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HAR - Harmony Gold Mining Company - Results for the second quarter and six
Release Date: 08/02/2010 08:00:04 Code(s): HARHAR - Harmony Gold Mining Company - Results for the second quarter and six
months ended 31 December 2009
Harmony Gold Mining Company Limited
Incorporated in the Republic of South Africa
Registration Number 1950/038232/06
("Harmony" or "Company")
JSE Share code: HAR
NYSE Share code: HMY
ISIN: ZAE 000015228
Results for the second quarter and six months ended 31 December 2009
Key features for the quarter
- Safety remains our top priority
- 45% increase in cash operating profit to R800 million
1% decrease in total operating costs
gold price increased by 11% to R264 774/kg
- Free cash flow from SA underground operations
- `Fixing the mix`
more quality, low-cost ounces the objective
- Commissioning of growth projects
2.5% drop in total capex
- Exciting exploration results from Wafi-Golpu in PNG
Financial review for the second quarter and
six months ending 31 December 2009
Quarter Quarter
December September Q-on-Q
2009 2009 variance
Gold produced* - kg 11 569 11 714 (1.2)
- oz 371 956 376 599 (1.2)
Cash operating - R/kg 192 101 188 362 (2.0)
costs - $/oz 798 753 (6.0)
Gold sold* - kg 11 640 11 471 1.5
- oz 374 234 368 800 1.5
Gold price - R/kg 264 774 239 438 10.6
received - US$/oz 1 100 957 14.9
Cash operating - Rm 800 552 44.9
profit - US$m 107 71 50.7
Basic - SAc/s 28 (7) >100
earnings/(loss) - USc/s 4 (1) >100
Headline - Rm 207 (51) >100
profit/(loss) - US$m 28 (7) >100
Headline - SAc/s 49 (12) >100
earnings/(loss) - USc/s 7 (2) >100
Exchange rate - R/US$ 7.49 7.78 (3.7)
6 months 6 months Year-to-
December December year
2009 2008 variance
Gold produced* - kg 23 283 23 554 (1.2)
- oz 748 555 757 277 (1.2)
Cash operating - R/kg 190 172 162 550 (17.0)
costs - $/oz 775 580 (33.6)
Gold sold* - kg 23 111 24 757 (6.7)
- oz 743 034 795 953 (6.7)
Gold price - R/kg 251 968 235 421 7.0
received - US$/oz 1 028 831 23.7
Cash operating - Rm 1 351 1 921 (29.7)
profit - US$m 178 217 (18.0)
Basic - SAc/s 21 161 (87.0)
earnings/(loss) - USc/s 3 18 (83.3)
Headline - Rm 156 427 (63.4)
profit/(loss) - US$m 20 48 (58.3)
Headline - SAc/s 37 105 (64.8)
earnings/(loss) - USc/s 5 12 (58.3)
Exchange rate - R/US$ 7.63 8.84 (13.7)
* Production and sales statistics for Hidden Valley have been included. The
mine is in a build-up phase and revenue and costs are currently capitalised.
HARMONY`S ANNUAL REPORTS
Harmony`s Annual Report, Notice of Annual General Meeting, its 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 2009 are
available on our website at www.harmony.co.za.
Chief Executive Officer`s Review
Overview
The turnaround at Harmony continues with an increase in profitability on the
back of favourable market conditions and restructuring for more quality ounces.
`Fixing the mix` - was a primary focus in the quarter under review. Costs were
well-controlled and a higher Rand gold price received helped us towards
significantly improved profit levels. Work continued on the commissioning of
our growth projects and on production planning for the Pamodzi Gold Free State
assets. In addition, we reported some very exciting exploration results out of
Papua New Guinea (PNG).
Safety
With deep regret, I must report that five of our colleagues died in
work-related incidents during the quarter. Those who died were: Lekhetho Ranko,
a team leader at Bambanani, Ashley Nortje, a boilermaker, and Keith Coleman, a
maintenance technician, both at Target; Lebusa Elia, a team leader at Virginia
Operations; and Martin Thosa, a night shift cleaner at Elandsrand. I would like
to extend my deepest condolences to their families, friends and colleagues.
Our Fatal Injury Frequency Rate (FIFR) showed an encouraging improvement
quarter on quarter. Whilst the current quarter has not been great, safety is a
high priority and is being constantly addressed. The rewards of these will be
seen in time.
Gold market
The South African Rand was stronger against the US Dollar during the quarter,
the exchange rate averaging R7.49/US$ compared with R7.78/US$ in the previous
quarter.
The US Dollar gold price averaged $1 100/oz, up 14.9% on the previous quarter,
pointing to the metal`s continuing robustness as world economies recover from
the meltdown of 2008. Consequently, the Rand gold price we received for our
production averaged R264 774/kg, a 10.6% improvement quarter on quarter.
