Harmony Gold Announces Proposed Efficiency Gains at Gold Fields
November 04 2004 - 8:43AM
PR Newswire (US)
Harmony Gold Announces Proposed Efficiency Gains at Gold Fields
JOHANNESBURG, South Africa, Nov. 4 /PRNewswire-FirstCall/ --
Harmony Gold Mining Company Limited (NYSE:HMY)(JSE:HAR) today
announced details of its proposed cost saving measures, which will
deliver at least ZAR 1 billion per annum in improved pre-tax
operating profit at Gold Fields' (NYSE:GFI)(JSE: GFI) South African
operations. Harmony Chief Executive, Bernard Swanepoel said: "Now
that we have seen the detail of Gold Fields defence, we are
providing detail of our own cost savings proposals -- we wouldn't
have wanted to give Gold Fields a route map to success prior to the
launch of their defence. "Last week Gold Fields announced new cost
savings initiatives of ZAR 200 to 300 million in South Africa,
though given the circumstances one has to treat this with a pinch
of salt. However, it does confirm the potential for cost savings
that Harmony has identified. The key difference between Harmony and
Gold Fields is that while Gold Fields has spent 6 years thinking
about efficiency improvements, Harmony has a track record of
delivering such improvements time and time again." Harmony has
stated that it can achieve sustainable cost reductions equivalent
to 15% per annum in Gold Fields' South African cost structure, over
and above Gold Fields current efficiency initiatives. Harmony will
do this through applying the 'Harmony Way', which has been so
effective at other mines in South Africa, including mines
previously owned by Gold Fields. Specifically for Gold Fields
current operations, Harmony sees opportunities to improve the cost
structure as follows: Planned Savings at Gold Fields Harmony Cost
Total Cost Reduction Cost Savings 2004 Target as a % of (ZAR m)
(ZAR m) total Head Office 140 98 1.45% Total Operations Cost 6589
Labour cost 330 5% Synergies: Stores 264 4% Electricity & Water
132 2% Other cost, incl G&A, Services 297 4.50% Contractors 66
1% Total Savings from operations 6729 1185 17.95% Capital
Optimisation 880 66 Additional Development -150 Total Cost Savings
1101 16.36% Previously Achieved Savings Evander St Helena
Randfontein Elandsrand Head Office Total Operations Cost Labour
cost 20% 18% 8% 8% Synergies: Stores 4% 8% 13% 2% Electricity &
Water 2% 5% 3% 2% Other cost, incl G&A, Services 7% -2% -3% 7%
Contractors 1% 2% 4% -1% Total Savings from operations 33% 32% 35%
17% Capital Optimisation Additional Development Total Cost Savings
"We have based these targets on our previous experience so this is
not just wishful thinking, even without full due diligence. The
Harmony Way is to reduce overall costs and to increase the
proportion of jobs actually at the mining level. Our history shows
that we are job preservers in that we are able to extend the life
of the mines we acquire. "In the case of Gold Fields, any jobs lost
will be at the head office, senior management and service level,"
said Bernard. The development of the Gold Fields' mines is another
key aspect of Harmony's proposal. While Gold Fields has effectively
put these mines in harvest mode, Harmony intends to invest in their
future. Again, Harmony has done this in the past, turning
previously abandoned reserves into growth projects. When these
projects are completed, abandoned reserves from previous Harmony
acquisitions will produce an aggregate of over 1.5 million higher-
grade, lower cost additional ounces per annum. "Gold Fields is
condemning its South African assets to a lingering death. Harmony
will enhance their life. As Ian Cockerill said at the presentation
of Gold Fields' formal defence, 'The Harmony Way works in South
Africa ... '," commented Bernard. Attached: Note to Editors - The
Harmony Way Harmony will host a conference call at 0930hrs (EST)
today. Slides for this call will be available at 1530hrs (South
Africa) 0830hrs (EST) on http://www.harmony.co.za/ South Africa UK
Toll: 011 535 3600 Toll Free: 0800 917 7042 Toll Free: 0800 200 648
