Continuing
operations
Revenue 2 663 3 005 2 620
Cost of sales 2 (2 863) (2 211) (2 325)
Production cost (1 920) (1 830) (1 625)
Amortisation and
depreciation 2(a) (546) (303) (222)
Impairment of assets 2(b) (330) (3) (359)
Employment
termination and
restructuring costs - (11) (48)
Other items (67) (64) (71)
Gross (loss)/profit (200) 794 295
Corporate,
administration and
other expenditure (99) (80) (49)
Exploration
expenditure (77) (75) (64)
Other income - net 3 (74) 332 100
Operating
(loss)/profit (450) 971 282
Profit/(loss) from
associates 49 14 (68)
Profit on sale of
investment in
associate - - -
Impairment of
investment in
associate - - (95)
Loss on sale of
investment in joint
venture - - (2)
Mark-to-market of
listed investments 12 3 -
Loss on sale of
listed investments - - -
Impairment of
investments - - (1)
Investment income 108 152 86
Finance cost (20) (42) (135)
(Loss)/profit
before taxation (301) 1 098 67
Taxation 547 (125) (268)
Net profit/(loss)
from continuing
operations 246 973 (201)
Discontinued
operations 4
(Loss)/profit from
discontinued
operations (8) (1) 130
Net profit/(loss) 238 972 (71)
Earnings/(loss) per
ordinary share
(cents) 5
- Earnings/(loss)
from continuing
operations 58 231 (50)
- (Loss)/earnings
from discontinued
operations (2) - 32
Total
earnings/(loss) per
ordinary share
(cents) 56 231 (18)
Diluted
earnings/(loss) per
ordinary share
(cents) 5
- Earnings/(loss)
from continuing
operations 58 230 (50)
- (Loss)/earnings
from discontinued
operations (2) - 32
Total diluted
earnings/(loss) per
ordinary share
(cents) 56 230 (18)
Year ended
June June (1)
2009 2008
(Audited)
R million R million
Continuing operations
Revenue 11 496 9 617
Cost of sales (9 836) (8 472)
Production cost (7 657) (6 973)
Amortisation and depreciation (1 467) (846)
Impairment of assets (484) (280)
Employment termination and restructuring costs (39) (236)
Other items (189) (137)
Gross (loss)/profit 1 660 1 145
Corporate, administration and other expenditure (362) (228)
Exploration expenditure (289) (224)
Other income - net 864 32
Operating (loss)/profit 1 873 725
Profit/(loss) from associates 12 (78)
Profit on sale of investment in associate 1 -
Impairment of investment in associate (112) (95)
Loss on sale of investment in joint venture - (2)
Mark-to-market of listed investments (101) 33
Loss on sale of listed investments - (459)
Impairment of investments - (1)
Investment income 444 284
Finance cost (212) (524)
(Loss)/profit before taxation 1 905 (117)
Taxation (196) (487)
Net profit/(loss) from continuing operations 1 709 (604)
Discontinued operations
(Loss)/profit from discontinued operations 1 218 359
Net profit/(loss) 2 927 (245)
Earnings/(loss) per ordinary share (cents)
- Earnings/(loss) from continuing operations 413 (151)
- (Loss)/earnings from discontinued operations 294 89
Total earnings/(loss) per ordinary share (cents) 707 (62)
Diluted earnings/(loss) per ordinary share (cents)
- Earnings/(loss) from continuing operations 411 (150)
- (Loss)/earnings from discontinued operations 293 88
Total diluted earnings/(loss) per ordinary share
(cents) 704 (62)
(1) The comparative figures are re-presented due to Mount Magnet being
reclassified as part of continuing operations. See note 4(a) in this regard.
The accompanying notes are an integral part of these condensed consolidated
financials statements.
