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Harmony reports record prodcution growth for 7th year in row

Harmony Gold Mining Company Limited (NYSE: HMY JSE: HAR) today announced that for the 2003/04 financial year it produced a record 3,3 million ounces, up 11% from the 3,0 million ounces for the previous year. Even with the downscaling of some of the more marginal shafts, the benefits from CONOPS and the inclusion of Target Mine, the company plans to produce 3,6 million ounces during the 2004/05 financial year.

The impact of the strength of the South African Rand has impacted adversely on what can be described as a difficult but rewarding twelve months. Revenue in R/kg terms decreased by 12% from R96 663/kg to R85 219/kg. As a result of the growth in production, the company managed to sustain revenue levels. Working costs for the year totals R79 599/kg. Net operating profit for the year was 76% lower at R580 million. Cash operating profit margins decreased from 26% to 7%.

Although reporting cash earnings of 229 SA cents per share, mainly higher depreciation charges and restructuring costs resulted in a loss of 206 SA cents per share. For the 2003 financial year the company reported earnings of 359 SA cents per share.

For the June 2004 quarter, Harmony reported cash operating profits of R14,8 million from its “steady state” shafts. If the operating loss of R57,8 million from the shafts currently being restructured is included, the company made an operational loss of R43,0 million.

In US Dollar terms the gold price received was 5% lower at US$384/oz. The negative impact of the strengthening of the South African Rand on revenue was evident where the price received quarter on quarter was 8% lower at R81 543/kg.

Continuous Operations (CONOPS), although not completely implemented throughout the operations, has started to deliver benefits. Underground tonnage from the steady state shafts increased by 8% to 4 070 000 tonnes. Target accounted for 207 000 tonnes of the increase. The higher recovery grade of 5,28 g/t resulted in a 9% increase in gold produced from these shafts. As expected, due to the downscaling activities underway, shafts being restructured reported a 13% decline in production. Overall production increased by 7% from 24 735 kg to 26 373 kg.

Despite the inclusion of additional costs related to CONOPS, the company maintained the cash costs from its steady state operations at the R80 918/kg levels reported for the March 2004 quarter.

“We anticipate that the benefits from our re-structuring initiatives throughout the company will start to show during the September 2004 quarter and cash costs are expected to be reduced to below R80 000/kg. This will be the case despite the implementation of the annual wage increase of 7% for the forthcoming year, which is part of the two-year wage agreement negotiated during the previous year,” commented Bernard Swanepoel, Chief Executive.

On 16 July 2004, the company concluded a groundbreaking agreement with the National Union of Mineworkers. According to the agreement the interest of all stakeholders would be protected and Harmony could continue its rightsizing process whilst doing it in such a manner, that the objective of avoiding or minimising compulsory retrenchment of employees is achieved.

“The past six months has probably been the most difficult period we have experienced in our recent history. Over the past few years we have built up a track record of paying dividends in good and in challenging times and proved that we can survive and grow the company. Due to Harmony’s consistent ability to generate cash earnings, the board felt that a reduced final dividend of 30 SA cents per share would be appropriate at this time. Dividends declared for the 2003/04 financial year totals 70 SA cents,” commented Bernard.

During the quarter the company completed the acquisition of both Avgold and Abelle Limited. These companies will have a favourable impact on Harmony’s growth.

The company continued with the development and delivery of its five growth projects in South Africa. Capital expenditure increased by 68% from R519 million to R871 million during the year. These projects will deliver growth in production at higher recovery grades and lower cash working costs over the next few years. During the quarter the Board approved the Hidden Valley Project in Papua New Guinea.

“By continuing our capital expenditure programmes, we aim to optimise the value from these growth projects. The legacy of the South African mining industry has been one of spending capital on projects during times when the gold price is high, and mining them during low gold price cycles, thereby diluting returns. By being able to build these projects during difficult times, we plan to optimise the returns to all stakeholders during good times.” concluded Bernard.

Additional financial and production statistics

A year-on-year analysis of the company’s results indicate the following:

Year-on-year analysis of the company’s results
 YEAR ENDING
JUNE 2004
YEAR ENDING
JUNE 2003
% Variance
Production - kg103 12793 05411
 - oz’s3 315 5952 991 73411
Revenue - R/kg85 21996 663(12)
 - US$/oz38532917
Working costs - R/kg79 59971 146(12)
 - US$/oz360242(49)
U/g working costs - R/tonne433384(12)
     
Cash operating profit (R’m) 5802 374(76)
Cash operating profit margin 7%26%(73)
Cash earnings per share 2291 334(83)
EPS (cents) (206)359(157)

The company’s performance is highlighted in the following tables:

Performance highlights
QUARTER ENDINGJUNE 2004MARCH 2004% VARIANCE
Production   
Steady state shafts (kg)25 21223 3998
Restructured shafts (kg)1 1611 336(13)
Total production (kg)26 37324 7357
Total Production (oz)847 908795 2397
Revenue R/kg81 54388 277(8)
Revenue US$/oz384406(5)
Cash costs R/kg   
Steady state shafts80 91880 801-
Restructured shafts132 146118 760(11)
Total operations83 17382 852-
Cash costs US$/oz   
Steady state shafts381371(3)
Restructured shafts623546(14)
Total operations392382(3)
Exchange rate6,606,77(3)
For more details contact:

Bernard Swanepoel
Chief Executive
on +27(0)83 303 9922

or

Ferdi Dippenaar
Marketing Director
on +27(0)82 807 3684

Disclaimer

This document includes certain information that is based on management’s reasonable expectations and assumptions. These “forward-looking statements” include, but are not limited to, statements regarding estimates, intentions and beliefs, as well as anticipated future production, mine life, market conditions and costs. While management has prepared this information using the best of their experience and judgment, and in all good faith, there are risks and uncertainties involved which could cause results to differ from projections.

Cautionary Note to US Investors – The United States Securities and Exchange Commission (the “SEC”) permits mining companies, in their filings with the SEC, to disclose only those mineral deposits that a company can economically and legally extract or produce. We may use certain terms in this document, such as “resources”, that the SEC guidelines strictly prohibit us from including in our filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our public filings with the SEC available from us at Harmony Gold Mining Company Limited, Suite Nr. 1, Private Bag X 1, Melrose Arch, 2076 South Africa, for the attention of: Mr. Ferdi Dippenaar, Commercial Director. You can also obtain these filings from the SEC by calling 1-800-SEC-0330.

Annual report

Integrated annual report 2016
Integrated annual report 2017

(HTML & PDFs)

Investor brief

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

(PDF - 6.5MB)

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