HARMONY GOLD MINING COMPANY LIMITED
Incorporated in the Republic of South Africa
Registration Number 1950/038232/06
("Harmony" or "Company")
JSE Share code: HAR
NYSE Share code: HMY
ISIN Code: ZAE 000015228
Results for the first quarter ended 30 September 2008
The quarter at a glance:
- Total gold production up by 6% and grade increased by 4%
- Good signs of operational improvement
- Management restructuring and refocusing
- Good progress with projects, particularly at Morobe JV
- Rand/gold price marginally down, but likely to remain robust in medium to
long term
- Debt levels reduced, despite significant capex
- Seven fatalities during quarter
- Cash operating costs (R/kg) up by 9%, as input costs (electricity and labour)
increase
- Cash operating profit down by 19%
Financial summary
for the first quarter ended 30 September 2008
(All results exclude Discontinued Operations, unless otherwise stated)
Quarter Quarter
September June
2008 2008
Gold produced � kg 12 342 11 694
� oz 396 803 375 970
Cash costs � R/kg 151 827 138 940
� $/oz 607 556
Cash operating profit � Rm 808 995
� US$m 104 128
Basic profit/(loss) � SAc/s 118 (60)
� USc/s 15 (8)
Headline profit/(loss) � SAc/s 8 38
� USc/s 1 5
Quarter
Q-on-Q September
variance 2007
Gold produced � kg 6% 13 699
� oz 6% 440 432
Cash costs � R/kg (9%) 134 549
� $/oz (9%) 590
Cash operating profit � Rm (19%) 297
� US$m (19%) 41
Basic profit/(loss) � SAc/s 297% (133)
� USc/s 288% (19)
Headline profit/(loss) � SAc/s (79%) (35)
� USc/s (80%) (5)
Harmony's Annual Report, Notice of Meeting, Sustainable Development Report and
its Annual Report filed on a Form 20F with the United States' Securities and
Exchange Commission for the year ended 30 June 2008 are available on our
website at www.harmony.co.za.
Chief executive officer's review
Overview
We made pleasing progress during the quarter under review towards fulfilment of
our vision to create a sustainable company that generates earnings to fund
dividends and growth.
Increased volumes, improved average grade and consequent higher gold production
demonstrate clearly that the measures we have applied in implementing our
`back-to-basics' philosophy during our stabilisation phase of our strategy,
have delivered the stability we need to implement the next phase of our
strategy, being organic growth.
There is a very notable turn for the better in the morale of the greater
Harmony team. Our people are getting excited about the business again and their
particular roles in it, which is evidenced by our productivity figures.
Safety improvement remains a critical priority requiring immediate and decisive
action. Despite our best efforts to ensure a safer workplace, seven
work-related fatalities occurred during the quarter, compared with four in the
previous quarter.
Safety
We are deeply saddened by the deaths of seven of our colleagues and I extend my
heartfelt condolences to their families, friends and workmates.
Those who died were: Elandsrand employees Diago Vasco Bila, a winch driver, and
Mpeo Moeti and Magatsela Mangaliso, both rock drill operators; Tshepong
employees Nokanyo Gcasamba, a locomotive operator, and Zinikele Yam, a utility
vehicle driver; Target employee Mokutu Amos Qondile, a load-haul-dumper
operator and Unisel employee Kali Makase, a rock drill operator.
Although our Lost Time Injury Frequency Rate (LTIFR) for the quarter improved
against that for the 2008 financial year, our Reportable Injury Frequency Rate
(RIFR) and Fatality Injury Frequency Rate (FIFR) for the quarter both
deteriorated.
Gold market
There was only a 3% drop in our average gold price received of R217 295/kg
($869/oz), compared with R224 036/kg ($897/oz) in June 2008, despite the
turmoil in global financial markets during the quarter. Notwithstanding
evidence to suggest that gold still fulfils its historic role as the investment
of last resort for many nervous investors in these circumstances, it seems
reasonable to assume that gold price volatility will continue until the
financial storm starts to abate.
We remain bullish about the fundamentals for the metal in the medium and longer
term. However, with economic deposits in mining locations harder to come by and
exploration and development budgets under extreme pressure, supplies of new
gold into the market are likely to continue to shrink.
Operating performance
Overall we have seen some good improvements. Total gold production for the
quarter from continuing operations increased by 6% to 12 342 kg, reflecting a
1% increase in volumes to 4.6 million tonnes and a 4% improvement in the
average recovered grade to 2.68 g/t.
Total underground gold production was 8% higher at 11 191 kg due to a 2%
increase in tonnes milled from underground to 2.3 million tonnes and a 5%
improvement in the average underground recovered grade to 4.79 g/t.