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME (Rand)
Quarter ended
June March June
2009 2009 2008
(Unaudited) (Unaudited) (Unaudited)
R million R million R million
Net profit/(loss) for the period 238 972 (71)
Attributable to:
Owners of the parent 238 972 (71)
Non-controlling interest - - -
Other comprehensive
(loss)/income for the period,
net of income tax (203) (220) (73)
Foreign exchange translation
(loss)/profit (205) (203) (86)
Mark-to-market of
available-for-sale investments 2 (17) 13
Total comprehensive
income/(loss) for the period 35 752 (144)
Attributable to:
Owners of the parent 35 752 (144)
Non-controlling interest - - -
Year ended
June June
2009 2008
(Audited)
R million R million
Net profit/(loss) for the period 2 927 (245)
Attributable to:
Owners of the parent 2 927 (245)
Non-controlling interest - -
Other comprehensive (loss)/income for the period,
net of income tax (450) 982
Foreign exchange translation (loss)/profit (497) 686
Mark-to-market of available-for-sale investments 47 296
Total comprehensive income/(loss) for the period 2 477 737
Attributable to:
Owners of the parent 2 477 737
Non-controlling interest - -
CONDENSED CONSOLIDATED BALANCE SHEET (Rand)
At
June
2009
Notes R million
ASSETS
Non-current assets
Property, plant and equipment 27 912
Intangible assets 2 223
Restricted cash 161
Restricted investments 1 640
Investments in financial assets 57
Investments in associates 6 329
Trade and other receivables 75
32 397
Current assets
Inventories 1 035
Trade and other receivables 900
Income and mining taxes 45
Cash and cash equivalents 1 950
3 930
Non-current assets classified as held-for-sale 4 -
3 930
Total assets 36 327
EQUITY AND LIABILITIES
Share capital and reserves
Share capital 7 28 091
Other reserves 339
Retained earnings/(accumulated loss) 1 095
29 525
Non-current liabilities
Borrowings 8 110
Deferred income tax 3 251
Provisions for other liabilities and charges 1 695
5 056
Current liabilities
Trade and other payables 1 132
Provisions and accrued liabilities 362
Borrowings 8 252
1 746
Liabilities directly associated with
non-current assets
classified as held-for-sale 4 -
1 746
Total equity and liabilities 36 327
Number of ordinary shares in issue 425 986 836
Net asset value per share (cents) 6 931
At At
March June
2009 2008
(Unaudited) (Audited)
R million R million
ASSETS
Non-current assets
Property, plant and equipment 28 103 27 556
Intangible assets 2 223 2 209
Restricted cash 167 78
Restricted investments 1 608 1 465
Investments in financial assets 17 67
Investments in associates 242 145
Trade and other receivables 73 137
32 433 31 657
Current assets
Inventories 914 693
Trade and other receivables 2 871 875
Income and mining taxes 58 82
Cash and cash equivalents 2 839 413
6 682 2 063
Non-current assets classified as held-for-sale 425 1 537
7 107 3 600
Total assets 39 540 35 257
EQUITY AND LIABILITIES
Share capital and reserves
Share capital 28 081 25 895
Other reserves 503 676
Retained earnings/(accumulated loss) 857 (1 832)
29 441 24 739
Non-current liabilities
Borrowings 159 242
Deferred income tax 3 796 2 990
Provisions for other liabilities and charges 1 366 1 273
5 321 4 505
Current liabilities
Trade and other payables 1 489 1 372
Provisions and accrued liabilities 268 287
Borrowings 2 681 3 857
4 438 5 516
Liabilities directly associated with
non-current assets
classified as held-for-sale 340 497
4 778 6 013
Total equity and liabilities 39 540 35 257
Number of ordinary shares in issue 425 763 329 403 253 756
Net asset value per share (cents) 6 915 6 135
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 2008 25 895 676
Issue of share capital 2 194 -
Deferred share-based payments 2 113
Comprehensive (loss)/income for the period - (450)
Balance as at 30 June 2009 28 091 339
Balance - 30 June 2007 25 636 (349)
Issue of share capital 236 -
Deferred share-based payments 23 43
Comprehensive income/(loss) for the period - 982
Dividends paid - -
Balance as at 30 June 2008 25 895 676
Retained
earnings/
(accumulated
loss) Total
R million R million
Balance - 30 June 2008 (1 832) 24 739
Issue of share capital - 2 194
Deferred share-based payments - 115
Comprehensive (loss)/income for the period 2 927 2 477
Balance as at 30 June 2009 1 095 29 525
Balance - 30 June 2007 (1 581) 23 706
Issue of share capital - 236
Deferred share-based payments - 66