What matters primarily to us as a dominant South African gold producer is of
course the Rand gold price we receive, the determinant of which is the
Rand/Dollar exchange rate. While the higher Rand gold price received during the
December 2009 quarter was most welcome, we still hold the view that general
Rand strength is likely to continue for so long as any global economic
uncertainties last. We therefore expect the gold price to remain fairly flat
for the next 12 months in R/kg terms.
Operating and financial results
Gold production for the quarter was down 1.2% to 11 569kg as expected, mainly
due to the restructuring, more detail of which is provided below. Underground
volume was 6.2% lower at 2 243 000t, underground grade flat at 4.51g/t, and
underground production thus 5.7% lower at 325 268oz. Surface volumes increased
by 22.9% to 2 681 000t. Combined with a 20% increase in grade to 0.54g/t,
resulted in surface production increasing by 46.8% to 46 688oz. The increase in
surface production can mainly be attributed to our opencast operations at PNG.
The aforementioned improvement in the average Rand gold price we received
resulted in a 8.2% increase in revenue to R2 971 million, and after accounting
for total cash operating costs - 1% lower at R2 172 million mainly because of
the lower summer electricity tariff - cash operating profit was 44.9% higher at
R800 million.
Restructuring for sustained profitability
As part of our stated strategy, cutbacks from marginal loss-making mining
operations at Harmony could be expected. Our objective is to eliminate
high-cost ounces from our production profile.
We carefully reviewed our asset portfolio over a period of some months.
During the December 2009 quarter there was an intense focus on the uneconomical
operations - specifically, Harmony 2 shaft, Merriespruit 1 and 3 shafts, and
Brand 3 shaft, all contained within the Virginia operations; and the Evander 2,
5 and 7 shafts.
Brand 3 and Evander 7 ceased production, mainly due to depletion of their ore
bodies, mature infrastructure and low grades. A number of their employees were
redeployed to our growth projects to fill vacancies or to replace contractors
at other operations.
Evander 2 and 5 were placed on care and maintenance during January 2010. We
will continue to closely monitor Harmony 2, while the Merriespruit shafts
appear to have remaining potential, provided they meet their production
targets. It is likely that we will be able to minimise further retrenchments by
absorbing some employees at the Pamodzi Gold Free State operations.
Growth project commissioning
The Company continued to focus on commissioning growth projects during the
quarter, which showed encouraging results.
At Phakisa, volume increased by 22.5%, while recovery from the previous
quarter`s geological interferences and resolution of infrastructure problems
were adequately addressed. Tshepong`s grade challenge is expected to continue
until production from the less erratic, higher-grade Sub-66 Decline area builds
up. At Bambanani, the Shaft Pillar Extraction Project is gaining momentum, with
development well under way.
Doornkop shaft received ISO 14001 accreditation in December 2009, the first
Harmony operation to achieve this. Work during the Christmas break helped to
reduce the impact of a shaft barrel delay on shaft equipping. While Elandsrand
had a disappointing production quarter, the No 1 settler dam was sealed and
pre-commissioning of the 115 level pump station was completed in preparation
for full commissioning during the March 2010 quarter. The 100 level
refrigeration complex construction is 90% complete, with completion planned for
November 2010.
In PNG, remaining sections of the Hidden Valley process
plant were completed in October 2009 and the overland conveyor in early
December 2009. The past quarter yielded 43 028oz of gold production and 53
081oz of silver, 50% of which is attributable to Harmony. Hidden Valley is
expected to reach commercial levels of production in March 2010 quarter.
Progressing other projects
The business plan for the Pamodzi Gold Free State assets was completed during
the quarter, the key milestones of which include: production of 18kg of gold a
month from rock dump milling at Target. Our planning includes the recovery of
some 800kg of gold from the plant clean-up; and production build-up from the
underground assets to 150 000oz over the next 24 months. The reserve and
resource estimates are currently being revised.
Re-treatment of surface tailings is proving to be an attractive proposition
from both safety and cost perspectives. At our Phoenix Project in the Free
State, we plan to increase volume by 400 000tpm to 900 000tpm, and at the
nearby Project Saints the mothballed St Helena plant will be upgraded and
re-commissioned to treat surface tailings over a period of at least 20 years.
We are looking at financing options to fund these projects.
Project TPM is evaluating the potential for the economic recovery of uranium
from the higher grade uranium ore mined at Tshepong, Phakisa and Masimong.
Currrent activities include resource estimation, environmental studies, process
and plant design, as well as metallurgical and flotation test-work. We are now
entering a 12-month feasability stage.
Exploration
Drilling at the Morobe Mining Joint Venture`s Golpu West prospect in Papua New
Guinea has achieved several highly significant intercepts of porphyry copper
gold mineralisation. These form a new zone of mineralisation immediately west
of the known Golpu resource. Although the mineralisation is open at depth
and along strike, it is evident that this new discovery will have a material
effect on the Golpu resource base and mining studies.
