NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2022 (RAND)
1. ACCOUNTING POLICIES
Basis of accounting
The condensed consolidated financial statements for the year ended 30 June 2022 have been prepared in accordance with the requirements of the JSE Limited Listings Requirements for provisional reports and the requirements of the Companies Act no. 71 of 2008 of South Africa. The Listings Requirements require provisional reports to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of the condensed consolidated financial statements are in terms of IFRS and are consistent with those applied in the previous consolidated annual financial statements. There were no new standards, amendments to standards or interpretations that became effective that had a material impact on the group's results or financial position.
The condensed consolidated financial statements have been prepared on a going concern basis.
During the year ended 30 June 2022, Mine Waste Solutions (MWS) was identified as a separate reportable segment as a result of it exceeding the quantitative threshold of 10% of total reported profit as set out in IFRS 8 Operating Segments. This resulted in MWS's segment information being disaggregated from the All other surface operations segment. In accordance with the requirements of IFRS, the June 2021 comparative information has been re-presented in the segment report.
Note 16 includes the revised figures for certain prescribed officers' shares held at 30 June 2021.
2. IMPACT OF CHANGES IN GLOBAL OPERATING AND ECONOMIC ENVIRONMENT
Covid-19
In South Africa, the national lockdown that began on 27 March 2020 to curb the spread of the Coronavirus (Covid-19) came to an end during April 2022. This led to the discontinuance of all Covid-19 regulations which had been put in place. In Papua New Guinea, where the Hidden Valley operation is located, significant decreases in positive cases have been experienced for the 2022 calendar year. In prior years, the group had been able to carry out its operations in Papua New Guinea during the state of emergency which had been imposed by the government.
The virus will still be prevalent in normal day-to-day living. However, unlike before, a significant percentage of the population has been vaccinated against Covid-19. This puts Harmony in a favourable position to manage Covid-19 as part of normal day-to-day activities and as a result management does not expect there to be any further disruptions.
Cost and inflationary pressures
During the second half of the 2022 financial year, Harmony experienced heightened input costs driven by inflationary pressures related to global supply chain constraints due to the Covid-19 pandemic, which was then further exacerbated by Russia’s invasion of Ukraine. The effect has been especially pronounced on certain key items such as oil (directly affecting diesel supply and cost), steel and certain chemical reagents used by the treatment plants. These cost pressures had an impact on, among others, the FY23 budget and life-of-mine planning process, determination of deferred tax rates for the group’s mining entities and impairment assessments performed for the group’s cash generating units. Refer to notes 5 and 7 respectively for further disclosure.
Discount rates
In recent months, central banks globally have been increasing interest rates as a measure of combating rising inflation. In the current financial year, the US Federal Reserve has increased interest rates by 150 basis points, while the South African Reserve Bank (SARB) has raised the repurchase interest rate by 125 basis points for the same period. This contributed to increased bond yields realised in the market, which results in increased risk-free rates being used for discounting of the provision for environmental rehabilitation and the determination of cost of equity as used for purposes of impairment assessments. Refer to note 7 and 9 respectively for further disclosure.
Commodity prices and exchange rates
Gold traded within a range of US$1 726/oz and US$2 052/oz (2021: US$1 681/oz and US$2 063/oz) during the current financial year, reaffirming its safe haven status with investors during times of global uncertainty and market volatility. These uncertainties have also resulted in increased volatility in the R/US$ and R/A$ exchange rates. The currencies traded in ranges of R14.15/US$1 to R16.30/US$1 (2021: R13.43/US$1 to R17.68/US$1) and R10.43/A$1 to R11.63/A$1 (2021: R10.41/A$1 to R12.66/A$1) respectively during the current financial year. Management believes this volatility could be a reflection of growing concern in market sentiment fears surrounding recessions in key economies and current and/or further geopolitical tensions.
As part of the underlying assumptions used in valuing certain line items, management used a consensus of market analysts’ forecasts in determining short-, medium- and long-term commodity prices and exchange rates. These economic assumptions are used in certain fair value calculations. Based on the consensus forecasts used, a marked increase was seen in US$ gold price and R/US$ exchange rate assumptions applied. Refer to note 7 for disclosed assumptions.
Harmony Gold Mining Company Limited | FY22 Results for the year ended 30 June 2022 21
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 30 JUNE 2022 (RAND)
3. REVENUE
| | | | | | | | | | | |
| | Year ended |
Figures in million | | 30 June 2022 (Reviewed) | 30 June 2021 (Audited) |
Revenue from contracts with customers | | 41 677 | | 43 632 | |
Gold1 | | 40 774 | | 42 597 | |
Silver2 | | 663 | | 857 | |
Uranium2 | | 240 | | 178 | |
Consideration from streaming contract3 | | 471 | | 397 | |
Hedging gain/(loss)4 | | 497 | | (2 296) | |
Total revenue5 | | 42 645 | | 41 733 | |
1 The decrease in gold revenue during the 2022 financial year is mainly due to the decrease in gold production by 3% to 46 236kg from 47 755kg in the prior year. The decrease is a result of mining constraints at Doornkop, Moab Khotsong and Tshepong Operations resulting in lower grade recovered, the seismic issues experienced at Bambanani as well as the geotechnical instability affecting Stage 6 and a conveyor belt failure at Hidden Valley. In addition, the average gold spot price received decreased by 1.8% from R899 563/kg in the 2021 year to R883 453/kg. The decrease was partially offset by an increase in production at Mponeng and Mine Waste Solutions as they contributed for the full year compared to nine months in the prior year.
2 Silver is derived from the Hidden Valley mine in Papua New Guinea. Uranium is derived from the Moab Khotsong operation.
3 Relates to the recognition of non-cash consideration recognised as part of revenue for the streaming arrangement. Refer to note 12 for further information.
4 Relates to the realised effective portion of the hedge-accounted gold derivatives.The average gold spot price traded during the 2022 financial year was R896 712/kg (2021: R915 736/kg) compared to the average forward price of matured contracts of R940 536/kg (2021: R731 971/kg) . Refer to note 8 for further information.
5 A geographical analysis of revenue is provided in the segment report.
The points of transfer of control are as follows:
| | | | | |
•Gold: South Africa (excluding streaming contract) | Gold is delivered and a certificate of sale is issued. |
•Gold and silver: Hidden Valley | Metal is collected from Hidden Valley and a confirmation of collection is sent to and accepted by the customer. |
•Uranium | Confirmation of transfer is issued. |
•Streaming contract | Gold is delivered and credited into the Franco-Nevada designated gold account. |
4. COST OF SALES
| | | | | | | | | | | |
| | Year ended |
Figures in million | | 30 June 2022 (Reviewed) | 30 June 2021 (Audited) |
Production costs – excluding royalty1 | | 32 739 | | 29 137 | |
Royalty expense2 | | 360 | | 637 | |
Amortisation and depreciation | | 3 683 | | 3 875 | |
Impairment of assets3 | | 4 433 | | 1 124 | |
Rehabilitation expenditure | | 136 | | 135 | |
Care and maintenance cost of restructured operations4 | | 273 | | 144 | |
Employment termination and restructuring costs5 | | 218 | | 332 | |
Share-based payments | | 143 | | 114 | |
Other | | (58) | | (9) | |
Total cost of sales | | 41 927 | | 35 489 | |
1 Production costs increased during the 2022 year, mainly due to inflationary pressures on costs including labour, electricity and consumable stores costs (refer to note 2) as well as the inclusion of the Mponeng operations and related assets for a full financial year.
2 The royalty expense decreased significantly during the 2022 year due to lower production profits, which also impacted on the rates at which royalties are calculated.
3 During the 2022 year impairments of R4 433 million were recognised for the property, plant and equipment of Tshepong Operations, Moab Khotsong, Bambanani and Kusasalethu as well as the goodwill of Bambanani and Moab Khotsong. Refer to note 7 for further details.
4 The care and maintenance costs increased during the 2022 year due to the closure of the Vaal River surface operations and the Kopanang gold plant, which were closed at the end of the previous financial year.
5 Employment termination and restructuring costs decreased during the 2022 year, due to the lower number of employees taking up voluntary severance packages year on year.
22 Harmony Gold Mining Company Limited | FY22 Results for the year ended 30 June 2022
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 30 JUNE 2022 (RAND)
5. TAXATION
Current taxation
The movement in foreign exchange translation from gains in 2021 to losses in 2022 and a decline in mining taxable income resulted in the decrease in the current tax expense during the 2022 financial year.
Deferred taxation
The movement in the net deferred tax liability is mainly attributable to a decrease in net taxable temporary differences as well as in deferred tax rates for the majority of the group's South African mining companies. The amount recognised at 30 June 2022 is as follows:
| | | | | | | | |
| At |
Figures in million | 30 June 2022 (Reviewed) | 30 June 2021 (Audited) |
Balance at beginning of year | 1 906 | | 465 | |
Net deferred tax liability of acquired operations at 1 October 2020 | — | | (55) | |
Expense/(credit) per income statement (a) | (353) | | 714 | |
Tax expense/(credit) directly charged to other comprehensive income (b) | (170) | | 782 | |
Balance at end of year | 1 383 | | 1 906 | |
Deferred tax asset per balance sheet (c) | (203) | | (272) | |
Deferred tax liability per balance sheet | 1 586 | | 2 178 | |
(a) The main contributors to the decreases were:
•Freegold (Harmony) Pty Ltd's deferred tax rate decreased, resulting in a R372 million decrease, which together with the impact of R266 million on the impairment recognised resulted in a R619 million decrease overall
•Harmony Moab Khotsong Operations (Pty) Ltd's deferred tax rate decreased, causing a R102 million decrease in the deferred tax liability. This was offset by the increased capital expenditure, which includes the Zaaiplaats project, resulting in a net decrease of R51 million
•Randfontein Estates Ltd utilised its unredeemed capital expenditure balance during 2022 and that combined with the R44 million impact of a higher deferred tax rate, resulted in a R117 million increase in the net deferred tax liability
•Golden Core Trade and Invest (Pty) Ltd, which acquired the Mponeng operation and the West Wits closure business utilised a portion of its unredeemed capital allowance and an increase in its asset value combined with the R37 million impact of a higher deferred tax rate, resulted in a R98 million increase for 2022
•Chemwes (Pty) Ltd (Chemwes Company) utilised a portion of its unredeemed capital expenditure balance and the Franco-Nevada liability decreased (refer note 12), resulting in a decrease of R74 million in its deferred tax asset
(b) The movement in the net derivative position (refer to note 8) resulted in a decrease of R170 million in the net deferred tax liability.
(c) As at 30 June 2022 a deferred tax asset was recognised in Harmony Gold Mining Company Limited (Harmony Company) and Chemwes Company. The deferred tax asset for Harmony Company remained stable at R179 million, while Chemwes Company decreased from R97 million to R24 million. A deferred tax asset continues to be recognised for both companies as it is probable that sufficient future taxable profits will be available against which the remaining deductible temporary differences existing at the reporting date can be utilised.