Comprehensive income/(loss) for the period (245) 737
Dividends paid (6) (6)
Balance as at 30 June 2008 (1 832) 24 739
CONDENSED CONSOLIDATED CASH FLOW STATEMENT (Rand)
Quarter ended
June March June
2009 2009 2008
(Unaudited) (Unaudited) (Unaudited)
R million R million R million
Cash flow from operating
activities
Cash generated by operations 780 985 1 506
Interest and dividends received 107 156 97
Interest paid (65) (41) (117)
Income and mining taxes paid (428) (133) (67)
Cash generated by operating
activities 394 967 1 419
Cash flow from investing
activities
Amounts invested in restricted
investments - - -
Decrease/(increase) in
restricted cash 6 1 2
Net proceeds on disposal of
listed investments - - -
Proceeds on disposal of South
Kal Mine - - -
Net additions to property plant
and equipment 1 093 (645) (1 267)
Other investing activities 51 (163) (190)
Cash generated/(utilised) by
investing activities 1 150 (807) (1 455)
Cash flow from financing
activities
Long-term loans raised - - 136
Long-term loans repaid (2 462) (20) (12)
Ordinary shares issued - net of
expenses 10 955 23
Dividends paid - - (6)
Cash (utilised)/generated by
financing activities (2 452) 935 141
Foreign currency translation
adjustments 18 99 (38)
Net (decrease)/increase in cash
and cash equivalents (890) 1 194 67
Cash and cash equivalents -
beginning of period 2 840 1 646 348
Cash and cash equivalents - end
of period 1 950 2 840 415
Cash and cash equivalents
comprises
Continuing operations 1 950 2 839 413
Discontinued operations - 1 2
Total cash and cash equivalents 1 950 2 840 415
Year ended
June June
2009 2008
(Audited)
R million R million
Cash flow from operating activities
Cash generated by operations 2 813 1 978
Interest and dividends received 457 306
Interest paid (280) (417)
Income and mining taxes paid (704) (129)
Cash generated by operating activities 2 286 1 738
Cash flow from investing activities
Amounts invested in restricted investments - (89)
Decrease/(increase) in restricted cash (83) 205
Net proceeds on disposal of listed investments - 1 310
Proceeds on disposal of South Kal Mine - 127
Net additions to property plant and equipment 978 (3 824)
Other investing activities (78) (102)
Cash generated/(utilised) by investing activities 817 (2 373)
Cash flow from financing activities
Long-term loans raised - 2 234
Long-term loans repaid (3 738) (1 820)
Ordinary shares issued - net of expenses 1 953 87
Dividends paid - (6)
Cash (utilised)/generated by financing activities (1 785) 495
Foreign currency translation adjustments 217 61
Net (decrease)/increase in cash and cash equivalents 1 535 (79)
Cash and cash equivalents - beginning of period 415 494
Cash and cash equivalents - end of period 1 950 415
Cash and cash equivalents comprises
Continuing operations 1 950 413
Discontinued operations - 2
Total cash and cash equivalents 1 950 415
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FOURTH QUARTER AND YEAR ENDED 30 JUNE 2009
1. Accounting policies
(a) Basis of accounting
The condensed consolidated interim financial statements for the period ended 30
June 2009 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 2008. 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 2008.
2. Cost of sales
Quarter ended
June March (1) June (1)
2009 2009 2008
(Unaudited) (Unaudited) (Unaudited)
R million R million R million
Production costs 1 920 1 830 1 625
Amortisation and depreciation
(a) 546 303 222
Impairment of assets (b) 330 3 359
Provision/(reversal of
provision) for rehabilitation
costs 13 (1) 12
Care and maintenance cost of
restructured shafts 15 13 29
Employment termination and
restructuring costs - 11 48
Share based compensation 38 52 19
Provision for post retirement
benefits 1 - 11
Total cost of sales 2 863 2 211 2 325
Year ended
June June(1)
2009 2008
(Audited)
R million R million
Production costs 7 657 6 973
Amortisation and depreciation (a) 1 467 846
Impairment of assets (b) 484 280
Provision/(reversal of provision) for
rehabilitation costs 21 12
Care and maintenance cost of restructured shafts 53 74
Employment termination and restructuring costs 39 236
Share based compensation 113 42
Provision for post retirement benefits 2 9
Total cost of sales 9 836 8 472
(1) The comparative figures are re-presented due to Mount Magnet being
reclassified as part of continuing operations. See note 4(a) in this regard.