USA Canada Toll: 1 412 858 4600 Toll Free: 1 866 519 5086 Toll
Free: 1800 860 2442 Australia Europe and Other Toll Free: 1800 350
100 Toll: +41 916 105 600 Toll Free: +800 246 78 700 In connection
with the proposed acquisition of Gold Fields, Harmony has filed a
registration statement on Form F-4, which includes a preliminary
prospectus and related exchange offer materials, to register the
Harmony ordinary shares (including Harmony ordinary shares
represented by Harmony American Depositary Shares (ADSs)) to be
issued in exchange for Gold Fields ordinary shares held by Gold
Fields shareholders located in the US and for Gold Fields ADSs held
by Gold Fields shareholders wherever located, as well as a
Statement on Schedule TO. Investors and holders of Gold Fields
securities are strongly advised to read the registration statement
and the preliminary prospectus, the related exchange offer
materials and the final prospectus (when available), the Statement
on Schedule TO and any other relevant documents filed with the
Securities and Exchange Commission (SEC), as well as any amendments
and supplements to those documents, because they will contain
important information. Investors and holders of Gold Fields
securities may obtain free copies of the registration statement,
the preliminary and final prospectus (when available), related
exchange offer materials and the Statement on Schedule TO, as well
as other relevant documents filed or to be filed with the SEC, at
the SEC's web site at http://www.sec.gov/. The preliminary
prospectus and other transaction-related documents may be obtained
for free from MacKenzie Partners, Inc., the information agent for
the U.S. offer, at the following address: 105 Madison Avenue, New
York, New York 10016; telephone 1 (212) 929 5500 (call collect) or
1 (800) 322 2885 (toll-free call); e-mail . Investors and security
holders may obtain a free copy of the Form 20-F filed with the SEC
on October 5, 2004, as amended, and any other documents filed with
or furnished to the SEC by Harmony at http://www.sec.gov/. This
communication is for information purposes only. It shall not
constitute an offer to purchase or exchange or the solicitation of
an offer to sell or exchange any securities of Gold Fields or an
offer to sell or exchange or the solicitation of an offer to buy or
exchange any securities of Harmony, nor shall there be any sale or
exchange of securities in any jurisdiction in which such offer,
solicitation or sale or exchange would be unlawful prior to the
registration or qualification under the laws of such jurisdiction.
The distribution of this communication may, in some countries, be
restricted by law or regulation. Accordingly, persons who come into
possession of this document should inform themselves of and observe
these restrictions. The solicitation of offers to buy Gold Fields
ordinary shares (including Gold Fields ordinary shares represented
by Gold Fields ADSs) in the United States will only be made
pursuant to a prospectus and related offer materials that Harmony
expects to send to holders of Gold Fields securities. The Harmony
ordinary shares (including Harmony ordinary shares represented by
Harmony ADSs) may not be sold, nor may offers to buy be accepted,
in the United States prior to the time the registration statement
becomes effective. No offering of securities shall be made in the
United States except by means of a prospectus meeting the
requirements of Section 10 of the United States Securities Act of
1933, as amended. Forward-looking Statements Statements in this
announcement include "forward-looking statements" that express or
imply expectations of future events or results. Forward-looking
statements are statements that are not historical facts. These
statements include financial projections and estimates and their
underlying assumptions, statements regarding plans, objectives and
expectations with respect to future operations, products and
services, and statements regarding future performance.