As part of the determination of the deferred tax rates for the South African entities mentioned above, consideration was given to the amended corporate income tax rate of 27% from 28% as well as the change in the mining tax rate from 34% to 33% for the 2023 financial year. The annual limitation of assessed loss utilisation to 80% of taxable income was incorporated in the calculation. The changes were considered to be substantively enacted at 30 June 2022 and would affect forecast tax estimations or cash flows. They were also taken into account in the determination of recoverable amounts for impairment purposes. Refer to note 7.
6. EARNINGS/(LOSS) PER ORDINARY SHARE
| | | | | | | | | | | |
| | Year ended |
| | 30 June 2022 (Reviewed) | 30 June 2021 (Audited) |
Weighted average number of shares (million) | | 612 | | 604 | |
Weighted average number of diluted shares (million) | | 615 | | 616 | |
Total earnings/(loss) per share (cents): | | | |
Basic earnings/(loss) | | (172) | | 842 | |
Diluted earnings/(loss)1 | | (172) | | 825 | |
Headline earnings | | 499 | 987 | |
Diluted headline earnings | | 497 | 967 | |
1 Due to the net loss attributable to shareholders, the inclusion of the share options as potential ordinary shares had an anti-dilutive effect on the earnings per share in 2022, whereas the net profit in 2021 had a dilutive effect.
Harmony Gold Mining Company Limited | FY22 Results for the year ended 30 June 2022 23
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 30 JUNE 2022 (RAND)
6. EARNINGS/(LOSS) PER ORDINARY SHARE continued
Reconciliation of headline earnings:
| | | | | | | | | | | |
| | Year ended |
Figures in million | | 30 June 2022 (Reviewed) | 30 June 2021 (Audited) |
Net profit/(loss) for the year attributable to owners of the parent | | (1 052) | | 5 087 | |
Adjusted for: | | | |
Gain on bargain purchase1 | | — | | (303) | |
Impairment of assets2 | | 4 433 | | 1 124 | |
Taxation effect on impairment of assets | | (312) | | (93) | |
Profit on sale of property, plant and equipment | | (24) | | (11) | |
Taxation effect on profit on sale of property, plant and equipment | | 4 | | 2 | |
Loss on scrapping of property, plant and equipment | | 7 | | 161 | |
Taxation effect on loss on scrapping of property, plant and equipment | | (1) | | (8) | |
Headline earnings | | 3 055 | | 5 959 | |
1 There is no tax effect on this item.
2 This total includes the impairment of goodwill which does not have a tax effect.
7. PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS
Impairment of property, plant and equipment (including goodwill)
Management performed an assessment for indicators of impairment as well as indicators of reversal of previously recorded impairment losses at 30 June 2022. Due to the net asset value (before any impairments recognised) exceeding the market capitalisation of Harmony as at 30 June 2022, as well as increased operating costs, the recoverable amounts for all cash-generating units (CGUs) were calculated. The recoverable amounts for these assets were determined on a fair value less cost to sell basis using assumptions in the discounted cash flow models and attributable resource values. These are fair value measurements classified as level 3.
Estimates and judgements
The recoverable amount of mining assets is determined utilising real discounted future cash flows or resource multiples in the case of undeveloped properties and certain resource bases. During this year's planning and testing, commodity price and exchange rate assumptions as per the table below were used. In determining the commodity prices and resource values to be used, management assesses the short-, medium- and long-term views of several reputable institutions on commodity prices and based on this, derives the commodity prices and resource values. The long-term price was determined as part of the annual budgeting process and is used in the life-of-mine plans and is also the cut-off price for calculating reserves included in the declaration of resources and reserves in terms of the South African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves (SAMREC). The resource multiple values have remained consistent with the prior year, as no new market transactions have taken place in the South African gold mining industry that would provide more recent information compared to prior year information.
Post-tax real discount rates ranging between 10.2% and 13.1% (2021: 9.4% and 12.0%), depending on the asset, were used to determine the recoverable amounts for the South African operations. Hidden Valley made use of a post-tax real discount rate of 11.4% (2021: 10.3%). | | | | | | | | | | | |
| | Year ended |
Figures in million | | 30 June 2022 (Reviewed) | 30 June 2021 (Audited) |
US$ gold price per ounce | | | |
– Year 1 | | 1 861 | | 1 805 | |
– Year 2 | | 1 744 | | 1 673 | |
– Year 3 | | 1 664 | | 1 582 | |
– Long term (year 4 onwards) | | 1 546 | | 1 500 | |
US$ silver price per ounce | | | |
– Year 1 | | 23.85 | | 25.72 | |
– Year 2 | | 22.42 | | 23.22 | |
– Year 3 | | 21.46 | | 21.70 | |
– Long term (year 4 onwards) | | 19.38 | | 20.70 | |
US$ copper price per pound | | 3.30 | | 3.00 | |
24 Harmony Gold Mining Company Limited | FY22 Results for the year ended 30 June 2022
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 30 JUNE 2022 (RAND)
7. PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS continued
Impairment of property, plant and equipment (including goodwill) continued
Estimates and judgements continued
| | | | | | | | | | | |
| | Year ended |
Figures in million | | 30 June 2022 (Reviewed) | 30 June 2021 (Audited) |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Exchange rate (R/US$) | | | |
– Year 1 | | 15.55 | | 14.54 | |
– Year 2 | | 15.34 | | 14.36 | |
– Year 3 | | 15.26 | | 14.44 | |
– Long term (Year 4 onwards) | | 15.35 | | 14.51 | |
Exchange rate (PGK/US$) | | 3.50 | | 3.50 | |
Rand gold price (R/kg) | | | |
– Year 1 | | 931 000 | | 843 000 | |
– Year 2 | | 860 000 | | 772 000 | |
– Year 3 | | 816 000 | | 735 000 | |
– Long term (Year 4 onwards) | | 763 000 | | 700 000 | |
Additional resources multiples (US$/oz) (underground operations)1 | | | |
Measured | | 16.50 | | 16.50 | |
Indicated | | 9.00 | | 9.00 | |
Inferred | | 3.60 | | 3.60 | |
Additional resources multiples US$/oz (surface sources)2 | | | |
Measured | | 30.00 | | 30.00 | |
Indicated | | 17.50 | | 17.50 | |
Inferred | | 8.00 | | 8.00 | |
1 The underground resource value has been applied to Target North and Doornkop's Kimberly Reef.
2 The surface resource values have been applied to the Vaal River and West Wits surface sources.
As disclosed in note 2, the uncertainty that existed in prior years surrounding the potential impact of Covid-19 has dissipated and therefore management believes that it is no longer appropriate to apply Covid-adjusted probability scenarios in determining recoverable amounts for the CGUs at 30 June 2022.
Harmony Gold Mining Company Limited | FY22 Results for the year ended 30 June 2022 25
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 30 JUNE 2022 (RAND)
7. PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS continued
Impairment of property, plant and equipment (including goodwill) continued
Results of impairment and assessment
Based on the impairment tests performed, the following impairments of property, plant and equipment and goodwill were recorded for the 2022 financial year:
| | | | | | | | |
| Year ended |
Figures in million | 30 June 2022 (Reviewed) | 30 June 2021 (Audited) |
Tshepong Operations (a) | 3 622 | | 759 |
Moab Khotsong (b) | 522 | | — |
Kusasalethu (c) | 145 | | — |
Bambanani (d) | 144 | | 187 |
Target 3 | — | | 178 |
Total impairment | 4 433 | | 1 124 |
(a) The Tshepong Operations were disaggregated into two separate cash generating units (CGU) being the Tshepong North CGU and the Tshepong South (also known as the Phakisa section) CGU, for impairment testing at 30 June 2022. This is due to the decision taken during the FY23 budget process to reinvest in the two individual operations to maximise individual profitability following the change to Tshepong North's life-of-mine with the sub-75 decline project being halted. Based on the forward-looking nature of the impairment assessment, a separate impairment calculation was prepared for each of the CGUs. The disaggregation of CGUs did not have an impact on reportable segments in terms of IFRS 8 Operating Segments as disclosed in the segment report, since information reported to the chief operating decision maker for the 2022 financial year was still for the combined Tshepong Operations. Going forward however, Tshepong North and Tshepong South will be disclosed as separate reportable segments. A total impairment of R3 622 million was recognised on these CGUs, which is made up of the following:
–An impairment of R2 296 million on property, plant and equipment of Tshepong North was recognised at 30 June 2022. This was mainly as a result of increased cost both for production and capital expenditure and the increased post-tax discount rate of 11.7% (2021: 10.1% for Tshepong Operations). The recoverable amount was also affected by the reclassification of production for the sub-75 level from reserves in the life-of-mine plan to the resource base, which is subject to a higher discount rate of 13.7% (2021: 12.0%). The post-tax recoverable amount was determined to be R1 938 million
–An impairment of R1 326 million on property, plant and equipment of Tshepong South was recognised at 30 June 2022. The individual life-of-mine plan included additional capital to address flexibility constraints at the operation. Costs also increased significantly as a result of inflationary pressures. The changes affected the discounted cash flows used to determine the recoverable amount of the operation. The post-tax recoverable amount, after the impact of a higher discount rate of 11.7% (2021: 10.1% for Tshepong Operations), was determined to be R1 645 million
The impairment for 2021 mainly resulted from a reduction in planned gold production resulting from lower grade and change in the timing of cash flows.
(b) An impairment of R522 million on property, plant and equipment and goodwill of Moab Khotsong was recognised at 30 June 2022, of which R302 million related to goodwill. The updated life-of-mine plan included an increase in working and capital costs as a result of inflationary pressures. The updated life-of-mine plan also includes additional capital expenditure which relates to the Zaaiplaats project after finalisation of its detailed design plan during the current financial year. This impacted the discounted cash flows used to determine the recoverable amount of the operation. The recoverable amount was further impacted by an increased post-tax discount rate of 10.4% (2021: 9.4%) which resulted in the post-tax recoverable amount decreasing to R3 748 million.
(c) The impairment of property, plant and equipment on Kusasalethu was mainly as a result of the reduction in tonnes combined with a decrease in grade over the remainder of the operation's life, leading to a decrease in planned gold production. The reduction is due to an updated plan to mitigate safety risks that exist at the operation. These changes reduced the recoverable amount to R806 million and an impairment of R145 million was recognised.
(d) During the December 2021 period, impairments of R144 million were recognised for property, plant and equipment and goodwill of Bambanani. The impairment of goodwill and assets on Bambanani was as a result of a change in the life-of-mine plan, moving the closure of the mine to June 2022 rather than June 2024 as planned during FY21. This was as a result of increased seismicity at the operation and the related risk increasing as pillars were mined out. The post-tax recoverable amount of R36 million, at December 2021, was derived from the expected cash flows as per the life-of-mine plans. The recoverable amount of the operation is now Rnil, as the operation was closed during June 2022.
Where CGUs had previously been impaired, management considered whether the impairment loss (or the contributors to the previously recognised impairment loss) no longer exists or might have decreased. Management considered general and specific factors for each CGU and concluded that although overall the gold price environment had improved from the time that the impairment losses had been recognised, the specific circumstances that led to the original impairments had not reversed. Furthermore, the service potential of the asset has not increased. Management therefore resolved it to be appropriate for no reversal of previously recognised impairment losses to be recorded for the year ended 30 June 2022.