(a) While Mount Magnet was classified as held-for-sale, no depreciation was
recorded as per the requirements of IFRS 5, Non-current Asset Held-for-sale and
Discontinued Operations. When Mount Magnet ceased being classified as
held-for-sale, depreciation was calculated for the period from April 2007 to
June 2009 and R219 million recorded in the current quarter.
(b) Impairments and reversals on impairments recorded in the June 2009 quarter:
R`million
Virginia* 52
Evander* 258
Target* 236
Mount Magnet+ (216)
330
* The revised business (Life-of-Mine) plans were completed during the June 2009
quarter. An impairment test was performed as required by IAS 36, Impairment of
Assets, and as a result impairments were recorded.
+ The impairment recorded for Mount Magnet since being classified as
held-for-sale was reversed when the requirement for IFRS 5 were no longer met
and the carrying value was adjusted for depreciation as per IFRS 5. See note
2(a) in this regard.
3. Other income - net
Included in other income in the June 2009 quarter is R76 million profit on sale
of 9.99% (March 2009: R437 million profit on sale of 10%) of Harmony`s Papua
New Guinea gold and copper assets to Newcrest Mining Limited in terms of the
farm-in agreement. The total profit included for the year to date relating to
the Newcrest transaction is R931 million.
4. Non-current assets held-for-sale and discontinued operations
(a) Following approval by the Board of Directors in April 2007, the asset and
liabilities related to Mount Magnet (operations in Australia) were classified
as held-for-sale. This operation also met the criteria to be classified as
discontinued operations in terms of IFRS 5. During the June 2009 quarter, it
was decided that further drilling at the site to define the orebody would
enhance the selling potential of the operation. As a result, the operation no
longer met the requirements of IFRS 5 to be classified as held-for-sale, and
was therefore reclassified as continuing operations again. Consequently, the
income statements and earnings per share amounts for all comparative periods
have been represented taking this change into account.
(b) 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. These operations were also deemed to be
discontinued operations.
The conditions precedent for the sale of Randfontein`s Cooke assets to Rand
Uranium were fulfilled and the transaction became effective on 21 November
2008. In exchange for 60% of the issued share capital of Rand Uranium, Pamodzi
Resources Fund (PRF) agreed to pay Harmony a purchase consideration of US$209
million. US$40 million of this amount was received on the effective date with
the balance and the interest on the outstanding amount, together amounting to
US$172 million, being received on 20 April 2009.
The Group recognised a profit on sale of assets of R64 million (before tax)
relating to the sale of Dump 20 to Rand Uranium in the June 2009 quarter. The
total profit for the year for the transaction is R1 786 million before tax.
5. Earnings/(loss) per ordinary share
Earnings/(loss) per ordinary share is calculated on the weighted average number
of ordinary shares in issue for the quarter ended 30 June 2009: 425.7 million
(31 March 2009: 421.0 million, 30 June 2008: 402.8 million) and the year ended
30 June 2009: 414.1 million (30 June 2008: 400.8 million).
The fully diluted earnings/(loss) per ordinary share is calculated on weighted
average number of diluted ordinary shares in issue for the quarter ended 30
June 2009: 427.5 million (31 March 2009: 423.6 million, 30 June 2008: 405.2
million) and the year ended 30 June 2009: 416.0 million (30 June 2008: 402.9
million).