Forward-looking statements are generally identified by the words
"expect," "anticipates," "believes," "intends," "estimates" and
similar expressions. All forward-looking statements involve a
number of risks, uncertainties and other factors, and Harmony
cannot give assurances that such statements will prove to be
correct. Risks, uncertainties and other factors that could cause
actual events or results to differ from those expressed or implied
by the forward-looking statements include, without limitation, the
satisfaction of closing conditions, the acceptance or rejection of
any agreement by regulators, delays in the regulatory processes,
changes in the economic or political situation in South Africa, the
European Union, the United States of America and/or any other
relevant jurisdiction, changes in the gold industry within any such
country or area or worldwide and the performance of (and cost
savings realised by) Harmony. Although Harmony's management
believes that the expectations reflected in such forward-looking
statements are reasonable, investors and holders of Gold Fields
securities are cautioned that forward-looking information and
statements are subject to various risks and uncertainties, many of
which are difficult to predict and generally beyond the control of
Harmony, that could cause actual results and developments to differ
materially from those expressed in, or implied or projected by, the
forward-looking information and statements. These risks and
uncertainties include those discussed or identified in the public
filings with the SEC made by Harmony and Gold Fields, including
those listed under "Cautionary Statement Concerning Forward-Looking
Statements" and "Risk Factors" in the preliminary prospectus
included in the registration statement on Form F-4 that Harmony
filed with the SEC. Harmony does not undertake any obligation to
update any forward-looking information or statements. You may
obtain a free copy of the registration statement and preliminary
and final prospectus (when available) and other public documents
filed with the SEC in the manner described above. The directors of
Harmony accept responsibility for the information contained in this
announcement. To the best of the knowledge and belief of the
directors of Harmony (who have taken all reasonable care to ensure
that such is the case), the information contained in this
announcement is in accordance with the facts and does not omit
anything likely to affect the import of such information. NOTE TO
EDITORS - THE HARMONY WAY A fundamental aspect of Harmony's success
has been the application of the unique "Harmony Way," a set of
management practices and philosophies that essentially flatten the
management structure and empower individuals and mine management
teams. Four cornerstones underlie this approach: 1. Creating value
is about the business of gold mining We spend money on what really
counts -- the business of gold mining -- most importantly it is an
intense focus on the development and optimization of the value
contained in the ore body. It is this scientific approach to ore
body optimization and disciplined approach to cost reduction which
has enabled Harmony to successfully make money out of mines that
other operators have regarded as throwaway. These principles apply
equally to existing long life operations. 2. No frills Our
disciplined cost management approach enables us to reduce cut-offs,
thereby dramatically increasing the proportion of the ore body that
is available to be mined economically -- thus increasing the number
of ounces in the ore body, extending the life of mines and saving
jobs. Some people criticize Harmony's "no frills" approach.
However, our people take pride in the fact that we don't spend
money on anything that isn't revenue generating (like the thickness
of the carpet, the neatness of the gardens, and the smoothness of
the roads). At Harmony the "garden" is underground, i.e. our ore
body. That's where our focus and our future lie. 3. We believe in
the ability of our people -- all our people We believe that it's
our crews operating underground that make the difference. They are
the key revenue generators in our business. The rest of us are
actually "costs" -- which need to be justified as adding value or
delivering a cost efficient service to enable the crew at the rock
face to perform the task of extracting the ore body more
efficiently. 4. We are lean The management structures that
outsiders see are a real demonstration of this belief. We have a
head office/corporate office, which accommodate no more than eight
executives. We have no mine related regional offices and extremely
flat management structures on our operations. We have forgone the
convoluted hierarchical structures that have traditionally dogged
the mining industry and are fundamentally based on the premise of
supervisors to supervise supervisors. Instead, Harmony has four
levels of management on each shaft because that is what we believe
is needed to mine optimally. The 26 heads of individual mines and
plants report directly to the executive team. By creating an
enabling and empowering environment, the individual's productivity
improves and consequently the efficiency and the overall
performance of the entire business improve. In summary, the Harmony
Way is not rocket science ... anything but. It's a back-to-basics
approach which brings simple, yet dynamic, business thinking (cost,
value, focus and attention to detail) to the mining equation; a
philosophy that if you create the right environment, ordinary
people will do extraordinary things; all wrapped up in a belief
that the right attitude can make ANYTHING possible. DATASOURCE:
Harmony Gold Mining Company Limited CONTACT: Issued by (direct
line, mobile): Harmony Gold - Ferdi Dippenaar, +27-11-684-0140,
+27-82-807-3684, or Corne Bobbert, +27-11-684-0146,
+27-83-380-6614; or United States - Financial Dynamics Business
Communications - Hollis Rafkin-Sax, +1-212-850-5789,
+1-917-509-0255, or Torie Pennington, +1-212-850-5629,
+1-917-838-1369, all for Harmony Gold Mining Company Limited; or
South Africa - Beachhead Media & Investor Relations - Jennifer
Cohen, +27-11-214-2401, +27-82-468-6469, or Patrick Lawlor,
+27-11-214-2410, +27-82-459-6709, both for Harmony Gold Mining
Company Limited; or United Kingdom - Financial Dynamics Business
Communications - Nic Bennett, +44-207-269-7115, +44-7979-536-619,
or Charles Watenphul, +44-207-269-7216, or +44-7866-438-013, both
for Harmony Gold Mining Company Limited Web site:
http://www.harmony.co.za/
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