26 Harmony Gold Mining Company Limited | FY22 Results for the year ended 30 June 2022
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 30 JUNE 2022 (RAND)
7. PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS continued
Impairment of property, plant and equipment (including goodwill) continued
Results of impairment and assessment continued
One of the most significant assumptions that influence the life-of-mine plans, and therefore impairment assessments, is the expected commodity prices. Management determined a reasonably possible long-term change of 10% in gold prices based on the standard deviation of both Harmony's long-term gold price assumption over the past five financial years and market analysts' forecasted long-term gold price assumptions. A 10% increase/decrease (pre-impairment and scrapping recognised) in the gold price and resource values used (with all other variables held constant and not taking any actions, such as stopping capital projects, into account) would have resulted in the following post-tax impairment being recorded (including the impairments recorded in the current period) as at 30 June 2022:
| | | | | |
Figures in million | 30 June 2022 (Reviewed) |
-10% decrease | |
Tshepong North | 4 074 | |
Moab1 | 3 869 | |
Tshepong South | 2 339 | |
Doornkop | 1 690 | |
Mponeng | 1 443 | |
Target 1 | 1 121 | |
Joel | 762 | |
Kusasalethu | 689 | |
Mine Waste Solutions | 493 | |
Kalgold | 304 | |
Other assets | 208 | |
Hidden Valley | 96 | |
Central Plant Reclamation | 32 | |
+10% increase | |
Tshepong South | 224 | |
1 The carrying amounts of these CGUs include goodwill and any impairment losses are allocated first to goodwill and then to the identifiable assets.
As a result of the significant increase in discount rates experienced during the current financial year, management opted to assess the sensitivity of a reasonably possible change in discount rates on impairments of assets for all CGUs. Management assessed an increase/decrease of 50 basis points to be a reasonably possible change, based on the standard deviation of the group's base weighted average cost of capital rate over the past five financial years. This change was factored into the individual CGUs' discount rates and did not result in a material impact on the impairment that would have been recognised for any CGUs.
Papua New Guinea
Costs related to stripping activities for the period ended 30 June 2022 amounted to R1 096 million (2021: R1 047 million) with Hidden Valley accounting for R922 million (2021: R871 million) of these costs. The increase was predominantly driven by the Hidden Valley Stage 7 cutback. Primary stripping activities commenced in July 2020 and the main ore body was reached in November 2021. Until that time, stripping costs were capitalised in full due to significant levels of waste being removed with incidental ore being mined.
In addition to the above, the foreign exchange translation movement on property, plant and equipment for the region was an increase of R819 million (2021: R1 079 million decrease) for the year ended 30 June 2022.
Harmony Gold Mining Company Limited | FY22 Results for the year ended 30 June 2022 27
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 30 JUNE 2022 (RAND)
8. DERIVATIVE FINANCIAL INSTRUMENTS
| | | | | | | | | | | | | | | | | | | |
Figures in million | | Rand gold hedging contracts | US$ gold hedging contracts | US$ silver contracts | Foreign exchange contracts | | Total |
At 30 June 2022 (Reviewed) | | | | | | | |
Derivative financial assets | | 523 | | 44 | | 77 | | 12 | | | 656 | |
Non-current | | 113 | | 18 | | 6 | | — | | | 137 | |
Current | | 410 | | 26 | | 71 | | 12 | | | 519 | |
Derivative financial liabilities | | — | | (11) | | — | | — | | | (11) | |
Non-current | | — | | (3) | | — | | — | | | (3) | |
Current | | — | | (8) | | — | | — | | | (8) | |
| | | | | | | |
Net derivative financial instruments | | 523 | | 33 | | 77 | | 12 | | | 645 | |
| | | | | | | |
Unrealised gains included in other reserves, net of tax | | 441 | | 39 | | — | | — | | | 480 | |
Movements for the year ended 30 June 2022 | | | | | | | |
Realised gains/(losses) included in revenue | | 602 | | (105) | | — | | — | | | 497 | |
Unrealised gains/(losses) on gold contracts recognised in other comprehensive income | | (292) | | 50 | | — | | — | | | (242) | |
Gains/(losses) on derivatives | | — | | — | | 114 | | (16) | | | 98 | |
Day one loss amortisation | | (39) | | (6) | | — | | — | | | (45) | |
Total gains/(losses) on derivatives | | (39) | | (6) | | 114 | | (16) | | | 53 | |
Hedge effectiveness | | | | | | | |
Changes in the fair value of the hedging instrument used as the basis for recognising hedge ineffectiveness | | (292) | | 50 | | — | | — | | | (242) | |
Changes in the fair value of the hedged item used as the basis for recognising hedge ineffectiveness | | 292 | | (50) | | — | | — | | | 242 | |
28 Harmony Gold Mining Company Limited | FY22 Results for the year ended 30 June 2022
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 30 JUNE 2022 (RAND)
8. DERIVATIVE FINANCIAL INSTRUMENTS continued
| | | | | | | | | | | | | | | | | | | | |
Figures in million | Rand gold hedging contracts (a) | US$ gold hedging contracts | US$ silver contracts | Foreign exchange contracts | Rand gold derivative contracts | Total |
At 30 June 2021 (Audited) | | | | | | |
Derivative financial assets | 1 358 | | 48 | | 10 | | 383 | | — | | 1 799 | |
Non-current | 279 | | 40 | | 9 | | — | | — | | 328 | |
Current | 1 079 | | 8 | | 1 | | 383 | | — | | 1 471 | |
Derivative financial liabilities | (41) | | (73) | | (98) | | — | | — | | (212) | |
Non-current | — | | — | | (6) | | — | | — | | (6) | |
Current | (41) | | (73) | | (92) | | — | | — | | (206) | |
| | | | | | |
Net derivative financial instruments | 1 317 | | (25) | | (88) | | 383 | | — | | 1 587 | |
| | | | | | |
Unrealised gains/(losses) included in other reserves, net of tax | 1 069 | | (18) | | — | | — | | — | | 1 051 | |
Movements for the year ended 30 June 2021 | | | | | | |
Realised losses included in revenue | (2 023) | | (273) | | — | | — | | — | | (2 296) | |
Unrealised gains/(losses) on gold contracts recognised in other comprehensive income | 2 999 | | (7) | | — | | — | | — | | 2 992 | |
Gains/(losses) on derivatives | — | | — | | (256) | | 1 217 | | 111 | | 1 072 | |
| | | | | | |
Day one loss amortisation | (42) | | (8) | | — | | — | | — | | (50) | |
Total gains/(losses) on derivatives | (42) | | (8) | | (256) | | 1 217 | | 111 | | 1 022 | |
Hedge effectiveness | | | | | | |
Changes in the fair value of the hedging instrument used as the basis for recognising hedge ineffectiveness | 2 999 | | (7) | | — | | — | | — | | 2 992 | |
Changes in the fair value of the hedged item used as the basis for recognising hedge ineffectiveness | (2 999) | | 7 | | — | | — | | — | | (2 992) | |
(a) Rand gold hedging contracts
All Rand gold forward contracts entered into after 1 October 2020 were apportioned to the South African operations which included Mponeng and Mine Waste Solutions operations.
Reconciliation of the hedge reserve:
| | | | | | | | | | | |
| | Year ended |
Figures in million | | 30 June 2022 (Reviewed) | 30 June 2021 (Audited) |
Opening balance | | 1 051 | | (3 395) | |
Remeasurement of gold hedging contracts | | (571) | | 4 467 | |
Unrealised gain/(loss) on gold hedging contracts | | (242) | | 2 992 | |
| | | |
Released to revenue on maturity of the gold hedging contracts | | (497) | | 2 296 | |
Foreign exchange translation | | (2) | | (39) | |
Deferred taxation thereon | | 170 | | (782) | |
Attributable to non-controlling interest | | — | | (21) | |
Closing balance | | 480 | | 1 051 | |
Harmony Gold Mining Company Limited | FY22 Results for the year ended 30 June 2022 29
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 30 JUNE 2022 (RAND)
8. DERIVATIVE FINANCIAL INSTRUMENTS continued
The following table shows the open position at the reporting date:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | FY2023 | FY2024 | TOTAL |
| | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 |
Foreign exchange contracts | | | | | | | | | |
Zero cost collars | | | | | | | | | |
US$m | | 42 | | 18 | | — | | — | | — | | — | | — | | 60 | |
Average Floor – R/US$ | | 15.90 | | 16.18 | | — | | — | | — | | — | | — | | 15.98 | |
Average Cap – R/US$ | | 17.90 | | 18.18 | | — | | — | | — | | — | | — | | 17.98 | |
Forward contracts | | | | | | | | | |
US$m | | 6 | | — | | — | | — | | — | | — | | — | | 6 | |
Average Forward rate – R/US$ | | 16.84 | | — | | — | | — | | — | | — | | — | | 16.84 | |
R/gold | | | | | | | | | |
000 oz – cash flow hedge | | 72 | | 72 | | 72 | | 70 | | 44 | | 32 | | 16 | | 378 | |
Average R'000/kg | | 1 033 | | 999 | | 1 019 | | 1 039 | | 1 061 | | 1 082 | | 1 107 | | 1 035 | |
US$/gold | | | | | | | | | |
000 oz – cash flow hedge | | 9 | | 9 | | 9 | | 9 | | 9 | | 8 | | 4 | | 57 | |
Average US$/oz | | 1 911 | | 1 867 | | 1 826 | | 1 836 | | 1 860 | | 1 926 | | 2 009 | | 1 880 | |
Total gold | | | | | | | | | |
000 oz | | 81 | | 81 | | 81 | | 79 | | 53 | | 40 | | 20 | | 435 | |
US$/silver | | | | | | | | | |
000 oz | | 285 | | 270 | | 210 | | 105 | | 30 | | 30 | | 20 | | 950 | |
Average Floor – US$/oz | | 24.39 | | 25.97 | | 25.62 | | 25.49 | | 25.14 | | 25.41 | | 25.68 | | 25.31 | |
Average Cap – US$/oz | | 27.02 | | 29.00 | | 28.81 | | 28.58 | | 28.14 | | 28.41 | | 28.68 | | 28.27 | |
Refer to note 13 for details on the fair value measurements.
9. PROVISION FOR ENVIRONMENTAL REHABILITATION
The increase in the provision for environmental rehabilitation during the 2022 financial year of R351 million is mainly due to a reduction of the life of certain operations, which impacted the discounting of the provision (R185 million). Also contributing is the weakening Rand/AUS$ exchange rate which impacted the translation of the balance year on year for South-east Asia (R101 million). The remaining increase relates to the increase of discount rates. Refer to note 2 for a discussion thereof.