Quarter ended
June March June
2009 2009 2008
(Unaudited) (Unaudited) (Unaudited)
Total earnings/(loss) per
ordinary share (cents):
Basic earnings/(loss) 56 231 (18)
Fully diluted earnings/(loss) 56 230 (18)
Headline earnings/(loss) 107 123 65
- Continuing operations 107 129 36
- Discontinued operations - (6) 29
R million R million R million
Reconciliation of headline
earnings/(loss):
Continuing operations
Net profit/(loss) 246 973 (201)
Adjusted for (net of tax):
Profit on sale of property,
plant and equipment (83) (437) (45)
Loss on sale of listed
investments - - -
(Gain)/loss on mark to market
of listed investments (9) - -
Foreign exchange gain recycled
from equity - - -
Profit on sale of associates - - -
Impairment of investments - - 1
Loss on sale of joint venture - - 2
Impairment of investment in
associates - - 95
Impairment of property, plant
and equipment 303 3 189
Impairment of intangible assets - - 105
Provision for doubtful debt - - -
Headline earnings 457 539 146
Discontinued operations
Net (loss)/profit (8) (1) 130
Adjusted for (net of tax):
Loss/(profit) on sale of
property, plant and equipment 6 (22) (13)
Headline (loss)/earnings (2) (23) 117
Total headline earnings 455 516 263
Year ended
June June
2009 2008
(Audited)
Total earnings/(loss) per ordinary share (cents):
Basic earnings/(loss) 707 (62)
Fully diluted earnings/(loss) 704 (62)
Headline earnings/(loss) 262 126
- Continuing operations 239 38
- Discontinued operations 23 88
R million R million
Reconciliation of headline earnings/(loss):
Continuing operations
Net profit/(loss) 1 709 (604)
Adjusted for (net of tax):
Profit on sale of property, plant and equipment (975) (90)
Loss on sale of listed investments - 459
(Gain)/loss on mark to market of listed investments 71 -
Foreign exchange gain recycled from equity (384) -
Profit on sale of associates (1) -
Impairment of investments - 1
Loss on sale of joint venture - 2
Impairment of investment in associates 112 95
Impairment of property, plant and equipment 457 134
Impairment of intangible assets - 105
Provision for doubtful debt - 52
Headline earnings 989 154
Discontinued operations
Net (loss)/profit 1 218 359
Adjusted for (net of tax):
Loss/(profit) on sale of property, plant and
equipment (1 121) (7)
Headline (loss)/earnings 97 352
Total headline earnings 1 086 506
6. Investment in associate
Harmony Gold Mining Company owns 32.4% of Pamodzi Gold Limited. The carrying
value of the investment at 30 June 2009 was R0 (March 2009: R0, June 2008: R145
million). The Group recognised an impairment of R112 million and losses of R33
million on the investment during the 2009 financial year.
On 21 November 2008, Harmony Group sold 60% of the issued share capital of Rand
Uranium to PRF. Refer to note 4(b) for details. This resulted in the Group
owning a 40% interest in Rand Uranium. The book value of the investment at 30
June 2009 was R329 million (March 2009: R242 million). The Group`s share in the
profits from Rand Uranium amounted to R46 million for the year.
7. Share capital
Capital raising
Harmony engaged in capital raising by issuing two tranches of shares following
the resolution passed by shareholders at the Annual General Meeting held on 24
November 2008. In the first tranche, completed between 25 November 2008 and 19
December 2008, 10 504 795 Harmony shares were issued at an average subscription
price of R93.20, resulting in R979 million before costs being raised.
The second tranche of shares was issued between 10 February 2009 and 6 March
2009 and consisted of 7 540 646 Harmony shares issued at an average
subscription price of R124.45, resulting in R938 million before costs being
raised. The combined share issue amounts to R1.9 billion at a cost of R30
million.
8. Borrowings
June March June
2009 2009 2008
(Unaudited) (Audited)
R million R million R million
Total long-term borrowings 110 159 242
Total current portion of
borrowings(1) 252 2 681 3 857
Total borrowings(2) 362 2 840 4 099
(1) Harmony repaid its Nedbank loan of R750 million and convertible bond of R1
700 million on 21 April 2009 and 20 May 2009, respectively.