A new zone of epithermal gold mineralisation was outlined in initial drilling
at the Northern Diatreme Margin prospect at Wafi, and a major new gold anomaly
defined through reconnaissance stream sediment sampling at Bavaga. The latter
lies about 6km north of the Wafi-Golpu project, on the Wafi transfer structure.
The size of the footprint (>1km in diameter) and the tenor of the anomaly
(>1g/t Au) are particularly encouraging and suggest potential for a significant
gold deposit.
Harmony team
Hannes Meyer was appointed as financial director designate on 1 August 2009 and
officially took over Harmony`s financial director`s responsibilities from Frank
Abbott on 1 November 2009, following his appointment to Harmony`s Board as
executive director. Hannes is a qualified chartered accountant with more than
14 years` experience in the mining industry. He brings with him vast knowledge
and experience of the mining industry from a financial perspective and he has
already proven to be an asset to Harmony. Frank Abbott agreed to continue to
serve on the Harmony Board as an executive director for the next 12 months, as
from January 2010. Frank will focus on the strategic direction and growth of
the Company. We are delighted that we have these two individuals on our team
and look forward to the contributions they will make.
Looking ahead
We will push ahead with the commissioning of our growth projects, in order to
bring to account their quality ounces, and we will continue to pursue
profitable growth opportunities - organically, by acquisition and through
forging strategic partnerships. Our immediate goal remains generating
profitable ounces of production and earnings to reward our shareholders, both
through dividends and future growth. We have made good progress in this regard,
having produced 748 555oz for the six months ended 31 December 2009.
We will continue to engage in robust, constructive debate on issues that may
affect the South African mining industry - in particular the outrageous power
price increases being considered and the nationalisation of the mines.
Graham Briggs
Chief Executive Officer
CONDENSED CONSOLIDATED INCOME STATEMENT (Rand)
Quarter ended
31 December 30 September 31 December 1
2009 2009 2008
(Unaudited) (Unaudited) (Unaudited)
Note R million R million R million
Continuing operations
Revenue 2 971 2 747 3 146
Cost of sales 2 (2 656) (2 604) (2 385)
Production cost (2 172) (2 195) (2 033)
Amortisation and
depreciation (321) (350) (310)
(Impairment)/reversal of
impairment of assets (104) - 1
Employment
termination and restructuring costs (3) - (16)
Other items (56) (59) (27)
Gross profit 315 143 761
Corporate, administration
and other expenditure (116) (88) (92)
Exploration expenditure (50) (60) (85)
Profit/(loss) on sale of
property, plant and equipment 3 1 (80)
Other (expenses)/income - net (20) (73) 159
Operating profit/(loss) 132 (77) 663
Profit/(loss) from associates 25 31 (52)
Profit on sale of
investment in associate - - -
Impairment of
investment in associate - - -
Fair value movement
of listed investments - - (116)
Profit on sale of
listed investments 3 2 -
Impairment of investments - (2) -
Investment income 54 71 107
Finance cost (37) (35) (63)
Profit/(loss) before taxation 177 (10) 539
Taxation (59) (19) (217)
Net profit/(loss)
from continuing operations 118 (29) 322
Discontinued
operations 3
Profit from
discontinued
operations - - 994
Net profit/(loss) 118 (29) 1 316
Earnings/(loss) per
ordinary share (cents) 4
- Earnings/(loss)
from continuing
operations 28 (7) 80
- Earnings from
discontinued operations - - 244
Total earnings/(loss) per
ordinary share (cents) 28 (7) 324
Diluted earnings/(loss) per
ordinary share (cents) 4
- Earnings/(loss)
from continuing operations 28 (7) 79
- Earnings from
discontinued operations - - 244
Total diluted
earnings/(loss) per
ordinary share (cents) 28 (7) 323
Six months ended Year ended
31 December 31 December1 30 June
2009 2008 2009
(Audited)
R million R million R million
Continuing operations
Revenue 5 718 5 828 11 496
Cost of sales (5 260) (4 762) (9 836)
Production cost (4 367) (3 907) (7 657)
Amortisation and depreciation (671) (618) (1 467)
(Impairment)/reversal of
impairment of assets (104) (151) (484)
Employment termination and
restructuring costs (3) (28) (39)
Other items (115) (58) (189)
Gross profit 458 1 066 1 660
Corporate, administration and
other expenditure (204) (183) (362)
Exploration expenditure (110) (137) (289)
Profit/(loss) on sale of
property, plant and equipment 4 459 965
Other (expenses)/income - net (93) 145 (101)
Operating profit/(loss) 55 1 350 1 873
Profit/(loss) from associates 56 (51) 12
Profit on sale of investment in
associate - 1 1
Impairment of investment in associate - (112) (112)
Fair value movement of listed
investments - (116) (101)
Profit on sale of listed
investments 5 - -
Impairment of investments (2) - -
Investment income 125 185 444
Finance cost (72) (149) (212)
Profit/(loss) before taxation 167 1 108 1 905
Taxation (78) (454) (196)
Net profit/(loss) from
continuing operations 89 654 1 709
Discontinued operations
Profit from discontinued operations - 1 064 1 218
Net profit/(loss) 89 1 718 2 927
Earnings/(loss) per ordinary
share (cents)
- Earnings/(loss) from
continuing operations 21 161 413
- Earnings from discontinued
operations - 263 294
Total earnings/(loss) per
ordinary share (cents) 21 424 707
Diluted earnings/(loss) per
ordinary share (cents)
- Earnings/(loss) from
continuing operations 21 161 411
- Earnings from discontinued
operations - 261 293
Total diluted earnings/(loss) per
ordinary share (cents) 21 422 704
The accompanying notes are an integral part of these condensed consolidated
financial statements.
