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HARMONY GOLD MINING COMPANY LIMITED - Operational overview for the 12 months ended 30 June 2020

Release Date: 12/08/2020 15:47:00      Code(s): HAR       PDF(s):  
Operational overview for the 12 months ended 30 June 2020

Harmony Gold Mining Company Limited
Registration number 1950/038232/06
Incorporated in the Republic of South Africa
ISIN: ZAE000015228
JSE share code: HAR
(“Harmony” and/or “the Company”)


Johannesburg, South Africa. Wednesday, 12 August 2020. Harmony Gold
Mining Company Limited (“Harmony” or “the Company”) is pleased to
provide an operational overview for the 12 months ended
30 June 2020.

Gold production in final quarter of financial year 2020 (“FY20”)
higher than anticipated

On 27 March 2020, South Africa was placed under national lockdown, to
curb the spread of the Coronavirus (“COVID-19”) and allow the country
time in which to prepare for the demands the pandemic would have on
its health care system. All of Harmony’s underground operations were
placed on care and maintenance, with the surface operations permitted
to continue working at close  to  100% capacity. On
1 May 2020, South African underground  operations  were granted
concessions to start producing at a maximum capacity of 50% and as of
1 June 2020, operational restrictions were lifted further to allow the
mining industry to operate at 100% capacity.

The resumption of work has been in strict compliance with Harmony’s
COVID-19 Standard Operating Procedure. Our Standard Operating
Procedure has been informed by guidelines provided by the Department
of Mineral Resources and Energy, the National Council for Infectious
Diseases and the World Health Organisation.

Return to work has progressed smoothly albeit slowly, with the return
of foreign nationals to South Africa taking longer than anticipated.
Harmony has approximately 5 500 migrant workers that went to their
respective countries during lockdown and while they have started
returning, Harmony will only return to pre-lockdown production levels
towards the end of August 2020.

Despite the disruption of COVID-19, the South African operations
managed to achieve up to 75% of planned production during the last
quarter of the financial year, which was higher than initially
expected by  Harmony. However,  year on year, total  annual gold
production was 15% lower at 37 863kg, or 1.2Moz, mainly due to the
impact of the COVID-19 national lockdown and phased recovery in South

Year on year, the average underground recovered grade of the South
African assets was 2.5% lower at 5.45g/t (FY19: 5.59/t), mainly due to
the impact of ongoing remedial actions to address geological challenges
and seismicity at Kusasalethu, while surface operations posted a 3.9%
improvement in grade to 0.267g/t. As Hidden Valley in Papua New Guinea
transitions from Stage 5 to Stage 6, recovered grade decreased to
1.25g/t at year end from 1.60g/t in financial year 2019 (“FY19”).

Due to lower production year on year, the all-in sustaining costs for
all operations is expected to be between 17% to 19% higher at about
R645 000/kg to R655 000/kg (FY19: R550 005/kg). In US dollar terms,
all-in sustaining costs is expected to only increase by between 6% to
8% from US$1 280/oz to US$1 300/oz (FY19: US$1 207) as the Company
benefitted from a weaker average Rand exchange rate against the US
dollar in FY20.

Gold prices have rallied to an all-time high following the global
economic fallout of COVID-19 and  ongoing  geopolitical  uncertainty
supporting its safe haven status with investors. The average gold
price received for the FY20 was 25% higher at R735 569/kg than in FY19

(R586 653/kg) (in dollar terms, the gold price increased by 14% from
US$1 287/oz to US$1 461/oz), resulting in strong operating cash flows
year on year. It is estimated that the operating free cash flow margin
for FY20 may double – from 7% in the previous financial year to about
13% to 15% in FY20.

Harmony’s  directors have  taken   responsibility  for this operating
overview. The auditors have not reviewed or reported on any of the
financial information included in the announcement.

Key elements of safety journey reinforced through COVID-19 operating

At Harmony, the health and safety of our employees is our first value.
Across   our  operations   we   are   reinforcing  the  key elements of our
safety journey  – leadership,  risk  management  and  attainment of a
proactive safety culture, with the aim of preventing fatal accidents.