(2) Included in the borrowings is R106 million (March 2009: R168 million, June
2008: R258 million) owed to Wespac Bank Limited in terms of a finance lease
agreement. The future minimum lease payments to the loan are as follows:
June March June
2009 2009 2008
(Unaudited) (Audited)
R million R million R million
Due within one year 30 45 57
Due between one and five years 80 133 228
110 178 285
Future finance charges (4) (10) (27)
Total future minimum lease payments 106 168 258
9. Commitments and contingencies
June March June
2009 2009 2008
(Unaudited) (Audited)
R million R million R million
Capital expenditure commitments
Contracts for capital expenditure 478 790 1 164
Authorised by the directors but not
contracted for 734 1 478 1 720
1 212 2 268 2 884
This expenditure will be financed from existing resources.
Contingent liability
Class action
We have filed with the Court a Motion to Dismiss all claims asserted in the
Class Action Case, the plaintiffs have filed an opposing response, and we have
since replied to that response. At this point the matter is in the hands of the
Court and we are awaiting a ruling by the Court. It is not possible to predict
with certainty when the Court will rule on the Motion to Dismiss as the timing
of the ruling is entirely within the discretion of the Court.
10. Subsequent events
Dividends
On 13 August 2009, the Board of Directors approved a final dividend for the
2009 financial year of 50 SA cents per share. The total dividend amounts to
R213 million. As this dividend was declared after the reporting date, it has
not been reflected in the financial statements for the periods ended 30 June
2009.
11. Segment report
The segment report follows on after the notes.
12. Reconciliation of segment information to consolidated income statements and
balance sheet
June June
2009 2008
(Audited)
R million R million
The "reconciliation of segment data to consolidated
financials" line item in the
segment reports are broken down in the following
elements, to give a better
understanding of the differences between the income
statement, balance sheet
and segment report.
Revenue from:
Discontinued operations 614 1 856
Production costs from:
Discontinued operations 447 1 368
Reconciliation of cash operating profit to gross
profit:
Total segment revenue 12 110 11 473
Total segment production costs (8 104) (8 341)
Cash operating profit as per segment report 4 006 3 132
Less: Discontinued operations (167) (488)
Cash operating profit as per segment report 3 839 2 644
Cost of sales items other than production costs (2 179) (1 499)
Amortisation and depreciation (1 467) (846)
Impairment of assets (484) (280)
Employment termination and restructuring costs (39) (236)
Share based compensation (113) (42)
Rehabilitation costs (21) (12)
Care and maintenance costs of restructured shafts (53) (74)
Provision for former employees` post retirement
benefits (2) (9)
Gross profit as per income statements * 1 660 1 145
Reconciliation of total segment mining assets to
consolidated property,
plant and equipment:
Property, plant and equipment not allocated to a
segment
Mining assets 552 516
Undeveloped property 5 139 6 491
Other non-mining assets 63 50
Less: Non-current assets previously classified as
held-for-sale - (515)
Less: Non-current assets classified as held-for-sale - (667)
5 754 5 875
* The reconciliation was done up to the first recognisable line item on the
income statement. The reconciliation will follow the income statement after
that.
13. Audit review
The condensed consolidated financial statements for the year ended 30 June 2009
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.