Tonnes milled for our surface operations remained fairly constant at 2.2
million tonnes for the quarter. The average grade was 12% lower from 0.58 g/t
in June 2008 to 0.51 g/t, resulting in an 11% decline in surface gold
production to 1 151 kg. The decrease in grade was mainly due to a reduction in
the kilograms recovered from plant clean-ups.
Productivity has improved, but we need to remain focused on attaining ore
reserve management excellence and quality mining throughout our operations to
ensure that we meet our productivity targets.
It is no coincidence that operation-by-operation comparisons show that our best
safety performers, notably Masimong, Bambanani and the Virginia operations, are
emerging also as our best producers and that our worst safety performers, being
Elandsrand and Target are under-performing in terms of production.
The lesson is obvious and we have not been slow to act. Elandsrand is now in
`intensive care'. Chief Operating Officer, Alwyn Pretorius, has been
re-assigned to lead Elandsrand's management in a safety and production
turnaround strategy and until this assignment is completed, Bob Atkinson,
Executive: Projects, will act as Chief Operating Officer of the remaining
operations in the North Region. At Target, new management has been appointed
from within and outside the Company to ensure that we turn the value of the
orebody to account.
Financial performance
An increase in operating costs as well as a decrease in the gold price received
for the quarter under review, resulted in a decrease in cash operating profit
of R187.1 million when compared with the June 2008 quarter. Operating costs
increased by R249.2 million, 15% higher when compared with the June 2008
quarter, mainly due to higher power costs (specifically Eskom's 20% general
tariff increase effective from the beginning of July and higher winter
tariffs), annual wage increases effective from July 2008 and stores price hikes
of 16%. Quarter on quarter our power bill rose by 43% and our labour bill by
13% (which is inclusive of the holiday leave allowance). Power as a percentage
of our total costs increased from 10% to 13%.
Capital expenditure for the quarter decreased by 25% from R1.3 billion in the
June 2008 quarter to R993 million in the September 2008 quarter. The decrease
was as a result of Newcrest Mining Limited funding the remaining capex
requirements of the Hidden Valley project as prescribed by Stage 2 of the joint
venture, as from August 2008 when the joint venture came into effect.
Cash costs and capital expenditure were both influenced by our decision to lift
the ceiling on abnormal expenditure items from R50 000 to R250 000 and to
allocate these to operating costs going forward, rather than to capital
expenditure as in the past. This is another step, amongst many, we have taken
in our drive to decentralise decision-making downward to general manager level.
Power
During the quarter, we engaged very constructively with Eskom and have secured
the baseline power allocations for all of our current operations and
undertakings to supply the additional power required for our Elandsrand,
Phakisa and Doornkop projects. This will accommodate the build-up requirements
on these operations as the projects come on line and are commissioned. We
remain committed to partaking in as much power-saving efforts that are
required.
Transactions
Cooke Assets
We announced on 19 December 2007 that our wholly-owned subsidiary, Randfontein
Estates Limited (Randfontein), had entered into agreements with Pamodzi
Resources Fund 1, LL.P (PRF), in terms of which certain uranium and gold assets
of Randfontein (Cooke Assets) would be sold into Rand Uranium (Proprietary)
Limited (Rand Uranium), for a purchase consideration of US$420 million.
The delay in meeting the conditions precedent, Harmony benefiting from the cash
flow during this period, the turmoil in the global financial markets and other
market-related adjustments resulted in a renegotiation of the purchase
consideration. A revised purchase consideration of US$348 million for the Cooke
Assets has been agreed. Harmony will receive a total purchase consideration of
US$209 million for 60% of the issued share capital of Rand Uranium.
The majority of the conditions precedent, including the approvals from the
Minister of Minerals and Energy and the issuance of a certificate of
registration by the National Nuclear Regulator, have been fulfilled. It is
anticipated that the remaining conditions precedent will be fulfilled on or
before 20 November 2008 and the transaction will become effective on 21
November 2008.
In exchange for 60% of the issued share capital of Rand Uranium, Harmony will
receive US$40 million on the effective date of the transaction, a further
US$157 million, plus interest thereon at 5% per annum, on 22 April 2009 and the
balance of the purchase consideration of approximately US$12 million as soon as
the second stage of the transaction (which relates to its Old Randfontein
assets), is finalised. This is anticipated to be on or shortly after 22 April
2009. PRF's investors, affiliates of First Reserve and AMCI Capital, have
provided Harmony with a guarantee in respect of the payment of the above
amounts. In addition, PRF will pledge its shares in Rand Uranium to Harmony as
security for PRF's obligation to pay the purchase consideration to Harmony.