10. BORROWINGS
Summary of facilities' terms
| | | | | | | | | | | | | | | | | |
Figures in million | US$ term loan US dollar | US$ RCF US dollar | Green loan SA rand | Rand RCF SA rand | Westpac fleet loan US dollar |
Borrowings summary at 30 June 2022 | | | | | |
Original facility | 100 | | 300 | | 1 500 | | 2 500 | | N/A |
Drawn down/ loan balance | 100 | | 100 | | — | | — | | 2 | |
Undrawn committed borrowing facilities | N/A | 200 | | 1 5001 | 2 500 | | N/A |
Maturity | May | May | November | May | July |
20252 | 20252 | 2028 | 20252 | 2022 |
Repayment terms | On maturity | On maturity | Bi-annual3 | On maturity | Quarterly |
Interest rate | SOFR4 + 2.85% | SOFR4 + 2.70% | JIBAR + 2.65% | JIBAR + 2.40% | LIBOR + 3.20% |
1 This facility can only be drawn down from November 2022.
2 Does not take into account the two extension options of 12 months each.
3 Ten equal bi-annual instalments starting from June 2024 with the final instalment on maturity.
4 Secured Overnight Financing Rate. The SOFR is a secured interbank overnight interest rate that has been established as an alternative to LIBOR. Refer to note 13 for further detail.
30 Harmony Gold Mining Company Limited | FY22 Results for the year ended 30 June 2022
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 30 JUNE 2022 (RAND)
10. BORROWINGS continued
Refinancing of facilities
During May 2022, Harmony refinanced its existing R2 billion and US$400 million facility with the following facilities held with a syndicate of local and international lenders:
•R2.5 billion revolving credit facility (Rand RCF)
•$100 million term facility (US$ term loan)
•$300 million revolving credit facility (US$ RCF)
•R1.5 billion green loan (Green loan)
The Green loan can only be used for renewable energy projects.
The Rand RCF, US$ RCF and US$ term loan are linked to certain sustainability-linked key performance indicators (ESG KPIs), which will be measured annually for the next three financial years and will result in changes to interest rate margins. The adjustments to interest rate margins for each financial year's ESG performance would impact the following financial year. The respective ESG KPIs are as follows:
| | | | | | | | | | | | | | | | | |
KPI | Unit of Measurement | Scope | Sustainability performance targets |
| | | FY23 | FY24 | FY25 |
Greenhouse gas emissions | ‘000 tonnes of Scope 1 and Scope 2 CO2e emissions | All operations | 4 485 | 4 279 | 4 074 |
Renewable energy | Renewable energy consumption as % of total electricity consumed | SA operations | 2 | % | 8 | % | 20 | % |
Water consumption | Potable water consumed (Mℓ) | SA operations | 20 453 | 19 833 | 19 436 |
Depending on Harmony's performance in relation to these ESG KPIs, the potential change in interest rate margin is as follows:
| | | | | | | | | | | |
Cumulative benefit/penalty for each financial year (basis points) | FY23 | FY24 | FY25 |
KPI | | | |
Greenhouse gas emissions | 1 | | 2 | | 3 | |
Renewable energy | 1 | | 2 | | 3 | |
Water consumption | 1 | 2 | 3 |
The new debt covenant tests for both the Rand and the US$ facilities are as follows:
•The group's interest cover ratio shall be more than five times (EBITDA1/ Total Interest paid);
•Leverage2 shall not be more than 2.5 times.
1 Earnings before interest, taxes, depreciation and amortisation (EBITDA) as defined in the agreement also excludes unusual items such as impairment and restructuring cost.
2 Leverage is defined as total net debt to EBITDA.
During the refinancing process, the tangible net worth to total net debt ratio that was relevant to the previous facilities has been removed as a debt covenant while the interest cover and leverage ratios remained unchanged.
The cash flows from the refinancing process were directed by Harmony and are therefore reflected in the cash flow statement. The transaction costs of R172 million are included as part of the interest paid line in the cash flow statement.
Harmony Gold Mining Company Limited | FY22 Results for the year ended 30 June 2022 31
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 30 JUNE 2022 (RAND)
10. BORROWINGS continued
Interest bearing borrowings
| | | | | | | | | | | |
| | At |
Figures in million | | 30 June 2022 (Reviewed) | 30 June 2021 (Audited) |
Non-current borrowings | | | |
R2 billion facility | | — | | 153 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
US$400 million facility | | — | | 2 799 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
US$400 million facility - sustainability linked | | 3 180 | | — | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Westpac fleet loan | | — | | 22 | |
| | | |
| | | |
| | | |
| | | |
Total non-current borrowings | | 3180 | 2 974 | |
Current borrowings | | | |
R2 billion facility | | — | | 300 | |
| | | |
| | | |
Westpac fleet loan | | 25 | | 87 | |
| | | |
| | | |
Total current borrowings | | 25 | 387 | |
The following repayments/draw downs were made during the 2022 year:
•R2 billion facility (retired): R450 million repayment
•US$400 million facility (retired): US$200 million (R3 057 million) repayment
•Westpac fleet loan: R94 million repayment
•US$400 million facility – sustainability linked: US$200 million (R3 057 million) draw down
Loan covenants tests were performed for both the old and new loan facilities for the 2022 and 2021 financial years and no breaches were noted. For the 2022 financial year, the group's interest cover ratio was 43.4 times (2021: 42.8 times) while the group's leverage was 0.1 (2021: 0.1). As mentioned above, the tangible net worth to total net debt ratio was removed as a loan covenant during the current financial year (2021: 57.8). Management believes that it is very likely that the covenant requirements will be met in the foreseeable future given the current earnings and interest levels.
| | | | | | | | | | | |
| | Year ended |
Figures in million | | 30 June 2022 (Reviewed | 30 June 2021 (Audited) |
Translation gain/(loss) on US$ facilities1 | | (409) | | 895 | |
Rand/US$ exchange rate: | | | |
Closing/spot | | 16.27 | | 14.27 | |
Average | | 15.21 | | 15.40 | |
1 The remainder of foreign exchange transaction gain or loss included in profit or loss mainly relates to the translation of cash from a foreign currency to the functional currencies of the operating entities.
11. CONTINGENT CONSIDERATION LIABILITY
Consideration for the acquisition of Mponeng and its related assets included contingent consideration subject to the following criteria:
•US$260 per ounce payable on all underground production from the Mponeng, Savuka and Tau Tona mines in excess of 250 000 ounces per year for six years commencing 1 January 2021
•US$20 per ounce payable on underground production from the Mponeng, Savuka and Tau Tona mines sourced from levels developed in the future below the current infrastructure
As at 30 June 2022, the contingent consideration liability was valued at R356 million (2021: R417 million) by using the discounted cash flows valuation method, discounted at a post-tax real rate of 10.2% (2021:10.3%). Other assumptions applied in the valuation are the forecast Rand/US dollar exchange rate and life-of-mine plan of the Mponeng operation. Refer to note 7 for R/US$ exchange rates used in the valuation as at 30 June 2022. The remeasurement of the liability of R61 million is included in other operating expenses and relates primarily to a change in the production profile, as included in the life-of-mine plan of the Mponeng operation. The fair value calculated for the contingent consideration is level 3 in the fair value hierarchy due to the use of unobservable inputs. The contingent consideration attributable to the below infrastructure ounces of gold was valued at Rnil at 30 June 2022 (2021: Rnil).
32 Harmony Gold Mining Company Limited | FY22 Results for the year ended 30 June 2022
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 30 JUNE 2022 (RAND)
12. STREAMING ARRANGEMENTS
Contract liability and gold delivered
As at 30 June 2021, the balance of gold ounces to be delivered to Franco-Nevada amounted to 84 429oz. For the year ended 30 June 2022, 23 272oz has been delivered to Franco-Nevada bringing the remaining balance of gold ounces to be delivered as at year end to 61 157oz.
The contract price receivable in US$/oz for each ounce of gold delivered is as follows:
•1 October 2020 – 16 December 2020: US$433/oz
•17 December 2020 – 16 December 2021: US$437/oz
•17 December 2021 – 30 June 2022: US$442/oz
Reconciliation of the streaming contract liability:
| | | | | | | | |
| At |
Figures in million | 30 June 2022 (Reviewed) | 30 June 2021 (Audited) |
Opening balance | 1 091 | | — | |
Initial recognition as at 1 October 2020 | — | | 1 417 | |
Finance costs related to significant financing component | 67 | | 71 | |
Non-cash consideration for delivery of gold ounces | (471) | | (397) | |
Closing balance | 687 | | 1 091 | |
– Current* | 309 | | 396 | |
– Non-current | 378 | | 695 | |
* The current portion of the liability is determined with reference to the current production profile of Mine Waste Solutions for the next 12 months.
13. FINANCIAL RISK MANAGEMENT ACTIVITIES
Foreign exchange risk
Harmony's revenues are sensitive to the R/US$ exchange rate as all revenues are generated by gold sales denominated in US$. A weakening of the Rand will increase the reported revenue total; conversely a strengthening will decrease it.
Harmony maintains a foreign currency derivative programme to manage foreign exchange risk. The limit currently set by the Board is 25% of the group's foreign exchange risk exposure for a period of 24 months. The audit and risk committee reviews the details of the programme quarterly. Refer to note 8 and the fair value determination section below for further detail on these contracts.
The Rand weakened during the 2022 year from R14.27/US$1 on 30 June 2021 to close at R16.27/US$1 on 30 June 2022. The volatility in the exchange rate is driven by global economic factors. Refer to note 2 for a discussion on some of the factors and their impact. The weakening negatively impacted on the derivative valuations as well as the translation of the US$ debt facilities at 30 June 2022. Refer to note 10 for detail.
During the 2022 year the Rand weakened from a closing rate of R10.72/A$1 on 30 June 2021 to R11.25/A$1 on 30 June 2022. This impacted on the translation of balances from Australian dollar to Rand on consolidation as well as the average rate at which income statement items were translated at. These changes resulted in a foreign exchange movement translation gain of R742 million for the 2022 year.
Commodity price sensitivity
The profitability of the group’s operations, and the cash flows generated by those operations, are mainly affected by changes in the market price of gold, and in the case of Hidden Valley, silver as well. Harmony entered into derivative contracts to manage the variability in cash flows from the group’s production, in order to create cash certainty and protect the group against lower commodity prices. The general limit for gold hedging currently set by the Board is 20% for a 24-month period. The limit set by the Board is 50% of silver exposure over a 24-month period. The audit and risk committee reviews the details of the programme quarterly. Refer to note 8 and the fair value determination section below for further detail on these contracts.
Interest rate risk
During the 2022 year the US Federal Reserve increased the fund rate by 150 basis points. Similarly the SARB increased the repo rate by 125 basis points causing the higher interest rates to have a non-favourable impact on the group's cost of debt. This was offset by lower debt balances. The SOFR (Secured Overnight Financing Rate) has been used for the refinanced US$ borrowings, as opposed to LIBOR (London Interbank Offered Rate) which was used for the historic borrowings. This due to LIBOR being phased out. During the refinancing process, the group was able to secure slightly improved margins on its facilities. Even though it can be expected that the increase in the repo rate will result in a higher cost of debt as financial institutions will increase their lending rates, the group has not entered into interest rate swap agreements. The audit and risk committee reviews the group's risk exposure quarterly.