SEGMENT REPORT FOR THE YEAR ENDED 30 JUNE 2009 (Rand/Metric)
Production Operating Mining
Revenue cost profit assets
R million R million R million R million
Continuing operations
South Africa
Underground
Tshepong 1 780 978 802 3 634
Phakisa 171 107 64 3 658
Bambanani 924 651 273 705
Doornkop 343 281 62 2 544
Elandsrand 1 422 1 056 366 2 715
Target 688 536 152 2 218
Masimong 1 215 661 554 665
Evander 1 514 998 516 940
Virginia 2 033 1 488 545 898
Other(1) 503 366 137 240
Surface
Other(2) 903 535 368 142
Total South Africa 11 496 7 657 3 839 18 359
International
Papua New Guinea(3) - - - 3 540
Other operations(4) - - - 259
Total international - - - 3 799
Total continuing
operations 11 496 7 657 3 839 22 158
Discontinued operations
Cooke operations 614 447 167 -
Total discontinued
operations 614 447 167 -
Total operations 12 110 8 104 4 006 22 158
Reconciliation of the
segment
information to the
consolidated
income statement and
balance sheet (refer
to note 12) (614) (447) 5 754
11 496 7 657 27 912
Capital Kilograms Tonnes
expenditure produced* milled*
R million kg t`000
Continuing operations
South Africa
Underground
Tshepong 249 7 178 1 375
Phakisa 461 691 185
Bambanani 52 3 780 517
Doornkop 395 1 311 549
Elandsrand 422 5 422 962
Target 342 2 713 644
Masimong 130 4 791 890
Evander 210 5 912 1 125
Virginia 199 8 030 2 261
Other(1) 56 2 043 513
Surface
Other(2) 84 3 566 8 867
Total South Africa 2 600 45 437 17 888
International
Papua New Guinea(3) 1 782 - -
Other operations(4) - - -
Total international 1 782 - -
Total continuing operations 4 382 45 437 17 888
Discontinued operations
Cooke operations 87 2 500 1 287
Total discontinued operations 87 2 500 1 287
Total operations 4 469 47 937 19 175
Reconciliation of the segment
information to the consolidated
income statement and
balance sheet (refer to note 12)
Notes:
(1) Includes Joel.
(2) Includes Kalgold, Phoenix and Dumps.
(3) Included in the capital expenditure is an amount of R1 543 million
contributed by Newcrest in terms of the farm-in agreement.
(4) Includes Mount Magnet.
* Operational statistics are unaudited.
CONTACT DETAILS
HARMONY GOLD MINING COMPANY LIMITED
Corporate Office
Randfontein Office Park
PO Box 2
Randfontein, 1760
South Africa
Corner Main Reef Road
and Ward Avenue
Randfontein, 1759
Johannesburg
South Africa
Telephone : +27 11 411 2000
Website : http://www.harmony.co.za
Directors
P T Motsepe (Chairman)*
G Briggs (Chief Executive Officer)
F Abbott (Interim Financial Director)
J A Chissano*
F F T De Buck*, Dr C Diarra*+,
K V Dicks*, Dr D S Lushaba*, C Markus*,
M Motloba*, C M L Savage*, A J Wilkens*
(* non-executive)
(1 Mocambican)
(+ US/Mali Citizen)
Investor Relations Team
Esha Brijmohan
Investor Relations Officer
Telephone : +27 11 411 2314
Fax : +27 11 692 3879
Mobile : +27 82 759 1775
E-mail : esha@harmony.co.za
Marian van der Walt
Executive: Corporate and Investor Relations
Telephone : +27 11 411 2037
Fax : +27 86 614 0999
Mobile : +27 82 888 1242
E-mail : marian@harmony.co.za
Company Secretary
Khanya Maluleke
Telephone : +27 11 411 2019
Fax : +27 11 411 2070
Mobile : +27 82 767 1082
E-mail : Khanya.maluleke@harmony.co.za
South African Share Transfer Secretaries
Link Market Services South Africa (Proprietary) Limited
(Registration number 2000/007239/07)
16th Floor, 11 Diagonal Street
Johannesburg, 2001
PO Box 4844
Johannesburg, 2000
South Africa
Telephone : +27 86 154 6572
Fax : +27 86 674 3260
United Kingdom Registrars
Capita Registrars
The Registry
34 Beckenham Road
Bechenham
Kent BR3 4TU
United Kingdom
Telephone : +44 870 162 3100
Fax : +44 208 636 2342
ADR Depositary
The Bank of New York Mellon Inc
101 Barclay Street
New York, NY 10286
United States of America
Telephone : +1888-BNY-ADRS
Fax : +1 212 571 3050
Sponsor
JP Morgan Equities Limited
1 Fricker Road, Corner Hurlingham Road
Illovo, Johannesburg, 2196
Private Bag X9936, Sandton, 2146
Telephone : +27 11 507 0300
Fax : +27 11 507 0503
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
Registration Number 1950/038232/06
Incorporated in the Republic of South Africa
ISIN: ZAE 000015228
Date: 17/08/2009 08:00:01 Supplied by www.sharenet.co.za
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