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Harmony Results improve despite difficult SA working conditions

  • Headline earnings of 42 cents per share
  • Cash operating profit increased to R828 million
  • Total cash operating cost down by 8.9%
  • Harmony announces Newcrest as PNG partner
  • Restructuring complete, benefits to flow

Johannesburg. Thursday, 8 May 2008. Harmony Gold Mining Company Limited (Harmony) announced its financial results for the third quarter ended 31 March 2008.

Graham Briggs, chief executive officer says, “I am pleased with Harmony’s financial performance for the quarter when considering that these results were achieved under some difficult South African working conditions and that all our revenue is generated from our South African operations.

“We have been through some pain, but I am confident that we have turned the corner and can begin to build on the new foundation. It is pleasing to note that some of our restructuring efforts were evident in this quarter with the R147 million reduction in working costs. Total cash operating costs were down 8.9% to R1 506 million from R1 652 million”, adds Briggs.

The company's restructuring phase has nonetheless had a negative impact on productivity. The termination of Conops at three of the operations ­ Masimong during the December 2007 quarter; Elandsrand and Tshepong during the March 2008 quarter ­ caused the SA underground tonnages and, to some extent, the grade to drop due to the reduction of the labour force and, in some instances, transferring labour to other operations. Over the past two quarters the company's staff complement has reduced by 5 985 employees.

External factors also played their part. Harmony's operations experienced a loss of production due to last year's lengthy Christmas holiday period. The effects of a five-day power cut were felt and similarly when it was restored at 80% of our previous consumption and thereafter the resultant build-up phase from 80% to 90% power supply. This resulted in an estimated total loss of more than 800 kilograms from our operations.

Harmony’s operational performance from its continuing operations for the quarter under review was weaker with 7.2% lower tonnages at 4 125 000 tonnes compared with 4 445 000 tonnes in the December quarter, resulting in a 16.6% decrease in kilograms produced of 10 347kg versus 12 403kg.

Total grade for the group was 10% lower at 2.51g/t, while the grade from our SA underground operations was recorded at 4.81g/t a 1.2% drop on the previous quarter. The company's cash operating costs increased by 9.2% to R145 514/kg from R133 234/kg.

Briggs says, “We continued to forge ahead with our activities to create value, strengthen the company's balance sheet and improve operational performance. Accordingly, we are determined to get all our operations on a sound footing with all operations profitable after taking capital expenditure into account. In our short-life operations we are considering ways of extending the life of mines. The operations have all the required infrastructure and we are considering options of increasing development.

A higher received gold price of US$944.40/oz and a weaker, thus more favourable, R/US$ exchange rate of R7.43/$ (R6.77/$) resulted in higher revenues of R2.3 billion compared with R2.1 billion and a net profit of R164 million compared with a net loss of R195 million for the previous quarter.

Headline earnings stood at 42 cents per share versus a loss of 43 cents per share for the December 2007 quarter.”

A number of transactions were signed during the quarter and conditions precedent have either being met or are in the process of being met. The most recent transaction which was executed in the fourth quarter of 2008 is the 50:50 joint venture agreement with Newcrest Mining Limited of Australia for the development of Harmony's PNG assets.

Newcrest will earn its 50% interest in the new joint venture by contributing a maximum of US$525 million which will be paid in two tranches. An initial US$180 million payment to acquire a 30.01% interest by 30 June 2008, together with a reimbursement to Harmony of US$45 million in project expenditure, and a farm-in commitment for the remaining 19.99% of US$300 million, to fund project expenditure up to the commencement of mining operations at Hidden Valley.

The introduction of a quality partner such as Newcrest with significant technical skills, particularly in copper mining and bulk underground mining techniques including block caving techniques will provide additional expertise to the existing Harmony team in PNG and will add to the development potential of the PNG assets.

The creation of this joint venture facilitates significant capital investment in the PNG assets and substantially removes Harmony's obligation to continue funding the development of these assets entirely from our own cash flows.

We have been made aware of a pending class action in the United States of America against Harmony whereby some ADR holders are seeking damages pertaining to the company's business practices. We have retained legal professionals in that country to advise Harmony.

For more details contact:

Graham Briggs
Chief Executive Officer
+27(0)11 411 2012
+27 (0)83 265 0274

Amelia Soares
General Manager, Investor Relations
+27 11 411 2314
+27 (0)82 654 9241

Annual report

Integrated annual report 2016
Integrated annual report 2016

(HTML & PDFs)

Investor brief

Harmony Investor brief, Sep 2017
September 2017 -
Harmony Investor brief

(PDF - 6.5MB)

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