Since entering into the agreements with PRF, Rand Uranium has been formed as a
stand-alone company, information on the building of a potential uranium plant
has been compiled and consultants have been involved with feasibility,
metallurgical and environmental studies in respect of the extraction of
uranium. Management capacity under the leadership of John Munro has been built
up. Harmony will supply certain corporate services for a limited period and an
agreement has been entered into for milling of the underground ore.
We believe that the dual commodity (gold and uranium) mix should combine to
make the Cooke Assets a viable, low-cost operation and look forward to a
mutually beneficial partnership with PRF in developing the significant uranium
resource base as a platform for future growth opportunities within the West
Rand.
Mt Magnet
We have resumed our efforts to sell our Mount Magnet operation in Australia,
following our termination of the sales agreement with Monarch Gold in August
2008. The operation is on care and maintenance, which we estimate will cost us
some A$5 million per year.
Exploration
Exploration in Papua New Guinea, under the auspices of our Morobe Joint Venture
with Newcrest Mining Limited, focused primarily on the Wafi-Golpu Nambonga
North brownfields prospect and the Morobe Consolidated Tenements Upper Bulolo
brownfields prospect during the quarter. In respect of the former, work is on
schedule to achieve a mineral resource estimate by the end of calendar 2008. At
the latter, a significant and exciting new development, trenching is in
progress and diamond drilling is scheduled to begin in December 2008.
Social and Labour Plans
We continue to make substantive progress in the implementation of our Social
and Labour Plans. While this is essential to ensure retention of our licence to
operate, it is also an enormously satisfying fulfilment of our commitment to be
relevant to communities in which we do business.
During the quarter, we have contributed, with various other interested and
affected parties, towards three major land development projects. These are:
the Secunda West project, which will comprise 12 313 residential units covering
all income levels, schools, community facilities, shops, sports amenities and
green spaces;
the Middelvlei/Droogeheuwel (Mohlakeng Ext 11)project, which will include all
housing options, schools, social amenities and
provisions for business development and the Phakisa Estate near Welkom,
whichenvisages the establishment of a township comprising 6 500 residential
units.
Looking ahead
While we remain mindful of the need to continue to apply the core principles of
our `back to basics' philosophy initiated in August 2007 � most diligently in
those of our operations that have been slower to turn around than we would have
hoped � I believe we are well embarked on the `organic growth' phase of our
three-phase growth plan to June 2012.
We now have sufficient latitude to focus more closely on delivery of our
various organic growth projects in South Africa and of the Hidden Valley
project in Papua New Guinea, also to clear our debt burden and strengthen our
balance sheet, positioning to look towards the third `organic-acquisition'
phase of our strategy from June 2009.
Note of thanks
I wish to thank each Harmony employee for her/his contribution in building a
sustainable company.
Chief Executive Officer
Graham Briggs
FINANCIAL REVIEW FOR THE FIRST QUARTER ENDED 30 SEPTEMBER 2008 (RAND)
CONDENSED CONSOLIDATED INCOME STATEMENT (Unaudited) (Rand)
Quarter ended(1)
September
Notes 2008
R million
Continuing operations
Revenue 2 682
Cost of sales 2 (2 225)
Production cost (1 874)
Amortisation and depreciation (308)
Impairment of assets �
Employment termination and restructuring costs (12)
Other items (31)
Gross profit 457
Corporate, administration and other expenditure (97)
Exploration expenditure (39)
Other income/(expenses) � net 3 505
Operating profit/(loss) 826
Profit/(loss) from associates 1
Profit on sale of investment in associate 1
Impairment of investment in associate 6 (112)
Loss on sale of investment in joint venture �
Mark-to-market of listed investments �
Loss on sale of listed investments �
Impairment of investments �
Investment income 77
Finance cost (85)
Profit/(loss) before taxation 708
Taxation (234)
Net profit/(loss) from continuing operations 474
Discontinued operations 4
(Loss)/profit from discontinued operations (72)
Net profit/(loss) 402
Earnings/(loss) per ordinary share (cents) 5
� Earnings/(loss) from continuing operations 118
� (Loss)/earnings from discontinued operations (18)
Total earnings/(loss) per ordinary share (cents) 100
Diluted earnings/(loss) per ordinary share (cents) 5
� Earnings/(loss) from continuing operations 117
� (Loss)/earnings from discontinued operations (18)
Total diluted earnings/(loss) per ordinary share (cents) 99
Quarter ended Quarter ended
(1) (1)
June September
2008 2007
R million R million
Continuing operations
Revenue 2 620 2 140
Cost of sales (2 284) (2 063)
Production cost (1 625) (1 843)
Amortisation and depreciation (222) (201)
Impairment of assets (316) �
Employment termination and restructuring costs (50) �
Other items (71) (19)
Gross profit 336 77
Corporate, administration and other
expenditure (49) (72)
Exploration expenditure (62) (44)
Other income/(expenses) � net (9) (15)
Operating profit/(loss) 216 (54)
Profit/(loss) from associates (68) �
Profit on sale of investment in associate � �
Impairment of investment in associate (95) �
Loss on sale of investment in joint venture (2) �
Mark-to-market of listed investments � 33
Loss on sale of listed investments � (459)
Impairment of investments (1) �
Investment income 86 67
Finance cost (131) (121)
Profit/(loss) before taxation 5 (534)
Taxation (246) 2
Net profit/(loss) from continuing operations (241) (532)
Discontinued operations
(Loss)/profit from discontinued operations 170 (34)
Net profit/(loss) (71) (566)
Earnings/(loss) per ordinary share (cents)
� Earnings/(loss) from continuing operations (60) (133)
� (Loss)/earnings from discontinued
operations 42 (9)
Total earnings/(loss) per ordinary share (cents) (18) (142)
Diluted earnings/(loss) per ordinary share
(cents)
� Earnings/(loss) from continuing operations (60) (133)
� (Loss)/earnings from discontinued operations 42 (9)
Total diluted earnings/(loss) per ordinary share (18) (142)
(cents)
(1) There are no year ended figures, this being the first quarter of the
financial year.