1 The comparative figures are re-presented due to Mount Magnet being
reclassified as part of continuing operations. See note 3 in this regard.
CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME (Rand)
Quarter ended
31 December 30 September
2009 2009
(Unaudited) (Unaudited)
R million R million
Net profit/(loss) for the period 118 (29)
Attributable to:
Owners of the parent 118 (29)
Non-controlling interest - -
Other comprehensive (loss)/income for the
period, net of income tax (51) 15
Foreign exchange translation (57) 19
Mark-to-market of available-for-sale
investments 6 (4)
Total comprehensive income/(loss)
for the period 67 (14)
Attributable to:
Owners of the parent 67 (14)
Non-controlling interest - -
Quarter ended Six months ended
31 December 31 December
2008 2009
(Unaudited)
R million R million
Net profit/(loss) for the period 1 316 89
Attributable to:
Owners of the parent 1 316 89
Non-controlling interest - -
Other comprehensive (loss)/income for the
period, net of income tax (115) (36)
Foreign exchange translation (208) (38)
Mark-to-market of available-for-sale investments 93 2
Total comprehensive income/(loss)
for the period 1 201 53
Attributable to:
Owners of the parent 1 201 53
Non-controlling interest - -
Six months ended Year ended
31 December 30 June
2008 2009
(Audited)
R million R million
Net profit/(loss) for the period 1 718 2 927
Attributable to:
Owners of the parent 1 718 2 927
Non-controlling interest - -
Other comprehensive (loss)/income for the period,
net of income tax (27) (450)
Foreign exchange translation (89) (497)
Mark-to-market of available-for-sale investments 62 47
Total comprehensive income/(loss)
for the period 1 691 2 477
Attributable to:
Owners of the parent 1 691 2 477
Non-controlling interest - -
CONDENSED CONSOLIDATED BALANCE SHEET (Rand)
At At
31 December 30 September
2009 2009
(Unaudited)
Note R million R million
ASSETS
Non-current assets
Property, plant and equipment 28 862 28 457
Intangible assets 2 217 2 218
Restricted cash 167 165
Restricted investments 1 697 1 668
Investments in financial assets 20 39
Investments in associates 385 360
Inventories 5 77 -
Trade and other receivables 74 72
33 499 32 979
Current assets
Inventories 5 1 103 1 147
Income and mining taxes 55 45
Trade and other receivables 1 108 838
Restricted cash 6 280 -
Cash and cash equivalents 808 1 094
3 354 3 124
Assets of disposal groups classified
as held-for-sale 3 - -
3 354 3 124
Total assets 36 853 36 103
EQUITY AND LIABILITIES
Share capital and reserves
Share capital 28 096 28 093
Other reserves 375 388
Retained earnings/(accumulated loss) 971 853
29 442 29 334
Non-current liabilities
Deferred tax 3 317 3 265
Provision for environmental
rehabilitation 1 612 1 564
Retirement benefit obligation and
other provisions 167 166
Borrowings 7 565 108
5 661 5 103
Current liabilities
Borrowings 7 460 260
Trade and other payables 1 279 1 385
Income and mining taxes 11 21
1 750 1 666
Liabilities of disposal groups
classified as held-for-sale 3 - -
1 750 1 666
Total equity and liabilities 36 853 36 103
Number of ordinary shares in issue 426 079 492 426 024 653
Net asset value per share (cents) 6 910 6 886
At At
30 June 31 December
2009 2008
(Audited)
R million R million
ASSETS
Non-current assets
Property, plant and equipment 27 912 27 786
Intangible assets 2 224 2 223
Restricted cash 161 169
Restricted investments 1 640 1 567
Investments in financial assets 57 28
Investments in associates 329 228
Inventories - -
Trade and other receivables 75 56
32 398 32 057
Current assets
Inventories 1 035 898
Income and mining taxes 45 108
Trade and other receivables 885 2 732
Restricted cash - -
Cash and cash equivalents 1 950 1 645
3 915 5 383
Assets of disposal groups classified as
held-for-sale - 407
3 915 5 790
Total assets 36 313 37 847
EQUITY AND LIABILITIES
Share capital and reserves
Share capital 28 091 27 126
Other reserves 339 671
Retained earnings/(accumulated loss) 1 095 (114)
29 525 27 683
Non-current liabilities
Deferred tax 3 251 3 699
Provision for environmental rehabilitation 1 530 1 189
Retirement benefit obligation and other
provisions 166 153
Borrowings 110 188
5 057 5 229
Current liabilities
Borrowings 252 2 671
Trade and other payables 1 460 1 613
Income and mining taxes 19 273
1 731 4 557
Liabilities of disposal groups classified as
held-for-sale - 378
1 731 4 935
Total equity and liabilities 36 313 37 847
Number of ordinary shares in issue 425 986 836 417 637 697
Net asset value per share (cents) 6 931 6 628
The accompanying notes are an integral part of these condensed consolidated
financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Rand)