Harmony Gold Mining Company Limited | FY22 Results for the year ended 30 June 2022 33
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 30 JUNE 2022 (RAND)
13. FINANCIAL RISK MANAGEMENT ACTIVITIES continued
Credit risk
Financial instruments which are subject to credit risk are restricted cash and investments, derivative financial instruments and cash and cash equivalents, all of which are invested with financial institutions that meet the group's policy requirements for credit quality, as well as trade and other receivables (excluding non-financial instruments). In assessing the creditworthiness of local institutions, management uses the national scale long-term ratings.
At 30 June 2022, the rating of major SA banks remained unchanged at AA+, which is in line with the group's credit risk policy. An assessment of the expected credit losses (ECLs) for the financial assets measured at amortised costs at 30 June 2022 resulted in an immaterial amount for each instrument. The credit rating of the group's Australian counterparts remained unchanged at A+ resulting in the assessed ECL remaining immaterial.
Management will continue to review the underlying strength of the economies we operate in as well as the creditworthiness of the financial institutions and make any changes deemed necessary to safeguard the assets and reduce the credit risk.
Capital risk management
The weakening of the Rand has resulted in foreign exchange translation losses on foreign borrowings, being the major contributor to the group's increased net debt compared to 30 June 2021. It remains the group's objective to adhere to a conservative approach to debt and maintain low levels of gearing.
Net debt is as follows:
| | | | | | | | | | | |
| | At |
Figures in million | | 30 June 2022 (Reviewed) | 30 June 2021 (Audited) |
Cash and cash equivalents | | 2 448 | | 2 819 | |
Borrowings | | (3 205) | | (3 361) | |
Net debt | | (757) | | (542) | |
Fair value determination
The fair value levels of hierarchy are as follows:
| | | | | |
Level 1: | Quoted prices (unadjusted) in active markets |
Level 2: | Inputs other than quoted prices included within level 1 that are observable for the asset, either directly or indirectly (that is, as prices) or indirectly (that is derived from prices) |
Level 3: | Inputs for the asset that are not based on observable market data (that is unobservable inputs) |
| | | | | | | | | | | |
| | At |
Figures in million | Fair value hierarchy level | 30 June 2022 (Reviewed) | 30 June 2021 (Audited) |
Fair value through other comprehensive income financial instruments | | | |
Other non-current assets (a) | Level 3 | 75 | | 74 | |
Restricted cash and investments (b) | Level 1 | 292 | | 252 | |
Fair value through profit or loss financial instruments | | | |
Restricted cash and investments (b) | Level 2 | 1 162 | | 1 391 | |
Derivative financial assets (c) | Level 2 | 656 | | 1 799 | |
Derivative financial liabilities (c) | Level 2 | (11) | | (212) | |
Loan to ARM BBEE Trust (d) | Level 3 | 148 | | 177 | |
Contingent consideration liability (e) | Level 3 | (356) | | (417) | |
(a) The majority of the balance relates to the equity investment in Rand Mutual Assurance. The fair value of the investment was estimated with reference to an independent valuation. A combination of the "Embedded Valuation" and "Net Asset Value" techniques were applied to revalue the investment as at 30 June 2022. In evaluating the group's share of the business, common practice marketability and minority discounts as well as additional specific risk discounts were applied. There are no inputs to the valuation that a reasonably possible change would result in a material change in the fair value of the investment.
(b) The majority of the level 2 valued assets are directly derived from the Top 40 index on the JSE, and are discounted at market interest rates. This relates to equity-linked deposits in the group's environmental rehabilitation trust funds. The level 1 valued assets comprise of listed equity securities designated as fair value through other comprehensive income instruments. The remaining balance of the environmental trust funds is carried at amortised cost and therefore not disclosed here.
34 Harmony Gold Mining Company Limited | FY22 Results for the year ended 30 June 2022
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 30 JUNE 2022 (RAND)
13. FINANCIAL RISK MANAGEMENT ACTIVITIES continued
(c) The mark-to-market remeasurement of the derivative contracts was determined as follows:
•Foreign exchange contracts comprise of zero cost collars and FECs: The zero cost collars were valued using a Black-Scholes valuation technique derived from spot Rand/US$ exchange rate inputs, implied volatilities on the Rand/US$ exchange rate, Rand/US$ inter-bank interest rates and discounted at a market interest rate (zero-coupon interest rate curve). The value of the FECs is derived from the forward Rand/US$ exchange rate and discounted at a market interest rate (zero coupon interest rate curve)
•Rand gold contracts (forward sale contracts): spot Rand/US$ exchange rate, Rand and dollar interest rates (forward points), spot US$ gold price, differential between the US interest rate and gold lease interest rate which is discounted at a market interest rate
•US$ gold contracts (forward sale contracts): spot US$ gold price, differential between the US interest rate and gold lease interest rate and discounted at a market interest rate
•Silver contracts (zero cost collars): a Black-Scholes valuation technique, derived from spot US$ silver price, strike price, implied volatilities, time to maturity and interest rates and discounted at a market interest rate investments
(d) At 30 June 2022, the fair value movement was calculated using a discounted cash flow model, taking into account forecasted dividend payments over the estimated repayment period of the loan at a rate of 9.3% (2021: 7.9%). A 99 basis point change in the discount rate, which would represent a reasonably possible change based on expected movements in lending rates, would not cause a material change in the fair value of the loan. The loan balance forms part of other non-current assets in the balance sheet.
(e) The contingent consideration liability related to the Mponeng operation (refer to note 11) was determined using the expected gold production profile for Mponeng at a post-tax real rate of 10.2% (2021: 10.3%). Should the expected gold production profile increase by 7.6% or decrease by 7.6%, the contingent consideration liability would increase by R251 million (2021: R208 million at 7%) or decrease by R189 million (June 2021: R183 million at 7%), respectively. This represents reasonably expected changes which were determined based on the standard deviation of previous years' production of the Mponeng operation. No other reasonably expected changes in key unobservable inputs would have caused a material change in the fair value of the liability.
The carrying values (less any impairment allowance) of short-term financial instruments are assumed to approximate their fair values. This includes restricted cash and investments carried at amortised cost. The fair values of borrowings are not materially different to their carrying amounts since the interest payable on those borrowings is at floating interest rates. The fair value of borrowings is based on discounted cash flows using a current borrowing rate. The determination of the fair values are level 3 in the fair value hierarchy due to the use of unobservable inputs, including own credit risk.
14. ADDITIONAL CASH FLOW DISCLOSURES
Cash generated by operations decreased year on year primarily due to the higher production costs incurred and the trade and other payables outflow in comparison to an inflow in 2021, as a result of the inclusion of the results of the Mponeng operations. Refer to note 4 for further detail.
The decrease was offset by the increase in revenue and gains on derivatives as well as the trade and other receivables inflow. Refer to note 3 and 8 for further detail.
Additions to property, plant and equipment:
| | | | | | | | | | | |
| | Year ended |
Figures in million | | 30 June 2022 (Reviewed) | 30 June 2021 (Audited) |
Capital expenditure – operations | | 5 096 | | 4 062 | |
Capital and capitalised exploration and evaluation expenditure for Wafi-Golpu | | 22 | | 34 | |
Additions resulting from stripping activities | | 1 096 | | 1 046 | |
Total additions to property, plant and equipment | | 6 214 | | 5 142 | |
Harmony Gold Mining Company Limited | FY22 Results for the year ended 30 June 2022 35
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 30 JUNE 2022 (RAND)
15. COMMITMENTS AND CONTINGENCIES
| | | | | | | | | | | |
| | At |
Figures in million | | 30 June 2022 (Reviewed) | 30 June 2021 (Audited) |
Capital expenditure commitments: | | | |
Contracts for capital expenditure1 | | 1 944 | | 373 | |
Authorised by the directors but not contracted for | | 6 300 | | 7 425 | |
Total capital commitments | | 8 244 | | 7 798 | |
1 The increase relates predominantly to the Kareerand Expansion project, for which regulatory approvals were obtained during June 2022.
This expenditure will be financed from existing resources and, where appropriate, borrowings which is adequate.
Contingent liabilities
During June 2022, the Water Use Licence (WUL) for Mine Waste Solutions' Kareerand tailings storage facility was approved by the Department of Water and Sanitation. We are still awaiting approvals of the WULs for our Free State operations as well as Doornkop. There were no other significant changes during the 2022 financial year. For a detailed disclosure on contingent liabilities, refer to Harmony's annual financial statements for the financial year ended 30 June 2021.
16. RELATED PARTIES
The following directors and prescribed officers owned shares in Harmony at year end:
| | | | | | | | | | | |
| | At |
Name of director/prescribed officer | | 30 June 2022 (Reviewed) | 30 June 2021 (Reviewed)* |
PW Steenkamp (Executive director)1 | | 772 589 | | 746 085 | |
BP Lekubo (Executive director)1 | | 15 988 | | 3 581 | |
HE Mashego (Executive director)1 | | 14 875 | | 3 319 | |
BB Nel (Prescribed officer)1,4 | | 110 207 | | 198 622 | |
VP Tobias (Prescribed officer)1,2,4 | | n/a | 321 084 | |
MP van der Walt (Prescribed officer)1,4 | | 100 000 | | 159 438 | |
JJ van Heerden (Prescribed officer)1,4 | | 30 734 | | 6 156 | |
M Naidoo-Vermaak (Prescribed officer)1,3 | | 7 966 | | n/a |
| | | |
AJ Wilkens (Non-executive director) | | 101 301 | | 101 301 | |
* Certain figures have been revised. Refer to footnote 4 below.
1 The balance of shares held is attributable to shares held privately and in terms of the minimum shareholding requirement as set out in our remuneration policy.
2 VP Tobias resigned effective 14 November 2021.
3 M Naidoo-Vermaak classified as a prescribed officer effective 21 February 2022.
4 During the year a misstatement was identified in the balance of the shares owned by certain prescribed officers for the year ended 30 June 2021. The previously disclosed balance at 30 June 2021 did not consider shares traded in the prescribed officers' personal capacity, and as a result were misstated. These figures have been revised. Shares held at 30 June 2021 were previously disclosed as: BB Nel, 216 175 shares, MP van der Walt, 139 356 shares, VP Tobias, 347 462 shares and JJ van Heerden, 166 156 shares.
On 7 December 2021, Harmony announced the retirement of Ms Fikile De Buck and Dr Simo Lushaba as independent non-executive directors with effect from 7 December 2021.
On 21 February 2022, Ms Melanie Naidoo-Vermaak and Mr Anton Buthelezi were appointed as Senior Executive: Sustainable Development and Senior Executive: Human Capital respectively and have been classified as prescribed officers.
On 19 May 2022, Harmony announced the appointment of Mr Bongani Nqwababa and Mr Martin Prinsloo to the Board of Directors of Harmony as independent non-executive directors with effect from 18 May 2022.
On 28 June 2022, Harmony announced the resignation of Mr Modise Motloba as a non-independent non-executive director with effect from 27 June 2022.