The accompanying notes are an integral part of these condensed consolidated
financials statements.
CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME (Unaudited)
(Rand)
Quarter ended Quarter ended Quarter ended
September June September
2008 2008 2007
R million R million R million
Net profit/(loss) for the period 402 (71) (566)
Attributable to:
Owners of the parent 402 (71) (566)
Non-controlling interest � � �
Other comprehensive income/(loss)
for the period, net of income tax 88 (73) 360
Foreign exchange translation
profit and loss 119 (86) 27
Mark-to-market of
available-for-sale investments (31) 13 333
Total comprehensive income/(loss)
for the period 490 (144) (206)
Attributable to:
Owners of the parent 490 (144) (206)
Non-controlling interest � � �
CONDENSED CONSOLIDATED BALANCE SHEET (Rand)
At At
September June
2008 2008
Notes (Unaudited) (Audited)
R million R million
ASSETS
Non-current assets
Property, plant and equipment 27 020 27 556
Intangible assets 2 213 2 209
Restricted cash 181 78
Restricted investments 1 512 1 465
Investments in financial assets 48 67
Investment in associate 6 34 145
Trade and other receivables 127 137
31 135 31 657
Current assets
Inventories 752 693
Trade and other receivables 875 875
Income and mining taxes 54 82
Cash and cash equivalents 8 1 186 413
2 867 2 063
Non-current assets classified as held
for sale 4 1 408 1 537
4 275 3 600
Total assets 35 410 35 257
EQUITY AND LIABILITIES
Share capital and reserves
Share capital 25 904 25 895
Other reserves 777 676
Accumulated loss (1 430) (1 832)
25 251 24 739
Non-current liabilities
Borrowings 7 176 242
Deferred income tax 3 008 2 990
Provisions for other liabilities and
charges 1 297 1 273
4 481 4 505
Current liabilities
Trade and other payables 1 528 1 372
Provisions and accrued liabilities 295 287
Borrowings 7 3 363 3 857
5 186 5 516
Liabilities directly associated with
non-current assets classified as held
for sale 4 492 497
5 678 6 013
Total equity and liabilities 35 410 35 257
Number of ordinary shares in issue 403 424 148 403 253 756
Net asset value per share (cents) 6 259 6 135
The accompanying notes are an integral part of these condensed consolidated
financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGE IN EQUITY (Unaudited) (Rand)
Issued share Other
capital reserves
R million R million
Balance � 30 June 2008 25 895 676
Issue of share capital 9 �
Deferred share-based payments � 13
Comprehensive income for the period � 88
Balance at 30 September 2008 25 904 777
Balance � 30 June 2007 25 636 (349)
Issue of share capital 16 �
Deferred share-based payments � 9
Comprehensive income/(loss) for the period � 360
Balance at 30 September 2007 25 652 20
Accumulated
loss Total
R million R million
Balance � 30 June 2008 (1 832) 24 739
Issue of share capital � 9
Deferred share-based payments � 13
Comprehensive income for the period 402 490
Balance at 30 September 2008 (1 430) 25 251
Balance � 30 June 2007 (1 581) 23 706
Issue of share capital � 16
Deferred share-based payments � 9
Comprehensive income/(loss) for the period (566) (206)
Balance at 30 September 2007 (2 147) 23 525
CONDENSED CONSOLIDATED CASH FLOW STATEMENT (Unaudited) (Rand)
Quarter ended
September
Note 2008
R million
Cash flow from operating activities
Cash generated by operations 670
Interest and dividends received 82
Interest paid (112)
Income and mining taxes paid (1)
Cash generated by operating activities 639
Cash flow from investing activities
(Increase)/decrease in restricted cash (103)
Net proceeds on disposal of listed investments �
Net additions to property, plant and equipment 798
Other investing activities 10
Cash generated/(utilised) by investing activities 705
Cash flow from financing activities
Long-term loans raised �
Long-term loans repaid (588)
Ordinary shares issued � net of expenses 8
Dividends paid �
Cash (utilised)/generated by financing activities (580)
Foreign currency translation adjustments 7
Net increase in cash and equivalents 770
Cash and equivalents � beginning of period 415
Cash and equivalents � end of period 8 1 186
Quarter ended Quarter ended
June September
2008 2007
R million R million
Cash flow from operating activities