Harmony’s overall safety performance improved in FY20, recording a
group lost-time injury frequency rate of 6.33 per million hours worked
(FY19:6.16).The   group fatality injury rate  improved to 0.08
(FY19:0.12). Frequency rates are measured per million hours worked.

Tragically, one of our colleagues lost his life in a mining related
incident during the fourth quarter of the financial year. We extend
our heartfelt condolences to the families, friends and colleagues of
Papa Ernest Dael.

Of the close to 4% of the Company’s employees who have contracted
COVID-19, 80% has already recovered. “We wish those who have been
infected a speedy recovery. We mourn the loss of 20 of our colleagues
who lost their battle against the pandemic and urge those who have not
been infected to remain vigilant as we brave the storm,” said Peter
Steenkamp, chief executive officer of Harmony.

Update on acquisition of Mponeng and Mine Waste Solutions

Harmony’s intention to acquire the last of AngloGold Ashanti’s assets
in South Africa for US$300 million (comprising a $200 million cash
and $100 million deferred consideration) was announced in February

The transaction, which will officially entrench Harmony’s position as
South Africa’s largest gold producer, is well advanced and the only
conditions  precedent  that  remain  outstanding to conclude  the
acquisition are those related to the rectification and approval for
the transfer of the mining rights in respect of the West Wits mines
(Mponeng and Mine Waste Solutions) from AngloGold Ashanti to Harmony
by the Department of Mineral Resources and Energy in accordance with
the Mineral and Petroleum Resources Development Act.

Expected impact on headline earnings due to derivative and foreign
exchange losses

The year-on-year  weakening of the  Rand against the US dollar
negatively impacted on the translation of the Company’s US dollar
facility, while also affecting the valuation of the foreign exchange
derivatives. The increase in the gold price - both in US dollar and in
Rand terms - negatively impacted on the valuation of the gold hedges.
As such, it is expected that these changes may have an impact on the
Company’s headline earnings. The group continues to enjoy favourable
commodity and foreign exchange pricing on the unhedged portion of its
exposure, whilst simultaneously locking-in the current higher prices
as part of its hedging programme.

Provisional annual results postponed to mid-September

During July 2020 there has been a marked increase in infection rates
across South Africa. Preparations for the reporting of the Company’s
year-end results have been slowed owing to the responsible employees

and external audit team members having to manage their schedules in
compliance with COVID-19 protective measures. As South Africa moves
into the peak of the COVID-19 pandemic, Harmony has prioritised the
safety and health of its employees, as well as those of service-
providers required to visit the Company’s offices and operations.

Consequently, the reporting of the provisional financial results for
the year ended 30 June 2020 has been rescheduled. The release of its
provisional results, initially planned for 18 August 2020, will not be
achievable. Due to the extended  processes involved to properly
consider the impact  of COVID-19 and  related  disclosures, various
reporting and audit streams are not yet finalized. Harmony therefore
felt it was prudent that it postpones its results to mid-September
2020 to ensure that the  FY20 numbers are accurate, reliable  and
reviewed by our  auditors, whilst still meeting  JSE reporting

The JSE has also  recognised  the impact of COVID-19  on year-end
reporting and has granted concessions, allowing companies to file
their   integrated  annual reports later than within   the usual four
months post year-end. Harmony believes it will be able to achieve its
original planned filing of the annual report on or about the 26th of
October 2020.

A word of thanks

Harmony thanks its stakeholders for partnering with it in its drive to
curb the spread of COVID-19, and particularly its employees, for their
exemplary conduct in these challenging times.


For more details, contact:

Marian van der Walt
Executive: Corporate and Investor Relations
+27(0) 82 888 1242 (mobile)

Max Manoeli
Senior Investor Relations Coordinator
+27(0) 82 759 1775 (mobile)
Johannesburg, South Africa
12 August 2020

J.P. Morgan Equities South Africa Proprietary Limited


Date: 12-08-2020 03:47:00
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