London, Oct. 30, 2009 (PR Newswire UK Disclose) --
HARMONY
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 2009
Key features for the quarter
- 6% increase in total gold production higher than guidance provided
- 6% increase in underground tonnage
- 10% improvement in average recovery grade
- 5.2% increase in total R/kg costs
- mainly related to wages and electricity increases
- Capital efficiencies
- capital expenditure 17% less than previous quarter
- On track to delivering annual production target
- increased ounces
- improved performance at all shafts except Virginia and Evander
Financial summary for the first quarter ended 30 September 2009
Quarter Quarter
Sept June Q-on-Q
2009 2009 % variance
Gold produced kg 11 615 11 003 5.6
Gold produced oz 373 431 353 752 5.6
Cash costs R/kg 188 362 179 074 (5.2)
Cash costs US$/oz 753 661 (13.9)
Cash operating profit R million 552 743 (25.7)
Cash operating profit US$ million 71 88 (19.3)
Gold sold kg 11 471 10 829 5.9
Gold sold oz 368 800 348 160 5.9
Gold price R/kg 239 438 245 953 (2.69)
Exchange rate R/US$ 7.78 8.42 (7.6)
HARMONY'S ANNUAL REPORTS
Harmony's Annual Report, Notice of Annual General Meeting, its 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 2009 are
available on our website at www.harmony.co.za.
Chief Executive Officer's Review
Overview
The first quarter of FY10 marked the start of our `Four-phase Growth Path', the
objective of which is to produce more ounces from those assets we have and to
acquire further ounces through acquisitions and strategic partnerships.
Safety
We are deeply saddened by the death of eight of our colleagues during the
quarter and I extend my hearfelt condolences to their families, friends and
workmates.
Those who died were: Phakisa employee Tokelo Maliba, a loader driver; Masimong
employee Letsema Hlaeli, a team leader; Unisel employees Simiao Alexandre Bila,
a miner, Thabiso Belekwane and Tseliso Lekeka, both locomotive operators;
Evander employee Boy Sikobi, a rock drill operator; Elandsrand employee Samual
Tsabedze, a stope team leader; and Doornkop employee Clement Rantjelebane, an
engineering foreman.
Safety concerns are being addressed through: management leading by example,
improved communication and safety awareness campaigns. Our safety strategy and
initiatives have resulted in improved safety statistics quarter-on-quarter, but
we continue to strive for an even safer working environment.
Gold market
Primarily a South African gold producer, we continued to experience the
negative impact of a strong South African Rand, and a consequent lower average
Rand gold price received, on revenue. In the quarter under review, the Rand/US
Dollar exchange rate averaged R7.78/US$ compared with R8.42/US$ in the previous
quarter. The average Rand gold price received during the period declined by 3%
to R239 438/kg.
It is encouraging, nonetheless, to note the 7% improvement in the US Dollar
gold price from US$935/oz at the start of the quarter to US$996/oz at the
close. This serves to underpin our confidence in gold, particularly during
times of global economic stress.
None of the fundamentals supporting the metal have changed: overall demand is
little affected by increased scrap entering the market; central banks continue
to exercise prudence in respect of their holdings; and supply of newly-mined
gold is likely to continue to be constrained by fewer new discoveries, as well
as the costs and timeframes associated with exploration, development and
mining, and by the availability of funding for new projects.
Operational performance
Total gold production increased by 6% to 11 615kg, reflecting increases in gold
production from both underground and surface sources and exceeding guidance
provided in September 2009. While total throughput was 4% lower at 4 484 000t,
the average yield was 10% higher at 2.59g/t.
Underground gold production was 5% higher at 10 724kg, resulting from a 6% rise
in throughput from underground to 2 392 000t. The average underground yield was
slightly lower at 4.48g/t. With the exception of Evander and Virginia, all of
the underground operations delivered improvements in gold production.
Particularly noteworthy was Doornkop's 28% increase in gold production. This
was the consequence of a 45% increase in yield, due largely to a remarkable
improvement in development metres achieved, which will ensure that the build-up
plan on the South Reef Project is achieved.
A 26% increase in surface yield to 0.43g/t more than offset the impact of a 13%
decrease in surface throughput, resulting in a 10% increase in surface gold
production to 891kg. The Kalgold open-pit operation recorded a 16% increase in
gold production on the back of higher throughput due to improved plant
availability, while the surface retreatment operations, excluding Phoenix,
showed a 61% improvement in yield and delivered 14% more gold.
Financial performance
Higher gold production helped to overcome the negative impact of a 3% drop in
the average Rand gold price received to R239 438/kg. Consequently, total
revenue was 3% higher at R2.7 billion. After accounting for an 11% increase in
cash operating costs to R2.2 billion the main drivers of which were
electricity and labour cash operating profit was 26% down on the previous
quarter at R552 million.