Cash generated by operations 1 506 54
Interest and dividends received 97 69
Interest paid (117) (59)
Income and mining taxes paid (67) (12)
Cash generated by operating activities 1 419 52
Cash flow from investing activities
(Increase)/decrease in restricted cash 2 274
Net proceeds on disposal of listed investments � 1 310
Net additions to property, plant and equipment (1 267) (833)
Other investing activities (190) (51)
Cash generated/(utilised) by investing
activities (1 455) 700
Cash flow from financing activities
Long-term loans raised 136 2 088
Long-term loans repaid (12) (1 802)
Ordinary shares issued � net of expenses 23 19
Dividends paid (6) �
Cash (utilised)/generated by financing
activities 141 305
Foreign currency translation adjustments (38) 20
Net increase in cash and equivalents 67 1 077
Cash and equivalents � beginning of period 348 494
Cash and equivalents � end of period 415 1 571
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2008
1. Accounting policies
(a) Basis of accounting
The condensed consolidated interim financial statements for the period ended 30
September 2008 have been prepared using accounting policies that comply with
International Financial Reporting Standards ("IFRS"), which are consistent with
the accounting policies used in the audited annual financial statements for the
year ended 30 June 2008. These condensed consolidated interim financial
statements are prepared in accordance with IAS 34, Interim Financial Reporting,
and should be read in conjunction with the financial statements for the year
ended 30 June 2008.
2. Cost of sales
Quarter ended Quarter ended Quarter ended
September June September
2008 2008 2007
(Unaudited) (Unaudited) (Unaudited)
R million R million R million
Production costs 1 874 1 625 1 843
Amortisation and depreciation 308 222 201
Impairment of assets � 316 �
Provision for rehabilitation
costs 6 12 �
Care and maintenance cost of
restructured shafts 12 29 9
Employment termination and
restructuring costs 12 50 �
Share-based compensation 13 19 10
Provision for post-retirement
benefits � 11 �
Total cost of sales 2 225 2 284 2 063
3. Other income/(expenses) � net
Included in other income is R523 million profit on sale of 30.01% of Harmony's
Papau New Guinea gold and copper assets to Newcrest Mining Limited, as
previously announced.
4. Non-current assets held for sale and Discontinued operations
The assets and liabilities related to Mount Magnet (operations in Australia)
have been presented as held for sale following approval of the Group's
management and Board of Directors on 20 April 2007. During fiscal 2008, we
entered into an agreement with Monarch Gold Mining Company ("Monarch") for the
sale of these operations. However, during July 2008 we were advised that
Monarch had placed itself in volantary administration and on 1 August 2008 the
Administrator indicated that Monarch would not proceed with the proposed
purchase and consequently the purchase agreement has been terminated.
Management is still intent on the disposal of Mount Magnet despite the asset
being classified as held for sale for more than 12 months.
The assets and liabilities relating to the Cooke 1, Cooke 2, Cooke 3, Cooke
plant and relating surface operations (operations in the Gauteng area) have
been presented as held for sale following the approval of the Group's
management on 16 October 2007. These operations were also deemed to be
discontinued operations.
Included in (loss)/profit from discontnued operations is an impairment charge
for the Mount Magnet assets for R152 million, relating to the decrease in the
fair value less costs to sell at 30 September 2008.
5. Earnings/(loss) per ordinary share
Earnings/(loss) per ordinary share is calculated on the weighted average number
of ordinary shares in issue for the quarter ended 30 September 2008: 403.1
million (30 June 2008: 402.8 million, 30 September 2007: 399.5 million).
The fully diluted earnings/(loss) per ordinary share is calculated on weighted
average number of diluted ordinary shares in issue for the quarter ended 30
September 2008: 404.6 million (30 June 2008: 405.2 million, 30 September 2007:
402.8 million).