Share Other
capital reserves
Note R million R million
Balance - 30 June 2009 28 091 339
Issue of shares 5 -
Share-based payments - 72
Comprehensive income for the period - (36)
Dividends paid 8 - -
Balance as at 31 December 2009 28 096 375
Balance - 30 June 2008 25 895 676
Issue of shares 1 231 -
Share-based payments - 22
Comprehensive income for the period - (27)
Balance as at 31 December 2008 27 126 671
Retained
earnings/
(accumulated
loss) Total
R million R million
Balance - 30 June 2009 1 095 29 525
Issue of shares - 5
Share-based payments - 72
Comprehensive income for the period 89 53
Dividends paid (213) (213)
Balance as at 31 December 2009 971 29 442
Balance - 30 June 2008 (1 832) 24 739
Issue of shares - 1 231
Share-based payments - 22
Comprehensive income for the period 1 718 1 691
Balance as at 31 December 2008 (114) 27 683
CONDENSED CONSOLIDATED CASH FLOW STATEMENT (Rand)
Quarter ended
31 December 30 September
2009 2009
(Unaudited) (Unaudited)
R million R million
Cash flow from operating activities
Cash generated by operations 183 225
Interest and dividends received 52 68
Interest paid (11) (9)
Income and mining taxes paid (34) (25)
Cash generated by operating activities 190 259
Cash flow from investing activities
(Increase)/decrease in restricted cash (283) (3)
Net proceeds on disposal of listed investments 29 15
Net (additions to)/disposal of property,
plant and equipment (890) (907)
Other investing activities (3) 8
Cash (utilised)/generated by investing
activities (1 147) (887)
Cash flow from financing activities
Borrowings raised 686 -
Borrowings repaid (18) (7)
Ordinary shares issued - net of expenses 3 2
Dividends paid - (213)
Cash generated/(utilised) by financing
activities 671 (218)
Foreign currency translation adjustments - (10)
Net (decrease)/increase in cash and cash
equivalents (286) (856)
Cash and cash equivalents - beginning of period 1 094 1 950
Cash and cash equivalents - end of period 808 1 094
Quarter ended Six months ended
31 December 31 December
2008 2009
(Unaudited)
R million R million
Cash flow from operating activities
Cash generated by operations 1 155 408
Interest and dividends received 112 120
Interest paid (62) (20)
Income and mining taxes paid (142) (59)
Cash generated by operating activities 1 063 449
Cash flow from investing activities
(Increase)/decrease in restricted cash 13 (286)
Net proceeds on disposal of listed investments - 44
Net (additions to)/disposal of property,
plant and equipment (840) (1 797)
Other investing activities 64 5
Cash (utilised)/generated by investing activities (763) (2 034)
Cash flow from financing activities
Borrowings raised - 686
Borrowings repaid (698) (25)
Ordinary shares issued - net of expenses 980 5
Dividends paid - (213)
Cash generated/(utilised) by financing activities 282 453
Foreign currency translation adjustments (122) (10)
Net (decrease)/increase in cash and cash
equivalents 460 (1 142)
Cash and cash equivalents - beginning of period 1 186 1 950
Cash and cash equivalents - end of period 1 646 808
Six months ended Year ended
31 December 30 June
2008 2009
(Audited)
R million R million
Cash flow from operating activities
Cash generated by operations 1 825 2 813
Interest and dividends received 194 457
Interest paid (174) (280)
Income and mining taxes paid (143) (704)
Cash generated by operating activities 1 702 2 286
Cash flow from investing activities
(Increase)/decrease in restricted cash (90) (83)
Net proceeds on disposal of listed investments - -
Net (additions to)/disposal of property,
plant and equipment (42) 979
Other investing activities 74 (79)
Cash (utilised)/generated by investing activities (58) 817
Cash flow from financing activities
Borrowings raised - -
Borrowings repaid (1 286) (3 738)
Ordinary shares issued - net of expenses 988 1 953
Dividends paid - -
Cash generated/(utilised) by financing activities (298) (1 785)
Foreign currency translation adjustments (115) 217
Net (decrease)/increase in cash and cash equivalents 1 231 1 535
Cash and cash equivalents - beginning of period 415 415
Cash and cash equivalents - end of period 1 646 1 950
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2009
1. Accounting policies
Basis of accounting
The condensed consolidated interim financial statements for the period ended 31
December 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 2009. These condensed consolidated interim financial
statements are prepared in accordance with IAS 34, Interim Financial Reporting
and in the manner required by the Companies Act of South Africa. They should be
read in conjunction with the annual financial statements for the year ended 30
June 2009.