Labour costs increased by R162 million when compared to the previous quarter,
due to annual wage increases implemented and a once off leave liability
adjustment of R35 million. Electricity costs increased by R135 million, R75
million of which was attributable to winter tariffs.
As previously advised, capital expenditure is beginning to edge downward as the
major projects reach advanced stages of development and start to come on
stream. The September quarter's capital expenditure was 17% down at R915
million.
Project progress
Our South African growth projects, Phakisa, Doornkop, Elandsrand and the
Tshepong decline are working towards contributing lower cost per unit ounces.
These projects are well on their way towards achieving their targets.
Despite some setbacks during the commissioning phase, good progress was made at
Hidden Valley in Papua New Guinea. Completion and commissioning of the conveyor
is scheduled during the December 2009 quarter, with production expected to ramp
up to commercial levels during the December 2009 quarter.
Exploration
Generally, exploration results were pleasing and the drilling programmes are on
track.
Investor Day
On 19 August 2009 Harmony held an Investor Day, the purpose of which was to
share with investors our planning parameters, strategic plan and outlook for
the next five years. We have spent R1.1 billion on capital development in the
past year, which is already showing results.
Corporate matters
It is pleasing to report that all agreements relating to our acquisition of the
Free State assets from Pamodzi Gold Free State (Pty) Limited (in provisional
liquidation) (Pamodzi Gold Free State) have been signed, following indications
of support from the main creditors being the Industrial Development Corporation
and the Unions, and the sanction of the High Court.
The waste rock dump agreement became unconditional on 16 September 2009 and R20
million in terms of this agreement was paid to Pamodzi Gold Free State. It is
likely that the remaining agreements will become unconditional towards the end
of November 2009, which will result in Harmony having to pay the balance of the
consideration price, being R380 million.
The assets, to be known collectively for now as the President Steyn Shafts, are
an excellent fit with our existing Free State assets. As reported previously,
we expect to be able to exploit numerous synergies between the two, and to
deliver significant profitable ounces into our growth profile as a result.
Harmony paid its first dividend in five years on 21 September 2009. We believe
that paying a dividend is a sign of a healthy company and, depending on
operational performance and revenue, we intend paying regular dividends to
shareholders.
Looking ahead
In the short term, we would expect gold production to increase marginally as
the various restructuring measures we have taken in respect of existing
operations continue to bed down and as our new projects start to deliver.
We will have to contend with the likelihood of continuing Rand strength for
now, and the negative consequences of this on Rand gold receipts. Indeed, we
may have to consider some restructuring at our lowest- grade, highest-cost
operations.
In terms of costs, while we are into summer and free for a couple of quarters
from higher winter electricity tariffs, the spectre of further extraordinary
price hikes from power utility Eskom to fund its growth imperative looms large.
In addition, our wage bill will reflect the impact of the recently agreed
two-year wage settlement.
Our weapon in managing the strong Rand and rising costs, must be improved
productivity in short, we need to work harder and smarter. Our focus remains
producing more profitable ounces.
Looking further ahead, we remain bullish on the fundamentals of the gold sector
in the medium and longer term. This is what encourages us to continue to pursue
our four-phase growth path:
- optimising our asset portfolio;
- improving operational efficiency and productivity;
- making further acquisitions and entering into other strategic partnerships
when it makes sense to do so; and
- growing organically.
Chief Executive Officer
Graham Briggs
Safety and health
Safety
Safety remains a key focus at all of Harmony's operations. It is with deep
regret that we report that eight fatalities occurred during the September 2009
quarter. Falls of ground were the main cause of most of these incidents. Our
management teams continue to roll out effective behavior-based safety
programmes to ensure that safety standards are adhered to and that best
practices are applied at all workplaces.
We are pleased to announce that, during the September quarter, there was an
improvement in the key safety rates compared to the previous quarter. The Lost
Time Injury Frequency Rate (LTIFR) improved by 26% compared to the actual
figure for the previous year (from 9.35 to 6.91) and by 17% quarter-on-quarter
from 8.35 to 6.91, the best rate ever achieved at Harmony. A single-digit LTIFR
was achieved for the fourth consecutive quarter. The year to date Reportable
Injury Frequency Rate (RIFR) improved by 29% compared to the actual figure for
the previous year (from 4.97 to 3.55) and by 20% from 4.43 in the June 2009
quarter to 3.55 in the current quarter; again, the best ever achieved RIFR at
Harmony. Although the Fatality Injury Frequency Rate (FIFR) declined 52%
compared to the actual figure for the previous year (from 0.21 to 0.32), an
improvement of 9% was achieved for the quarter under review at 0.32 compared
with a FIFR of 0.35 in the previous quarter. These improvements in safety rates
bear testimony to the emphasis placed on safety at Harmony and we are starting
to see the positive effects of behaviour change among our employees.