September June September
2008 2008 2007
(Unaudited) (Unaudited) (Unaudited)
R million R million R million
Total earnings/(loss) per
ordinary share (cents):
Basic earnings/(loss) 100 (18) (142)
Fully diluted earnings/(loss) 99 (18) (142)
Headline earnings/(loss) 24 65 (41)
Reconciliation of headline
earnings/(loss):
Continuing operations
Net profit/(loss) 474 (241) (532)
Adjusted for (net of tax):
(Profit)/loss on sale of
property, plant and equipment (553) 32 (2)
Loss on sale of listed
investment � � 392
Impairment of investments � 1 �
Loss on sale of joint venture � 2 �
Profit on sale of associate (1) � �
Impairment of investment in
associates 112 95 �
Impairment of property, plant
and equipment � 159 �
Impairment of intangible assets � 105 �
Headline profit/(loss) 32 153 (142)
Discontinued operations
Net (loss)/profit (72) 170 (34)
Adjusted for (net of tax):
Profit on sale of property,
plant and equipment (14) (90) �
Impairment of property, plant
and equipment 152 30 7
Headline profit/(loss) 66 110 (27)
Total headline profit/(loss) 98 263 (169)
6. Investment in associate
On 27 February 2008, Pamodzi Gold Limited bought the Orkney operations from the
Harmony Group for a consideration of 30 million Pamodzi Gold Limited shares.
This resulted in Harmony Gold Mining Company owning 32.4% of Pamodzi Gold
Limited. At 30 September 2008, management tested for impairment of the
investment in associate. An additional amount of R112 million (June 2008: R91
million) was impaired and accounted for in the income statement. The book value
at 30 September 2008, after taking impairment and loss from associate into
account, was R34 million (June 2008: R145 million).
7. Borrowings
September June
2008 2008
(Unaudited) (Audited)
R million R million
Unsecured borrowings
Convertible unsecured fixed rate bonds 1 649 1 626
Africa Vanguard Resources (Proprietary) Limited 32 32
1 681 1 658
Less: Short-term portion (1 649) (1 626)
Total unsecured long-term borrowings 32 32
Secured borrowings
Westpac Bank Limited* 183 258
Africa Vanguard Resources (Doornkop) (Pty)
Limited (Nedbank Limited) 201 194
Nedbank Limited 1 482 2 000
Less: Unamortised transaction costs (8) (11)
1 858 2 441
Less: Short-term portion (1 714) (2 231)
Total secured long-term borrowings 144 210
Total long-term borrowings 176 242
Total current portion of borrowings 3 363 3 857
Total long-term borrowings 3 539 4 099
* The future minimum lease payments to Westpac Bank Limited are as follows:
September June
2008 2008
(Unaudited) (Audited)
R million R million
Due within one year 46 57
Due between one and five years 156 228
202 285
Future finance charges (19) (27)
Total future minimum lease payments 183 258
8. Cash and cash equivalents
Comprises:
September June
2008 2008
(Unaudited) (Audited)
R million R million
Continuing operations 1 186 413
Discontinued operations � 2
Total cash and cash equivalents 1 186 415
9. Commitments and contingencies
September June
2008 2008
(Unaudited) (Audited)
R million R million
Capital expenditure commitments
Contracts for capital expenditure 512 1 164
Authorised by the directors but not contracted for 2 467 1 720
2 979 2 884
This expenditure will be financed from existing
resources and where appropriate, borrowings.
Contingent liabilities
Guarantees and suretyships 18 18
Environmental guarantees 303 171
321 189
Contingent liability
On 18 April 2008, Harmony Gold Mining Company Limited was made aware that it
has been named or may be named as a defendant in a lawsuit filed in the U.S.
District Court in the Southern District of New York on behalf of certain
purchasers and sellers of Harmony's American Depositary Receipts ("ADRs").
Harmony has retained legal counsel, who will advise Harmony on further
developments in the U.S.
10. Subsequent events
Sale of Randfontein's Cooke Assets
The majority of the conditions percent, have been fulfilled. It is anticipated
that the remaining conditions precedent will be fulfilled on or before 20
November 2008 and the transaction will become effective on 21 November 2008.
A revised purchase consideration of US$348 million for the Cooke Assets has
been agreed. Harmony will receive a total purchase consideration of US$209
million for 60% of the issued share capital of Rand Uranium.
In exchange for 60% of the issued share capital of Rand Uranium, Harmony will
receive US$40 million on the effective date of the transaction, a further
US$157 million, plus interest thereon at 5% per annum, by 22 April 2009 and the
balance of the purchase consideration of approximately US$12 million as soon as
the second stage of the transaction, which relates to its Old Randfontein
assets, is finalised , which is anticipated to be on or shortly after 22 April
2009. Pamodzi Resources Fund 1, LLP's ("PRF") investors, affiliates of First
Reserve and AMCI Capital, have provided Harmony with a guarantee in respect of
the payment of the above amounts. In addition, PRF will pledge its shares in
Rand Uranium to Harmony as security for RPF's obligation to pay the purchase
consideration to Harmony.