36 Harmony Gold Mining Company Limited | FY22 Results for the year ended 30 June 2022
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS continued
FOR THE YEAR ENDED 30 JUNE 2022 (RAND)
17. SEGMENT REPORT
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker (CODM) as well as the requirements of IFRS 8, Operating Segments.
As of 1 July 2021, Mine Waste Solutions is disclosed as a separate operating segment based on the requirements of IFRS 8.
The segment report follows on page 38.
18. RECONCILIATION OF SEGMENT INFORMATION
| | | | | | | | | | | |
| | Year ended |
Figures in million | | 30 June 2022 (Reviewed) | 30 June 2021 (Audited) |
Reconciliation of production profit to gross profit | | | |
Revenue | | 42 645 | | 41 733 | |
– Per segment report | | 41 742 | | 40 698 | |
– Other metal sales treated as by-product credits in the segment report | | 903 | | 1 035 | |
Production costs | | (33 099) | | (29 774) | |
– Per segment report | | (32 196) | | (28 739) | |
– Other metal sales treated as by-product credits in the segment report | | (903) | | (1 035) | |
| | | |
Production profit per segment report | | 9 546 | | 11 959 | |
Amortisation and depreciation | | (3 683) | | (3 875) | |
Impairment of assets | | (4 433) | | (1 124) | |
Other cost of sales items | | (712) | | (716) | |
Gross profit as per income statement1 | | 718 | | 6 244 | |
1 The reconciliation was done up to the first recognisable line item on the income statement. The reconciliation will follow the income statement after that.
| | | | | | | | | | | |
| | At |
Figures in million | | 30 June 2022 (Reviewed) | 30 June 2021 (Audited) |
Reconciliation of total segment assets to consolidated property, plant and equipment | | | |
Property, plant and equipment not allocated to a segment | | | |
Mining assets | | 943 | | 757 | |
Undeveloped property | | 4 004 | | 3 989 | |
Other non-mining assets | | 510 | | 411 | |
Assets under construction* | | 1 823 | | 1 584 | |
| | 7 280 | | 6 741 | |
* Assets under construction consist of the Wafi-Golpu assets
19. SUBSEQUENT EVENTS
On 29 August 2022, a final dividend of 22 SA cents was declared, payable on 17 October 2022.
Harmony Gold Mining Company Limited | FY22 Results for the year ended 30 June 2022 37
SEGMENT REPORT (RAND/METRIC)
FOR THE YEAR ENDED 30 JUNE 2022 (REVIEWED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Revenue | Production cost | Production profit/(loss) | Segment assets | Capital expenditure | Kilograms produced* | Tonnes milled* |
| 30 June | 30 June | 30 June | 30 June | 30 June | 30 June | 30 June |
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 |
| R million | R million | R million | R million | R million | kg | t'000 |
South Africa Underground | | | | | | | | | | | | | | |
Tshepong Operations | 6 351 | | 6 214 | | 5 084 | | 4 865 | | 1 267 | | 1 349 | | 3 779 | | 6 541 | | 1 514 | | 1 112 | | 7 022 | | 7 419 | | 1 561 | | 1 558 | |
Moab Khotsong | 5 779 | | 6 048 | | 4 038 | | 3 842 | | 1 741 | | 2 206 | | 4 324 | | 4 008 | | 894 | | 633 | | 6 508 | | 7 166 | | 959 | | 903 | |
Mponeng | 5 620 | | 4 750 | | 4 487 | | 2 938 | | 1 133 | | 1 812 | | 4 433 | | 4 321 | | 605 | | 493 | | 6 086 | | 5 446 | | 840 | | 683 | |
Bambanani1 | 1 286 | | 1 687 | | 1 163 | | 1 156 | | 123 | | 531 | | — | | 327 | | 25 | | 71 | | 1 433 | | 1 992 | | 176 | | 227 | |
Joel | 1 411 | | 1 199 | | 1 308 | | 1 124 | | 103 | | 75 | | 1 244 | | 1 166 | | 225 | | 172 | | 1 556 | | 1 424 | | 434 | | 359 | |
Doornkop | 3 106 | | 3 077 | | 2 453 | | 2 140 | | 653 | | 937 | | 3 222 | | 2 994 | | 491 | | 425 | | 3 444 | | 3 670 | | 874 | | 851 | |
Target 1 | 1 648 | | 1 410 | | 1 812 | | 1 667 | | (164) | | (257) | | 1 517 | | 1 367 | | 384 | | 368 | | 1 800 | | 1 603 | | 455 | | 488 | |
Kusasalethu | 4 139 | | 3 400 | | 3 086 | | 2 955 | | 1 053 | | 445 | | 822 | | 1 057 | | 210 | | 205 | | 4 567 | | 3 999 | | 607 | | 708 | |
Masimong | 1 733 | | 1 636 | | 1 504 | | 1 427 | | 229 | | 209 | | 17 | | 26 | | 49 | | 29 | | 1 910 | | 2 012 | | 486 | | 510 | |
Unisel2 | — | | 224 | | — | | 182 | | — | | 42 | | — | | — | | — | | — | | — | | 247 | | — | | 57 | |
Total Underground | 31 073 | | 29 645 | | 24 935 | | 22 296 | | 6 138 | | 7 349 | | 19 358 | | 21 807 | | 4 397 | | 3 508 | | 34 326 | | 34 978 | | 6 392 | | 6 344 | |
Surface | | | | | | | | | | | | | | |
Mine Waste Solutions3 | 2 642 | | 1 889 | | 1 588 | | 1 137 | | 1 054 | | 751 | | 1 027 | | 1 031 | | 264 | | 70 | | 2 899 | | 2 057 | | 23 443 | | 17 665 | |
All other surface operations3 | 4 868 | | 5 136 | | 3 551 | | 3 587 | | 1 317 | | 1 550 | | 1 066 | | 890 | | 282 | | 265 | | 5 304 | | 6 031 | | 20 737 | | 21 824 | |
Total Surface | 7 510 | | 7 025 | | 5 139 | | 4 724 | | 2 371 | | 2 301 | | 2 093 | | 1 921 | | 546 | | 335 | | 8 203 | | 8 088 | | 44 180 | | 39 489 | |
Total South Africa | 38 583 | | 36 670 | | 30 074 | | 27 020 | | 8 509 | | 9 650 | | 21 451 | | 23 728 | | 4 943 | | 3 843 | | 42 529 | | 43 066 | | 50 572 | | 45 833 | |
International | | | | | | | | | | | | | | |
Hidden Valley | 3 159 | | 4 028 | | 2 122 | | 1 719 | | 1 037 | | 2 309 | | 4 141 | | 3 128 | | 1 249 | | 1 260 | | 3 707 | | 4 689 | | 3 229 | | 3 420 | |
Total international | 3 159 | | 4 028 | | 2 122 | | 1 719 | | 1 037 | | 2 309 | | 4 141 | | 3 128 | | 1 249 | | 1 260 | | 3 707 | | 4 689 | | 3 229 | | 3 420 | |
Total operations | 41 742 | | 40 698 | | 32 196 | | 28 739 | | 9 546 | | 11 959 | | 25 592 | | 26 856 | | 6 192 | | 5 103 | | 46 236 | | 47 755 | | 53 801 | | 49 253 | |
Reconciliation of the segment information to the consolidated income statement and balance sheet (refer to note 18) | 903 | | 1 035 | | 903 | | 1 035 | | — | | — | | 7 280 | | 6 741 | | | | | | | |
| 42 645 | | 41 733 | | 33 099 | | 29 774 | | 9 546 | | 11 959 | | 32 872 | | 33 597 | | 6 192 | | 5 103 | | 46 236 | | 47 755 | | 53 801 | | 49 253 | |
* Production statistics are unaudited and not reviewed.
1 The Bambanani operation closed in June 2022
2 The Unisel operation closed in October 2020
3 The Mine Waste Solutions and All other surface operations line items were disaggregated as a result of Mine Waste Solutions meeting the 10% profit quantitative threshold for a reportable segment. Refer to note 1 for further details.
38 Harmony Gold Mining Company Limited | FY22 Results for the year ended 30 June 2022
CONDENSED CONSOLIDATED INCOME STATEMENT (US$)
(CONVENIENCE TRANSLATION) (UNAUDITED AND UNREVIEWED)
| | | | | | | | | | | |
| | Year ended |
Figures in million | | 30 June 2022 | 30 June 2021 |
Revenue | | 2 804 | | 2 710 | |
Cost of sales | | (2 738) | | (2 310) | |
Production costs | | (2 176) | | (1 933) | |
Amortisation and depreciation | | (242) | | (252) | |
Impairment of assets | | (273) | | (79) | |
Other items | | (47) | | (46) | |
| | | |
Gross profit | | 66 | | 400 | |
Corporate, administration and other expenditure | | (65) | | (69) | |
Exploration expenditure | | (14) | | (11) | |
Gains/(losses) on derivatives | | 3 | | 66 | |
Foreign exchange translation gain/(loss) | | (21) | | 44 | |
Other operating expenses | | — | | (16) | |
Operating profit/(loss) | | (31) | | 414 | |
Gain on bargain purchase | | — | | 18 | |
Acquisition-related costs | | — | | (8) | |
Share of profits from associates | | 4 | | 5 | |
Investment income | | 23 | | 21 | |
Finance costs | | (47) | | (43) | |
Profit/(loss) before taxation | | (51) | | 407 | |
Taxation | | 3 | | (81) | |
Current taxation | | (20) | | (35) | |
Deferred taxation | | 23 | | (46) | |
| | | |
Net profit/(loss) for the year | | (48) | | 326 | |
Attributable to: | | | |
Non-controlling interest | | 3 | | 2 | |
Owners of the parent | | (51) | | 324 | |
Earnings/(loss) per ordinary share (cents) | | | |
Basic earnings/(loss) | | (8) | | 54 | |
Diluted earnings/(loss) | | (8) | | 52 | |
The currency conversion average rates for the year ended 30 June 2022: US$1 = R15.21 (30 June 2021: US$1 = R15.40).
| | |
Note on convenience translations The requirements of IAS 21 The Effects of Changes in Foreign Exchange Rates have not necessarily been applied in the translation of the US Dollar financial statements presented on page 39 to 43. |
Harmony Gold Mining Company Limited | FY22 Results for the year ended 30 June 2022 39
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (US$)
(CONVENIENCE TRANSLATION) (UNAUDITED AND UNREVIEWED)
| | | | | | | | | | | |
| | Year ended |
Figures in million | | 30 June 2022 | 30 June 2021 |
Net profit/(loss) for the year | | (48) | | 326 | |
Other comprehensive income for the year, net of income tax | | 12 | | 211 | |
Items that may be reclassified subsequently to profit or loss: | | 11 | | 210 | |
Foreign exchange translation gain/(loss) | | 49 | | (80) | |
Remeasurement of gold hedging contracts | | (38) | | 290 | |
Items that will not be reclassified to profit or loss | | 1 | | 1 | |
Total comprehensive income for the year | | (36) | | 537 | |
Attributable to: | | | |
Non-controlling interest | | 2 | | 3 | |
Owners of the parent | | (38) | | 534 | |
The currency conversion average rates for the year ended 30 June 2022: US$1 = R15.21 (30 June 2021: US$1 = R15.40).
