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Trading statement for the year ended 30 June 2017

Johannesburg, Monday, 14 August 2017. In terms of paragraph 3.4(b) of the Listings Requirements of the JSE Limited (JSE), a company listed on the JSE is required to publish a trading statement as soon as they are satisfied that a reasonable degree of certainty exists that the financial results for the period to be reported upon next will differ by at least 20% from the financial results for the previous corresponding period.

Shareholders of Harmony are advised that a reasonable degree of certainty exists that earnings for the year ended 30 June 2017 will be lower than for the year ended 30 June 2016 (“the previous comparable period”), primarily due to:

  • an impairment of approximately R1.7 billion (US$131 million) recorded following the annual life-of-mine planning process (added back to headline earnings), and
  • a provision raised for a possible silicosis class action settlement of R917 million (US$70 million) pre–tax (post-tax: R762 million (US$58 million)) (not added back to headline earnings);

which will reduce the net profit of the company, but will not have an impact on reported cash balances and free cash flow.

Harmony’s year-on-year financial performance and cash flow was strengthened by gains recognised on the gold and currency hedges (included in headline earnings).

Headline earnings per share (“HEPS”) are expected to increase to between 276 and 320 South African cents per share, which is between 25% and 45% higher than the headline earnings of 221 South African cents per share reported for the previous comparable period.  In US dollar terms, HEPS are expected to be between 20 and 23 US cents per share, which is between 35% and 55% higher than the headline earnings of 15 US cents per share reported for the previous comparable period.

Earnings per share (“EPS”) are expected to decrease to between 65 and 109 South African cents per share, which is between 70% and 50% lower than the 218 South African cents  per share reported for the previous comparable period, due to the impairment and the provision for silicosis. In US dollar terms, EPS are expected to be between 5 and 8 US cents per share, which is between 70% and 50% lower than the earnings of 15 US cents per share reported for the previous comparable period.

The financial information on which this trading statement has been based has not been reviewed or reported on by Harmony’s external auditors.

Harmony will publish its financial results for the year ended 30 June 2017 on Thursday, 17 August 2017.

Further details on the impairment and silicosis provision are as follow:

Impairment

The life-of-mine plans form the basis for assessing whether any impairment against the carrying value of an asset is required. These values are informed by a number of factors, including estimates of future gold prices and exchange rates and operating and capital cost estimates.

Impairments have been recorded on:

  • Target 1, following the reduction in the life of mine from ten years to seven years;
  • a lower recoverable amount for Kusasalethu following a reduction in declared resources as a result of the decision to not develop another decline during FY17, and
  • additional capital expenditure on improving environmental conditions at Tshepong (which now includes Phakisa).

Silicosis class action provision

Harmony expects to record a provision of R917million (US$70 million) at 30 June 2017, representing the company’s share of the estimated cost of a possible settlement of the silicosis class action litigation and related costs. The ultimate outcome of the silicosis class action litigation remains uncertain, with a possible failure to reach settlement with the claimants or to obtain the requisite court approval for a potential settlement. The provision to be recorded in the financial statements is consequently subject to adjustment or reversal in the future, depending on the progress of the working group discussions and stakeholder consultations, and the ongoing legal proceedings.

In November 2014, a gold mining industry working group was formed to address issues relating to the compensation and medical care for occupational lung diseases in the gold mining industry in South Africa. The working group comprises Harmony, African Rainbow Minerals Limited, Anglo American South Africa Limited, AngloGold Ashanti Limited, Gold Fields Limited and Sibanye Gold Limited (collectively “the working group”).

The working group engaged all stakeholders including government, organised labour, other mining companies and legal representatives of claimants who have filed legal suits against the companies. These engagements have sought a comprehensive solution to address legacy compensation issues and future legal frameworks that is fair to past and current employees and enables companies to continue to be sustainable over the long term.

As a consequence of the progress of negotiations between the working group and affected stakeholders, an estimate of the cost to the companies of a potential settlement of the class action claims and related costs can be determined. The companies in the working group continue to defend the legal proceedings filed against them. Harmony and the other respondents are appealing the ruling which has been set down for hearing from 19 to 23 March 2018.  The negotiations with the claimants’ lawyers are confidential and the working group companies are accordingly not able to provide any details of the negotiations. 

For more details contact:

Lauren Fourie
Investor Relations Manager
+27 (0)71 607 1498 (mobile)

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

Sponsor:
J.P. Morgan Equities South Africa Proprietary Limited.

Harmony Gold Mining Company Limited (Harmony), a world-class gold mining and exploration company, has operations and assets in South Africa and Papua New Guinea (PNG). Harmony, which has more than 60 years’ experience in the industry, is the third largest gold producer in South Africa. Our assets include one open pit mine and several exploration tenements in PNG, as well as 9 underground mines and 1 open pit operation and several surface sources in South Africa. In addition, we own 50% of the significant Golpu project in a joint venture in PNG.

The company’s primary stock exchange listing is on the JSE with a secondary listing on the New York Stock Exchange. The bulk of our shareholders are in South Africa and the United States. Additional information on the company is available on the corporate website,, www.harmony.co.za.