11. Segment report
The Group early adopted IFRS 8 � Operating Segments, in the 2008 financial
year. The standard requires a "management approach", under which segment
information is presented on the same basis as that used for internal reporting
to the chief operating decision-maker ("CODM").
The Group has only one product, being gold. In order to determine operating and
reportable segments, management reviewed various factors, including
geographical location as well as managerial structure. It was determined that
an operating segment consists of a shaft or a group of shafts managed by a
single general manager and management team.
After applying the quantitative thresholds from the standard, the reportable
segments were determined as:
Tshepong, Phakisa, Bambanani, Masimong, Target, Doornkop, Elandskraal, Evander
operations, Virginia operations, Cooke operations (held for sale and
discontinued) and Papua New Guinea. All other operating segments have been
grouped together under Other � underground or Other � surface, under their
classification as either continuing or discontinued.
The comparative segment reports have been restated for these changes.
When assessing profitability, the CODM considers the revenue and production
costs of each segment. The net of these amounts is the cash operating or loss.
Therefore, cash operating profit has been disclosed in the segment report as
the measure of profit or loss.
The CODM does not consider depreciation or impairment and therefore these
amounts have not been disclosed in the segment report.
SEGMENT REPORT FOR QUARTER ENDED 30 SEPTEMBER 2008 (Rand/Metric)
Cash
Production operating
Continuing operations Revenue cost profit/(loss)
South Africa R million R million R million
Underground
Tshepong 410 250 160
Phakisa 23 18 5
Bambanani 256 171 85
Doornkop 55 59 (4)
Elandsrand 332 245 87
Target 127 118 9
Masimong 282 169 113
Evander operations 346 238 108
Virginia operations 485 377 108
Other operations 114 92 22
Surface
Other operations 252 137 115
Total South Africa 2 682 1 874 808
International
Papua New Guinea � � �
Total international � � �
Total continuing operations 2 682 1 874 808
Discontinued operations
Cooke operations 338 248 90
Other operations � � �
Total discontinued operations 338 248 90
Total operations 3 020 2 122 898
Capital Tonnes
Continuing operations expenditure milled
South Africa R million Kilograms t'000
Underground
Tshepong 51 1 904 354
Phakisa 105 109 30
Bambanani 11 1 188 142
Doornkop 83 255 110
Elandsrand 95 1 530 288
Target 61 588 167
Masimong 33 1 272 235
Evander operations 50 1 609 306
Virginia operations 39 2 198 568
Other operations 11 538 137
Surface
Other operations 54 1 151 2 262
Total South Africa 593 12 342 4 599
International
Papua New Guinea 400 � �
Total international 400 � �
Total continuing operations 993 12 342 4 599
Discontinued operations
Cooke operations 53 1 564 801
Other operations � � �
Total discontinued operations 53 1 564 801
Total operations 1 046 13 906 5 400
SEGMENT REPORT FOR QUARTER ENDED 30 SEPTEMBER 2007 (Rand/Metric)
Cash
Production operating
Continuing operations Revenue cost profit/(loss)
South Africa R million R million R million
Underground
Tshepong 366 245 121
Phakisa � � �
Bambanani 203 202 1
Doornkop 71 63 8
Elandsrand 273 241 32
Target 106 91 15
Masimong 171 191 (20)
Evander operations 351 249 102
Virginia operations 341 342 (1)
Other operations 93 114 (21)
Surface
Other operations 165 105 60
Total South Africa 2 140 1 843 297
International
Papua New Guinea � � �
Total international � � �
Total continuing operations 2 140 1 843 297
Discontinued operations
Cooke operations 350 236 114
Other operations 305 330 (25)
Total discontinued operations 655 566 89
Total operations 2 795 2 409 386
Capital Tonnes
Continuing operations expenditure milled
South Africa R million Kilograms t'000
Underground
Tshepong 52 2 345 386
Phakisa 62 � �
Bambanani 25 1 275 238
Doornkop 71 454 126
Elandsrand 84 1 753 289
Target 34 688 150
Masimong 30 1 096 241
Evander operations 70 2 244 372
Virginia operations 42 2 188 574
Other operations 16 595 134
Surface
Other operations 31 1 061 2 047
Total South Africa 517 13 699 4 557
International
Papua New Guinea 161 � �
Total international 161 � �
Total continuing operations 678 13 699 4 557
Discontinued operations
Cooke operations 43 2 240 834
Other operations 116 1 996 870
Total discontinued operations 159 4 236 1 704
Total operations 837 17 935 6 261
The full set of the results for the first quarter ended 30 September 2008 is
available on our website at www.harmony.co.za
Forward-looking statements
This quarterly report contains forward-looking statements within the meaning of
the United States Private Securities Litigation Reform Act of 1995 with respect
to Harmony's financial condition, results of operations, business strategies,
operating efficiencies, competitive positions, growth opportunities for
existing services, plans and objectives of management, markets for stock and
other matters. Statements in this quarter that are not historical facts are
"forward-looking statements" for the purpose of the safe harbor provided by
Section 21E of the U.S. Securities Exchange Act of 1934, as amended, and
Section 27A of the U.S. Securities Act of 1933, as amended. 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.