Harmony's management team is dedicated to ensuring that these safety
improvements are sustainable and to ensure that through the continued
implementation of effective behaviour-based safety programmemes at all our
operations, the safety culture and mindset of safety is maintained throughout
the company.
The following operations achieved outstanding safety results:
- Evander 8 Shaft 2 000 000 fatality free shifts
- Doornkop Shaft 1 000 000 fatality free shifts
- Merriespruit 1 Shaft 750 000 fatality free shifts
- Evander Plant 500 000 fatality free shifts
Health
The well-being and healthcare of our employees is another key focus for the
company. Harmony continues to consolidate the various components of healthcare
that will contribute to the well-being of our employees and improve
productivity in the company in the longer term.
In terms of occupational hygiene, noise and dust are the key problem areas.
Much is being done to curb the impact of these and ensure that our employees
are protected against them in their workplaces. During the quarter under
review, implementation of personalised hearing protection devices (HPDs) was
90% completed. The installation of sound attenuators on mechanical loaders has
been scheduled and some of the operations have already begun installation of
the devices.
CONDENSED CONSOLIDATED INCOME STATEMENT (Rand)
Quarter ended
September June
2009 2009
(Unaudited) (Unaudited)
Note R million R million
Continuing operations
Revenue 2 747 2 663
Cost of sales 2 (2 604) (2 863)
Production cost (2 195) (1 920)
Amortisation and depreciation (350) (546)
Impairment of assets (330)
Employment termination and
restructuring costs
Other items (59) (67)
Gross profit/(loss) 143 (200)
Corporate, administration and other
expenditure (88) (99)
Exploration expenditure (60) (77)
Other (expenses)/income net (72) (74)
Operating (loss)/profit (77) (450)
Profit from associates 31 49
Profit on sale of investment in associate
Impairment of investment in associate
Fair value movement of listed
investments 12
Profit on sale of listed investments 2
Impairment of investments (2)
Investment income 71 108
Finance cost (35) (20)
(Loss)/profit before taxation (10) (301)
Taxation (19) 547
Net (loss)/profit from continuing
operations (29) 246
Discontinued operations 3
(Loss)/profit from discontinued
operations (8)
Net (loss)/profit (29) 238
(Loss)/earnings per ordinary share
(cents) 4
(Loss)/earnings from continuing
operations (7) 58
(Loss)/earnings from discontinued
operations (2)
Total (loss)/earnings per ordinary
share (cents) (7) 56
Diluted (loss)/earnings per ordinary
share (cents) 4
(Loss)/earnings from continuing
operations (7) 58
(Loss)/earnings for discontinued
operations (2)
Total diluted (loss)/earnings per
ordinary share (cents) (7) 56
Year ended
September1 June
2008 2009
(Unaudited) (Audited)
R million R million
Continuing operations
Revenue 2 682 11 496
Cost of sales (2 377) (9 836)
Production cost (1 874) (7 657)
Amortisation and depreciation (308) (1 467)
Impairment of assets (152) (484)
Employment termination and restructuring costs (12) (39)
Other items (31) (189)
Gross profit/(loss) 305 1 660
Corporate, administration and other expenditure (91) (362)
Exploration expenditure (51) (289)
Other (expenses)/income net 524 864
Operating (loss)/profit 687 1 873
Profit from associates 1 12
Profit on sale of investment in associate 1 1
Impairment of investment in associate (112) (112)
Fair value movement of listed investments (101)
Profit on sale of listed investments
Impairment of investments
Investment income 77 444
Finance cost (85) (212)
(Loss)/profit before taxation 569 1 905
Taxation (237) (196)
Net (loss)/profit from continuing operations 332 1 709
Discontinued operations
(Loss)/profit from discontinued operations 70 1 218
Net (loss)/profit 402 2 927
(Loss)/earnings per ordinary share (cents)
(Loss)/earnings from continuing operations 83 413
(Loss)/earnings from discontinued operations 17 294
Total (loss)/earnings per ordinary share (cents) 100 707
Diluted (loss)/earnings per ordinary share
(cents)
(Loss)/earnings from continuing operations 82 411
(Loss)/earnings for discontinued operations 17 293
Total diluted (loss)/earnings per ordinary share
(cents) 99 704
The accompanying notes are an integral part of these condensed consolidated
financials statements.
1 The comparative figures are re-presented due to Mount Magnet being
reclassified as part of continuing operations. 