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (US$)
FOR THE YEAR ENDED 30 JUNE 2022 (CONVENIENCE TRANSLATION) (UNAUDITED AND UNREVIEWED)
| | | | | | | | | | | | | | | | | | | | |
Figures in million | | Share capital | Accumulated loss | Other reserves | Non-controlling interest | Total |
Balance – 1 July 2021 | | 2 024 | | (505) | | 394 | | 4 | | 1 917 | |
| | | | | | |
Share-based payments | | — | | — | | 9 | | — | | 9 | |
| | | | | | |
Net profit/(loss) for the year | | — | | (62) | | — | | 2 | | (60) | |
Other comprehensive income for the year | | — | | — | | 12 | | — | | 12 | |
Dividends paid | | — | | (25) | | — | | (1) | | (26) | |
Balance – 30 June 2022 | | 2 024 | | (592) | | 415 | | 5 | | 1 852 | |
Balance – 1 July 2020 | | 2 308 | | (882) | | 211 | | — | | 1 637 | |
| | | | | | |
Share-based payments | | — | | — | | 11 | | — | | 11 | |
Net profit for the year | | — | | 389 | | — | | 3 | | 392 | |
Other comprehensive income for the year | | — | | — | | 226 | | 1 | | 227 | |
Dividends paid | | — | | (47) | | — | | — | | (47) | |
Balance – 30 June 2021 | | 2 308 | | (540) | | 448 | | 4 | | 2 220 | |
The currency conversion closing rates for the year ended 30 June 2022: US$1 = R16.27 (30 June 2021: US$1 = R14.27).
40 Harmony Gold Mining Company Limited | FY22 Results for the year ended 30 June 2022
CONDENSED CONSOLIDATED BALANCE SHEET (US$)
(CONVENIENCE TRANSLATION) (UNAUDITED AND UNREVIEWED)
| | | | | | | | | | | |
| | At |
Figures in million | | 30 June 2022 | 30 June 2021 |
ASSETS | | | |
Non-current assets | | | |
Property, plant and equipment | | 2 020 | | 2 354 | |
Intangible assets | | 3 | | 26 | |
Restricted cash and investments | | 341 | | 367 | |
Investments in associates | | 8 | | 9 | |
Deferred tax assets | | 12 | | 19 | |
Other non-current assets | | 23 | | 23 | |
Derivative financial assets | | 8 | | 23 | |
Total non-current assets | | 2 415 | | 2 821 | |
Current assets | | | |
Inventories | | 173 | | 178 | |
Restricted cash and investments | | 2 | | 5 | |
Trade and other receivables | | 103 | | 116 | |
Derivative financial assets | | 32 | | 103 | |
Cash and cash equivalents | | 150 | | 198 | |
Total current assets | | 460 | | 600 | |
Total assets | | 2 875 | | 3 421 | |
EQUITY AND LIABILITIES | | | |
Share capital and reserves | | | |
Attributable to equity holders of the parent company | | 1 847 | | 2 183 | |
Share capital | | 2 024 | | 2 308 | |
Other reserves | | 415 | | 448 | |
Accumulated loss | | (592) | | (573) | |
Non-controlling interest | | 5 | | 4 | |
Total equity | | 1 852 | | 2 187 | |
Non-current liabilities | | | |
Deferred tax liabilities | | 97 | | 153 | |
Provision for environmental rehabilitation | | 308 | | 327 | |
Other provisions | | 57 | | 65 | |
Borrowings | | 195 | | 208 | |
Contingent consideration liability | | 22 | | 29 | |
Other non-current liabilities | | 16 | | 12 | |
| | | |
Streaming contract liability | | 23 | | 49 | |
Total non-current liabilities | | 718 | | 843 | |
Current liabilities | | | |
Other provisions | | 8 | | 12 | |
Borrowings | | 2 | | 27 | |
Trade and other payables | | 276 | | 310 | |
Derivative financial liabilities | | — | | 14 | |
Streaming contract liability | | 19 | | 28 | |
Total current liabilities | | 305 | | 391 | |
Total equity and liabilities | | 2 875 | | 3 421 | |
The balance sheet for 30 June 2022 converted at a conversion rate of US$1 = R16.27 (30 June 2021: US$1 = R14.27)
Harmony Gold Mining Company Limited | FY22 Results for the year ended 30 June 2022 41
CONDENSED CONSOLIDATED CASH FLOW STATEMENT (US$)
(CONVENIENCE TRANSLATION) (UNAUDITED AND UNREVIEWED)
| | | | | | | | | | | |
| | Year ended |
Figures in million | | 30 June 2022 | 30 June 2021 |
CASH FLOW FROM OPERATING ACTIVITIES | | | |
Cash generated by operations | | 485 | | 633 | |
Dividends received | | 5 | | 6 | |
Interest received | | 6 | | 11 | |
Interest paid | | (21) | | (15) | |
Income and mining taxes paid | | (19) | | (38) | |
Cash generated from operating activities | | 456 | | 597 | |
CASH FLOW FROM INVESTING ACTIVITIES | | | |
Increase in restricted cash and investments | | (8) | | (3) | |
Amounts refunded from restricted cash and investments | | 3 | | 2 | |
Redemption of preference shares from associates | | — | | 2 | |
Acquisition of Mponeng operations and related assets | | — | | (200) | |
ARM BBEE Trust loan repayment | | 4 | | 17 | |
ARM BBEE Trust loan advanced | | — | | (17) | |
Capital distribution from investments | | — | | 1 | |
Proceeds from disposal of property, plant and equipment | | 2 | | 1 | |
Additions to property, plant and equipment | | (409) | | (334) | |
Cash utilised by investing activities | | (408) | | (531) | |
CASH FLOW FROM FINANCING ACTIVITIES | | | |
Borrowings raised | | 201 | | — | |
Borrowings repaid | | (237) | | (227) | |
| | | |
Dividends paid | | (28) | | (44) | |
Lease payments | | (12) | | (8) | |
Cash utilised by financing activities | | (76) | | (279) | |
Foreign currency translation adjustments | | (20) | | 44 | |
Net decrease in cash and cash equivalents | | (48) | | (169) | |
Cash and cash equivalents – beginning of year | | 198 | | 367 | |
Cash and cash equivalents – end of year | | 150 | | 198 | |
The currency conversion average rates for the year ended 30 June 2022: US$1 = R15.21 (30 June 2021: US$1 = R15.40).
The closing balance translated at closing rate of 30 June 2022: US$1 = R16.27 (30 June 2021: US$1 = R14.27).
42 Harmony Gold Mining Company Limited | FY22 Results for the year ended 30 June 2022
SEGMENT REPORT (US$/IMPERIAL)
FOR THE YEAR ENDED 30 JUNE 2022 (CONVENIENCE TRANSLATION) (UNAUDITED AND UNREVIEWED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Revenue | Production cost | Production profit/(loss) | Segment assets | Capital expenditure | Ounces produced | Tons milled |
| 30 June | 30 June | 30 June | 30 June | 30 June | 30 June | 30 June |
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 |
| US$ million | US$ million | US$ million | US$ million | US$ million | oz | t'000 |
South Africa Underground | | | | | | | | | | | | | | |
Tshepong Operations | 418 | | 403 | | 334 | | 316 | | #SHEET! | 87 | | 232 | | 458 | | 100 | | 72 | | 225 763 | | 238 526 | | 1 721 | | 1 718 | |
Moab Khotsong | 380 | | 393 | | 265 | | 250 | | #SHEET! | 143 | | 266 | | 281 | | 59 | | 41 | | 209 237 | | 230 391 | | 1 059 | | 995 | |
Mponeng | 369 | | 308 | | 295 | | 191 | | 74 | | 117 | | 272 | | 303 | | 40 | | 32 | | 195 669 | | 175 092 | | 926 | | 753 | |
Bambanani1 | 85 | | 110 | | 76 | | 75 | | #SHEET! | 35 | | — | | 23 | | 2 | | 5 | | 46 072 | | 64 044 | | 194 | | 250 | |
Joel | 93 | | 78 | | 86 | | 73 | | 7 | | 5 | | 76 | | 82 | | 15 | | 11 | | 50 026 | | 45 783 | | 478 | | 396 | |
Doornkop | 204 | | 200 | | 161 | | 139 | | 43 | | 61 | | 198 | | 210 | | 32 | | 28 | | 110 726 | | 117 993 | | 963 | | 938 | |
Target 1 | 108 | | 92 | | 119 | | 108 | | (11) | | (16) | | 93 | | 96 | | 25 | | 24 | | 57 872 | | 51 536 | | 501 | | 537 | |
Kusasalethu | 272 | | 221 | | 203 | | 192 | | 69 | | 29 | | 51 | | 74 | | 14 | | 13 | | 146 833 | | 128 570 | | 669 | | 780 | |
Masimong | 114 | | 106 | | 99 | | 93 | | 15 | | 13 | | 1 | | 2 | | 3 | | 2 | | 61 407 | | 64 687 | | 536 | | 563 | |
Unisel2 | — | | 15 | | — | | 12 | | — | | 3 | | — | | — | | — | | — | | — | | 7 941 | | — | | 63 | |
Total Underground | 2 043 | | 1 926 | | 1 638 | | 1 449 | | #SHEET! | 477 | | 1 189 | | 1 529 | | 290 | | 228 | | 1 103 605 | | 1 124 563 | | 7 047 | | 6 993 | |
Surface | | | | | | | | | | | | | | |
Mine Waste Solutions3 | 174 | | 123 | | 104 | | 74 | | #SHEET! | 49 | | 63 | | 72 | | 17 | | 5 | | 93 205 | | 66 133 | | 25 851 | | 19 479 | |
All other surface operations | 320 | | 332 | | #SHEET! | 232 | | #SHEET! | 100 | | 66 | | 63 | | 19 | | 17 | | 170 525 | | 193 901 | | 22 866 | | 24 068 | |
Total Surface | 494 | | 455 | | #SHEET! | 306 | | #SHEET! | 149 | | 129 | | 135 | | 36 | | 22 | | 263 730 | | 260 034 | | 48 717 | | 43 547 | |
Total South Africa | 2 537 | | 2 381 | | 1 977 | | 1 755 | | #SHEET! | 626 | | 1 318 | | 1 664 | | #SHEET! | 250 | | 1 367 335 | | 1 384 597 | | 55 764 | | 50 540 | |
International | | | | | | | | | | | | | | |
Hidden Valley | 208 | | 262 | | 140 | | 112 | | 68 | | 150 | | 254 | | 219 | | 82 | | 82 | | 119 182 | | 150 755 | | 3 561 | | 3 772 | |
Total international | 208 | | 262 | | 140 | | 112 | | 68 | | 150 | | 254 | | 219 | | 82 | | 82 | | 119 182 | | 150 755 | | 3 561 | | 3 772 | |
Total operations | #SHEET! | 2 643 | | 2 117 | | 1 867 | | 628 | | 776 | | 1 572 | | 1 883 | | #SHEET! | 332 | | 1 486 517 | | 1 535 352 | | 59 325 | | 54 312 | |
1 The Bambanani operation closed in June 2022
2 The Unisel operation closed in October 2020
3 The Mine Waste Solutions and All other surface operations line items were disaggregated as a result of Mine Waste Solutions meeting the 10% profit quantitative threshold for a reportable segment.