2. Cost of sales
Quarter ended
31 December 30 September
2009 2009
(Unaudited) (Unaudited)
R million R million
Production costs 2 172 2 195
Amortisation and depreciation 321 350
Impairment/(reversal of impairment) of assets 104* -
Provision for rehabilitation costs 4 4
Care and maintenance cost of restructured shafts 13 21
Employment termination and restructuring costs 3 -
Share-based payments 38 34
Provision for post-retirement benefits 1 -
Total cost of sales 2 656 2 604
Quarter ended Six months ended
31 December 1 31 December
2008 2009
(Unaudited)
R million R million
Production costs 2 033 4 367
Amortisation and depreciation 310 671
Impairment/(reversal of impairment) of assets (1) 104*
Provision for rehabilitation costs 3 8
Care and maintenance cost of restructured shafts 14 34
Employment termination and restructuring costs 16 3
Share-based payments 9 72
Provision for post-retirement benefits 1 1
Total cost of sales 2 385 5 260
Six months ended Year ended
31 December 1 30 June
2008 2009
(Audited)
R million R million
Production costs 3 907 7 657
Amortisation and depreciation 618 1 467
Impairment/(reversal of impairment) of assets 151 484
Provision for rehabilitation costs 10 21
Care and maintenance cost of restructured shafts 25 53
Employment termination and restructuring costs 28 39
Share-based payments 22 113
Provision for post-retirement benefits 1 2
Total cost of sales 4 762 9 836
1 The comparative figures are re-presented due to Mount Magnet being
reclassified as part of continuing operations. See note 3 in this regard.
*The impairment recorded in the December 2009 quarter relates to Brand 3 and
Evander 2 & 5, which have been placed on care and maintenance.
3. Disposal groups classified as held-for-sale and discontinued operations
Following approval by the Board of Directors in April 2007, the assets and
liabilities related to Mount Magnet (an operation 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 re-presented taking
this change into account.
4. 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 31 December 2009: 425.9
million (30 September 2009: 425.9 million, 31 December 2008: 406.8 million),
and the six months ended 31 December 2009: 425.9 million (31 December 2008:
405.0 million) and the year ended 30 June 2009: 414.1 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 31 December 2009: 427.5 million (30 September 2009: 427.2 million,
31 December 2008: 409.1 million), and the six months ended 31 December 2009:
427.4 million (31 December 2008: 407.1 million) and the year ended 30 June
2009: 416.0 million.
Quarter ended
31 December 30 September 31 December1
2009 2009 2008
(Unaudited) (Unaudited) (Unaudited)
Total earnings/(loss) per
ordinary share (cents):
Basic earnings/(loss) 28 (7) 324
Fully diluted earnings/(loss) 28 (7) 323
Headline earnings/(loss) 49 (12) 121
- from continuing operations 49 (12) 98
- from discontinued operations - - 23
R million R million R million
Reconciliation of headline
earnings/(loss):
Continuing operations
Net profit/(loss) 118 (29) 322
Adjusted for (net of tax):
(Profit)/loss on sale of
property, plant and equipment (2) (1) 78
Profit on sale of listed investments (3) (1) -
Fair value movement of listed
investments - - -
Foreign exchange gain
reclassified from equity - (22) -
Profit on sale of associate - - -
Impairment of investment in associates - - -
Impairment of investments - 2 -
Impairment/(reversal of impairment)
of property, plant and equipment 94 - (1)
Headline earnings/(loss) 207 (51) 399
Discontinued operations
Net profit - - 994
Adjusted for (net of tax):
Profit on sale of property,
plant and equipment - - (901)
Headline earnings - - 93
Total headline earnings/(loss) 207 (51) 492
Six months ended Year ended
31 December 31 December1 30 June
2009 2008 2009
(Audited)
Total earnings/(loss) per
ordinary share (cents):
Basic earnings/(loss) 21 424 707
Fully diluted earnings/(loss) 21 422 704
Headline earnings/(loss) 37 145 262
- from continuing operations 37 105 239
- from discontinued operations - 40 23
R million R million R million
Reconciliation of headline
earnings/(loss):
Continuing operations
Net profit/(loss) 89 654 1 709
Adjusted for (net of tax):
(Profit)/loss on sale of
property, plant and equipment (3) (490) (975)
Profit on sale of listed investments (4) - -
Fair value movement of listed
investments - - 71
Foreign exchange gain
reclassified from equity (22) - (384)
Profit on sale of associate - - (1)
Impairment of investment in associates - 112 112
Impairment of investments 2 - -
Impairment/(reversal of impairment)
of property, plant and equipment 94 151 457
Headline earnings/(loss) 156 427 989
Discontinued operations
Net profit - 1 064 1 218
Adjusted for (net of tax):
Profit on sale of property,
plant and equipment - (901) (1 121)
Headline earnings - 163 97
Total headline earnings/(loss) 156 590 1 086
1 The comparative figures are re-presented due to Mount Magnet being
reclassified as part of continuing operations. See note 3 in this regard.