These statements are only predictions. All forward-looking statements involve
a number of risks, uncertainties and other factors and we cannot assure you
that such statements will prove to be correct. Risks, uncertainties and other
factors could cause actual events or results to differ from those expressed or
implied by the forward-looking statements.
These forward-looking statements, including, among others, those relating to
the future business prospects, revenues and income of Harmony, wherever they
may occur in this quarterly report and the exhibits to this quarterly report,
are necessarily estimates reflecting the best judgment of the senior management
of Harmony and involve a number of risks and uncertainties that could cause
actual results to differ materially from those suggested by the forward-looking
statements. As a consequence, these forward-looking statements should be
considered in light of various important factors, including those set forth in
this quarterly report. Important factors that could cause actual results to
differ materially from estimates or projections contained in the forward
looking statements include, without limitation:
- overall economic and business conditions in South Africa and elsewhere;
- the ability to achieve anticipated efficiencies and other cost savings;
- increases or decreases in the market price of gold;
- the occurrence of hazards associated with underground and surface gold
mining; the occurrence of labour disruptions;
- availability, terms and deployment of capital;
- changes in Government regulation, particularly mining rights and
environmental regulations;
- fluctuations in exchange rates;
- currency devaluations and other macro-economic monetary policies; and
- socio-economic instability in South Africa and regionally.
This report was approved by the Board of Directors and is signed on their
behalf by:
G Briggs B Abbott Virginia
Chief Executive Officer Intern Financial Director 31 October 2008
CONTACT DETAILS
HARMONY GOLD MINING COMPANY LIMITED
Corporate Office
Randfontein Office Park
PO Box 2
Randfontein, 1760
South Africa
Corner Main Reef Road
and Ward Avenue
Randfontein, 1759
Johannesburg
South Africa
Telephone: +27 11 411 2000
Website: http://www.harmony.co.za
Directors
P T Motsepe (Chairman)*
G Briggs (Chief Executive Officer)
F Abbott (Interim Financial Director)
J A Chissano*1
F F T De Buck*, Dr C Diarra*+,
K V Dicks*, Dr D S Lushaba*, C Markus*,
M Motloba*, C M L Savage*, A J Wilkens*
(* non-executive)
(1 Mocambican)
(+ US/Mali Citizen)
Investor Relations Team
Esha Brijmohan
Investor Relations Officer
Telephone: +27 11 411 2314
Fax: +27 11 692 3879
Mobile: +27 82 922 4584
E-mail: esha@harmony.co.za
Marian van der Walt
Executive: Corporate and Investor Relations
Telephone: +27 11 411 2037
Fax: +27 86 614 0999
Mobile: +27 82 888 1242
E-mail: marian@harmony.co.za
Company Secretary
Khanya Maluleke
Telephone: +27 11 411 2019
Fax: +27 11 411 2070
E-mail: Khanya.maluleke@harmony.co.za
South African Share Transfer Secretaries
Link Market Services South Africa (Proprietary) Limited
(Registration number 2000/007239/07)
5th Floor, 11 Diagonal Street
Johannesburg, 2001
PO Box 4844
Johannesburg, 2000
South Africa
Telephone: +27 86 154 6572
Fax: +27 11 834 4389
United Kingdom Registrars
Capita Registrars
The Registry
34 Beckenham Road
Bechenham
Kent BR3 4TU
United Kingdom
Telephone: +44 870 162 3100
Fax: +44 208 636 2342
ADR Depositary
The Bank of New York Mellon Inc
101 Barclay Street
New York, NY 10286
United States of America
Telephone: +1888-BNY-ADRS
Fax: +1 212 571 3050
Trading Symbols
JSE Limited HAR
New York Stock Exchange, Inc. HMY
NASDAQ HMY
London Stock Exchange Plc HRM
Euronext, Paris HG
Euronext, Brussels HMY
Berlin Stock Exchange HAM1
Registration Number 1950/038232/06
Incorporated in the Republic of South Africa
ISIN: ZAE 000015228
END
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