Harmony Gold Mining Company Limited | FY22 Results for the year ended 30 June 2022 43
DEVELOPMENT RESULTS
FOR THE YEAR ENDED 30 JUNE 2022
METRIC
| | | | | | | | | | | | | | | | | |
| | | CHANNEL |
| Reef | Sampled | Width | Value | Gold |
| metres | metres | (cms) | (g/t) | (cmg/t) |
Tshepong |
Basal | 1 082 | 1 064 | 13.37 | 62.40 | 834 |
B Reef | 484 | 442 | 131.26 | 11.71 | 1 537 |
All reefs | 1 567 | 1 506 | 47.97 | 21.69 | 1 040 |
Phakisa |
Basal | 996 | 992 | 37.21 | 40.38 | 1 503 |
All reefs | 996 | 992 | 37.21 | 40.38 | 1 503 |
Bambanani |
Basal | — | — | — | — | — |
All reefs | — | — | — | — | — |
Doornkop |
South Reef | 1 449 | 1 335 | 82.20 | 11.63 | 956 |
All reefs | 1 449 | 1 335 | 82.20 | 11.63 | 956 |
Kusasalethu |
VCR Reef | 1 025 | 1 002 | 70.26 | 21.41 | 1 504 |
All reefs | 1 025 | 1 002 | 70.26 | 21.41 | 1 504 |
Target 1 |
Elsburg/Dryerskuil | 55 | 52 | 272.00 | 6.98 | 1 899 |
All reefs | 55 | 52 | 272.00 | 6.98 | 1 899 |
Masimong 5 |
Basal | 723 | 554 | 107.62 | 12.14 | 1 307 |
B Reef* | 834 | 1 090 | 99.13 | 20.92 | 2 074 |
All reefs | 1 557 | 1 644 | 101.99 | 17.80 | 1 815 |
Joel |
Beatrix | 1 104 | 1 077 | 158.76 | 8.62 | 1 369 |
All reefs | 1 104 | 1 077 | 158.76 | 8.62 | 1 369 |
Moab Khotsong |
Vaal Reef | 1 409 | 1 102 | 109.45 | 27.93 | 3 057 |
C Reef | 15 | | | | |
All reefs | 1 424 | 1 102 | 109.45 | 27.93 | 3 057 |
Mponeng |
VCR | 1 155 | 1 108 | 79.28 | 42.29 | 3 353 |
Carbon Leader | 94 | 100 | 18.38 | 82.82 | 1 522 |
All reefs | 1 249 | 1 208 | 74.24 | 43.12 | 3 202 |
Total Harmony |
Basal | 2 801 | 2 610 | 42.44 | 28.01 | 1 189 |
Beatrix | 1 104 | 1 077 | 158.76 | 8.62 | 1 369 |
B Reef | 1 318 | 1 532 | 230.39 | 32.63 | 3 611 |
Elsburg/Dryerskuil | 55 | 52 | 272.00 | 6.98 | 1 899 |
Vaal Reef | 1 409 | 1 102 | 109.45 | 27.93 | 3 057 |
South Reef | 1 449 | 1 335 | 82.20 | 11.63 | 956 |
VCR | 2 179 | 2 110 | 149.54 | 63.71 | 4 858 |
Carbon Leader | 94 | 100 | 18.38 | 82.82 | 1 522 |
All reefs | 10 424 | 9 918 | 85.94 | 20.69 | 1 778 |
Rounding of numbers may result in slight computational discrepancies.
* B Reef drive metres not included in linear reef metres.
IMPERIAL
| | | | | | | | | | | | | | | | | |
| | | CHANNEL |
| Reef | Sampled | Width | Value | Gold |
| feet | feet | (inch) | (oz/t) | (in.oz/t) |
Tshepong |
Basal | 3 550 | 3 491 | 5.00 | 1.92 | 10 |
B Reef | 1 589 | 1 450 | 52.00 | 0.34 | 18 |
All reefs | 5 139 | 4 941 | 19.00 | 0.63 | 12 |
Phakisa | | | | | |
Basal | 3 267 | 3 255 | 15.00 | 1.15 | 17 |
All reefs | 3 267 | 3 255 | 15.00 | 1.15 | 17 |
Bambanani |
Basal | — | — | — | — | — |
All reefs | — | — | — | — | — |
Doornkop |
South Reef | 4 752 | 4 380 | 32.00 | 0.34 | 11 |
All reefs | 4 752 | 4 380 | 32.00 | 0.34 | 11 |
Kusasalethu |
VCR Reef | 3 362 | 3 287 | 28.00 | 0.62 | 17 |
All reefs | 3 362 | 3 287 | 28.00 | 0.62 | 17 |
Target 1 |
Elsburg/Dryerskuil | 181 | 171 | 107.00 | 0.20 | 22 |
All reefs | 181 | 171 | 107.00 | 0.20 | 22 |
Masimong 5 |
Basal | 2 373 | 1 818 | 42.00 | 0.36 | 15 |
B Reef* | 2 736 | 3 576 | 39.00 | 0.61 | 24 |
All reefs | 5 109 | 5 394 | 40.00 | 0.52 | 21 |
Joel |
Beatrix | 3 620 | 3 533 | 63.00 | 0.25 | 16 |
All reefs | 3 620 | 3 533 | 63.00 | 0.25 | 16 |
Moab Khotsong |
Vaal Reef | 4 624 | 3 615 | 43.00 | 0.82 | 35 |
C Reef | 49 | | | | |
All reefs | 4 672 | 3 615 | 43.00 | 0.82 | 35 |
Mponeng |
VCR | 3 788 | 3 635 | 31.00 | 1.24 | 39 |
Carbon Leader | 308 | 328 | 7.00 | 2.50 | 17 |
All reefs | 4 096 | 3 963 | 29.00 | 1.27 | 37 |
Total Harmony |
Basal | 9 190 | 8 563 | 17.00 | 0.80 | 14 |
Beatrix | 3 620 | 3 533 | 63.00 | 0.25 | 16 |
B Reef | 4 325 | 5 026 | 91.00 | 0.46 | 41 |
Elsburg/Dryerskuil | 181 | 171 | 107.00 | 0.20 | 22 |
Vaal Reef | 4 624 | 3 615 | 43.00 | 0.82 | 35 |
South Reef | 4 752 | 4 380 | 32.00 | 0.34 | 11 |
VCR | 7 150 | 6 923 | 59.00 | 0.95 | 56 |
Carbon Leader | 308 | 328 | 7.00 | 2.50 | 17 |
All reefs | 34 200 | 32 539 | 34.00 | 0.60 | 20 |
Rounding of numbers may result in slight computational discrepancies.
* B Reef drive metres not included in linear reef metres.
44 Harmony Gold Mining Company Limited | FY22 Results for the year ended 30 June 2022
COMPETENT PERSON'S DECLARATION
Harmony Gold Mining Company Limited’s statement of Mineral Resources and Mineral Reserves as at 30 June 2022 is produced in accordance with the South African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves (SAMREC). It should be noted that the Mineral Resources are reported inclusive of the Mineral Reserves.
In South Africa, Harmony employs an ore reserve manager at each of its operations who takes responsibility as competent person for the compilation and reporting of Mineral Resources and Mineral Reserves at their operations. In Papua New Guinea, competent persons are appointed for the Mineral Resources and Mineral Reserves for specific projects and operations.
The Mineral Resources and Mineral Reserves in this report are based on information compiled by the following competent persons:
Mineral Resources and Mineral Reserves of South Africa:
Jaco Boshoff, BSc (Hons), MSc, MBA, Pr.Sci.Nat, MSAIMM, MGSSA, who has 27 years’ relevant experience and is registered with the South African Council for Natural Scientific Professions (SACNASP), a member of the South African Institute of Mining and Metallurgy (SAIMM) and a member of the Geological Society of South Africa (GSSA).
Mr Boshoff is Harmony's Lead Competent Person.
| | | | | |
Jaco Boshoff | |
Physical address: | Postal address: |
Randfontein Office Park Corner of Main Reef Road and Ward Avenue Randfontein South Africa | PO Box 2 Randfontein 1760 South Africa |
Mineral Resources and Mineral Reserves of Papua New Guinea:
Gregory Job, BSc, MSc, who has 33 years’ relevant experience and is a member of the Australian Institute of Mining and Metallurgy (AusIMM).
| | | | | |
Greg Job | |
Physical address: | Postal address: |
Level 2, 189 Coronation Drive Milton, Queensland 4064 Australia | PO Box 1562 Milton, Queensland 4064 Australia |
Both these competent persons, who are full-time employees of Harmony, consent to the inclusion in the report of the matters based on the information in the form and context in which it appears.
DIRECTORATE AND ADMINISTRATION
| | |
HARMONY GOLD MINING COMPANY LIMITED |
Harmony Gold Mining Company Limited was incorporated and registered as a public company in South Africa on 25 August 1950 Registration number: 1950/038232/06 |
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: www.harmony.co.za |
DIRECTORS |
Dr PT Motsepe* (chairman), KT Nondumo*^ (deputy chairman), M Msimang*^ (lead independent director), PW Steenkamp (chief executive officer), BP Lekubo (financial director), HE Mashego (executive director) JA Chissano*^#, B Nqwababa*^, VP Pillay*^, M Prinsloo*^, GR Sibiya*^, PL Turner*^, JL Wetton*^, AJ Wilkens* * Non-executive ^ Independent # Mozambican |
INVESTOR RELATIONS |
E-mail: HarmonyIR@harmony.co.za Telephone: +27 11 411 6073 or +27 82 746 4120 |
COMPANY SECRETARIAT |
E-mail: companysecretariat@harmony.co.za Telephone: +27 11 411 2359 |
TRANSFER SECRETARIES |
JSE Investor Services (Proprietary) Limited (Registration number 2000/007239/07) 19 Ameshoff Street, 13th Floor, Hollard House, Braamfontein PO Box 4844, Johannesburg, 2000, South Africa Telephone: +27 86 154 6572 E-mail: info@jseinvestorservices.co.za Fax: +27 86 674 4381 |
AMERICAN DEPOSITARY RECEIPTS DEPOSITARY |
Deutsche Bank Trust Company Americas c/o American Stock Transfer and Trust Company Operations Centre, 6201 15th Avenue, Brooklyn, NY 11219, United States E-mail queries: db@astfinancial.com Toll free (within the US): +1 886 249 2593 Int: +1 718 921 8137 Fax: +1 718 921 8334 |
SPONSOR |
JP Morgan Equities South Africa Proprietary 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 |
ISIN: ZAE 000015228 |
Harmony Gold Mining Company Limited | FY22 Results for the year ended 30 June 2022 45