5. Inventories
During the quarter ended 31 December 2009, the Group concluded two separate
purchase agreements with Pamodzi Gold Free State (Proprietary) Limited (In
Provisional Liquidation) (Pamodzi), for the purchase of a waste rock dump and
a gold plant to the value of R120 million. The Group`s intention is to break up
the plant and extract the gold in lock-up. The portion of inventory that is
expected to be recovered more than twelve months after balance sheet date has
been classified as non-current.
6. Restricted cash
The Group entered into two separate purchase agreements with Pamodzi for the
purchase of Pamodzi`s Free State North and South Assets for a total
consideration of R280 million.
The Group had an obligation in terms of the North and South agreements to pay,
at the conclusion of the later of the waste rock dump and plant agreements, an
amount equal to the purchase consideration into an escrow account as the North
and South sale of assets agreements were not yet unconditional on 31 December
2009. The escrow account is an interest-bearing trust account on which the
interest accrues to the benefit of the Group.
7. Borrowings
31 December 30 September 30 June 31 December
2009 2009 2009 2008
(Unaudited) (Audited)
R million R million R million R million
Total long-term
borrowings 565 108 110 188
Total current
portion of borrowings 460 260 252 2 671
Total borrowings
(1) (2) 1 025 368 362 2 859
(1) On 11 December 2009, the Company entered into a loan facility with Nedbank
Limited, comprising of a Term Facility of R900 million and a Revolving Credit
Facility of R600 million. Interest accrues on a day-to-day basis over the term
of the loan at a variable interest rate, which is fixed for a three-month
period, equal to JIBAR plus 3.5%. Interest is repayable quarterly.
The Term Facility is repayable bi-annually in equal instalments of R90 million
over five years. The Revolving Credit Facility is repayable after three years.
The Group drew down R650 million of the Term Facility during December 2009.
(2) Included in the borrowings is R102 million (September 2009: 104 million;
June 2009: R106 million; December 2008: R198 million) owed to Westpac Bank
Limited in terms of a finance lease agreement. The future minimum lease
payments are as follows:
31 December 30 September
2009 2009
(Unaudited)
R million R million
Due within one year 32 31
Due between one and five years 73 76
105 107
Future finance charges (3) (3)
Total future minimum lease payments 102 104
30 June 31 December
2009 2008
(Audited)
R million R million
Due within one year 30 63
Due between one and five years 80 156
110 219
Future finance charges (4) (21)
Total future minimum lease payments 106 198
8. Dividend declared
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, amounting to
R213 million was paid on 21 September 2009.
31 December 30 September
2009 2009
(Unaudited)
Dividend declared (R million) - 213
Number of shares in issue (thousands) 426 079 426 025
Dividend per share (cents) - 50
30 June 31 December
2009 2008
(Audited)
Dividend declared (R million) - -
Number of shares in issue (thousands) 425 987 417 638
Dividend per share (cents) - -
9. Commitments and contingencies
31 December 30 September
2009 2009
(Unaudited)
R million R million
Capital expenditure commitments
Contracts for capital expenditure 411 528
Authorised by the directors but not contracted
for 1 771 1 829
2 182 2 357
30 June 31 December
2009 2008
(Audited)
R million R million
Capital expenditure commitments
Contracts for capital expenditure 478 692
Authorised by the directors but not contracted
for 734 1 689
1 212 2 381
This expenditure will be financed from existing resources and borrowings where
necessary.
Contingent liability
Class action. On 18 April 2008, Harmony Gold Mining Company Limited was made
aware that it has been named or may be named as a defendant in a lawsuit filed
in the U.S. District Court in the Southern District of New York on behalf of
certain purchasers and sellers of Harmony`s American Depository Receipts (ADRs)
with regard to certain of its business practises. Harmony has retained legal
counsel, who advise Harmony on further developments in the U.S.
During January 2009, the plaintiff filed an Amended Complaint with the Court.
Subsequently, the Company filed a Motion to Dismiss all claims asserted in the
Class Action Case with the Court. The plaintiffs have filed an opposing
response and the Company has since replied to that response. It is not possible
to predict with certainty when the Court will rule on the Motion of Dismiss as
the timing of the ruling is entirely within the discretion of the Court. It is
currently not possible to estimate if there will be a financial effect, or what
that effect might be.
10. Subsequent events
In January 2010, the sale of Big Bell Operations (Proprietary) Limited, an
operation in Western Australia, was concluded, in which the Group received an
amount of AU$3.0 million and the release on performance bonds of AU$3.1
million.
11. Segment report
The segment report follows below.
12. Reconciliation of segment information to consolidated income statements and
balance sheet
31 December 31 December
2009 2008
R million R million
The "Reconcilliation 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
Production costs from:
Discontinued operations - 447
Reconciliation of cash operating profit to
gross profit:
Total segment revenue 5 718 6 442
Total segment production costs (4 367) (4 354)
Cash operating profit as per segment report 1 351 2 088
Less: Discontinued operations - (167)
Cash operating profit as per segment report 1 351 1 921
Cost of sales items other than production costs (893) (855)
Amortisation and depreciation (671) (618)
Impairment of assets (104) (151)
Employment termination and restructuring costs (3) (28)
Share-based payments (72) (22)
Rehabilitation costs (8) (10)
Care and maintenance costs of restructured shafts (34) (25)
Provision for post-retirement benefits (1) (1)
Gross profit as per income statements * 458 1 066
Reconciliation of total segment mining assets to
consolidated property, plant and equipment:
Property, plant and equipment not allocated to
a segment:
Mining assets 755 569
Undeveloped property 5 386 5 168
Other non-mining assets 66 51
Less: Non-current assets previously classified
as held-for-sale - (280)
6 207 5 508
* 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. Review report
The condensed consolidated financial statements for the six months ended 31
December 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 report is available for inspection at the
Company`s registered office.
SEGMENT REPORT FOR THE SIX MONTHS ENDED 31 DECEMBER 2009 (Rand/Metric)
Cash Cash
production operating Mining
Revenue cost profit assets
R million R million R million R million
Operations
South Africa
Underground
Bambanani 490 369 121 680
Doornkop 259 209 50 2 699
Elandsrand 741 571 170 2 894
Evander 599 559 40 906
Masimong 648 360 288 711
Phakisa 161 139 22 3 898
Target 414 308 106 2 301
Tshepong 886 583 303 3 627
Virginia 813 789 24 841
Joel 291 209 82 135
Surface
All surface operations (1) 416 271 145 141
Total South Africa 5 718 4 367 1 351 18 833
International
Papua New Guinea (2) - - - 3 805
Mount Magnet - - - 17
Total international - - - 3 822
Total operations 5 718 4 367 1 351 22 655
Reconciliation of the
segment information to
the consolidated income
statement and balance sheet
(refer to note 12) - - 6 207
5 718 4 367 28 862
Capital Kilograms Tonnes
expenditure produced milled
R million kg* t`000*
Operations
South Africa
Underground
Bambanani 51 1 878 270
Doornkop 151 990 278
Elandsrand 236 3 012 495
Evander 106 2 296 504
Masimong 85 2 601 469
Phakisa 266 610 158
Target 161 1 700 384
Tshepong 129 3 395 814
Virginia 99 3 253 1 015
Joel 50 1 106 248
Surface
All surface operations (1) 44 1 674 4 384
Total South Africa 1 378 22 515 9 019
International
Papua New Guinea (2) 429 768 -
Mount Magnet - - -
Total international 429 768 -
Total operations 1 807 23 283 9 019
Reconciliation of the segment
information to the consolidated
income statement and
balance sheet (refer to note 12)
Notes:
(1) Includes Kalgold, Phoenix and Dumps.
(2) Production statistics for Hidden Valley are shown for information purposes.
The mine is in a build-up phase and revenue and cost are currently capitalised
until commercial levels of production are reached.
* Production statistics are not reviewed.
This report was approved by the Board of Directors and is signed on their
behalf by:
G P Briggs H O Meyer Randfontein
Chief Executive Officer Financial Director 8 February 2010
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
South Africa
Telephone: +27 11 411 2000
Website: http://www.harmony.co.za
Directors
PT Motsepe (Chairman)*
GP Briggs (Chief Executive Officer)
HO Meyer (Financial Director)
F Abbott (Executive Director)
JA Chissano*1
FFT De Buck*, Dr C Diarra*+,
KV 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
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
United Kingdom Registrars
Capita Registrars
The Registry
34 Beckenham Road
Bechenham
Kent BR3 4TU
United Kingdom
Telephone: +44 (0)20 8639 3399
0871 664 0300 (UK)
Fax: +44 (0) 20 8639 2220
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
Date: 08/02/2010 08:00:02 Supplied by www.sharenet.co.za
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