Harmony continues to invest in its growth
Harmony Gold Mining Company Limited (NYSE: HMY JSE: HAR) today announced that its restructuring initiatives had been completed and it was well positioned to optimise on the current higher R/kg gold price. However, for the September quarter cash operating profit decreased by 36% to R118,8 million, mainly due to production declining by 3% to 617 936 oz.
“Operationally the quarter was characterised by the impact of the five day gold industry wage strike, which came at a net cost of R60,5 million and finalising the restructuring of our Free State region. From an operational perspective we look forward to the December quarter, which we expect to be the first normalised quarter in 18 months.” commented Bernard Swanepoel, Chief Executive.
On a group basis, working costs increased by only 3% or R48,0 million from R1 599 million to R1 647 million, following the implementation of wage increases. Due to the lower volumes, cash operating costs increased by 7% to R85 718/kg. During September 2005, the company reported working costs below R78 000/kg. This trend is expected to continue as operations normalise during the December quarter.
“We have significantly reduced the number of our employees and stopped the mining of unprofitable reserves to enhance our cashflows. To date we have not seen the planned higher volumes and recovery grades. “We are now well positioned to deliver the planned production growth in the forthcoming quarter.” continued Bernard. On the positive side, unit revenues increased by 2% from R89 711/kg to R91 892/kg, largely as a result of the weaker Rand and the stronger US Dollar gold price. Cash earnings for the year to date total 30 cents per share. Fully diluted loss per share for the financial year to date totals 86 cents per share.
During the quarter and to bring Harmony into line with its industry peer group, it has started capitalising its development expenses. The impact of this change is that the operating cost of Harmony was reduced by R136 million for the September 2005 quarter. This equates to 8% of total cost or R7 075 per kilogram. Capital expenditure however increased with a similar amount.
“Despite the harsh financial and operating conditions encountered in the past 18 months the company has remained focused to complete and implement its growth strategy. Accordingly expenditure on all of the local and international growth projects continued as planned. In the past quarter R140m was spent on project capital and a further R226m on operational capital. Good progress continues to be made at our projects locally. Construction of our Hidden Valley open pit mine in PNG got underway during the quarter with the main access road being upgraded to allow project activity to increase.” concluded Bernard Swanepoel.
| Month ending | September 2005 | August 2005 | July 2005 |
|---|---|---|---|
| Tonnes milled (‘000) | 1 626 | 1 427 | 1 547 |
| Kg’s | 7 154 | 5 743 | 6 322 |
| R/kg costs | 77 734 | 93 952 | 87 258 |
| R/tonne costs | 342 | 378 | 357 |
| US$/oz costs | 372 | 450 | 418 |
The impact of the national strike and implementation of the restructuring initiative at our Free State operations is best reflected in the month by month analysis of the company’s performance.
| Cash operating profit – June 2005 | R184,9 million |
| volume change (tonnes) | (R42,9) million |
| working cost change (%) | (R47,7) million |
| recovery grade change (g/t) | (R16,1) million |
| Rand gold price change (R/kg) | R40,6 million |
| net variance | (R66,1) million |
| Cash operating profit – Sept 2005 | R118,8 million |
| Earnings per share (SA Cents) | Quarter ended September 2005 | Quarter ended June 2005 |
|---|---|---|
| Cash earnings | 30 | 47 |
| Basic loss | (82) | (283) |
| Headline loss | (86) | (94) |
| Fully diluted loss | (82) | (283) |
| Adjusted Headline loss* | (63) | (94) |
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
or
Investor Relations Officer
Vusi Magadana
Office: +27 11 684 0149
Mobile: +27(0)72 157 5986
Unless the context otherwise requires, the definitions contained in the offer document or the registration statement sent to Gold Fields shareholders have the same meaning in this announcement.
The directors of Harmony accept responsibility for the information contained in this announcement. To the best of the knowledge and belief of the directors of Harmony (who have taken all reasonable care to ensure that such is the case), the information contained in this announcement is in accordance with the facts and does not omit anything likely to affect the import of such information.
In connection with the proposed acquisition of Gold Fields, Harmony has filed a registration statement (File no: 333120975) on Form F4 (which was declared effective by the Securities and Exchange Commission (“SEC”) on February 28, 2005) and filed a final prospectus, dated February 25, 2005, with the SEC pursuant to Rule 424(b)(3) of the Securities Act of 1933, to register the Harmony ordinary shares (including Harmony ordinary shares represented by Harmony American Depositary Shares (“ADSs”)) to be issued in exchange for Gold Fields ordinary shares held by Gold Fields shareholders located in the United States and for Gold Fields ADSs held by Gold Fields shareholders wherever located, as well as a Statement on Schedule TO. Investors and holders of Gold Fields securities are strongly advised to read the registration statement, the related exchange offer materials and the final prospectus, the Statement on Schedule TO and any other relevant documents filed with the SEC, as well as any amendments and supplements to those documents, because they contain important information. Investors and holders of Gold Fields securities may obtain free copies of the registration statement, related exchange offer materials, the final prospectus and the Statement on Schedule TO, as well as other relevant documents filed or to be filed with the SEC, at the SEC’s web site at www.sec.gov. Investors and holders of Gold Fields securities will receive information at an appropriate time on how to obtain transactionrelated documents for free from Harmony or its duly designated agent. The final prospectus and other transactionrelated documents may be obtained for free from MacKenzie Partners, Inc., the information agent for the U.S. offer, at the following address: 105 Madison Avenue, New York, New York 10016; telephone 1 (212) 929 5500 (call collect) or 1 (800) 322 2885 (tollfree call); email proxy@mackenziepartners.com.
This communication is for information purposes only. It shall not constitute an offer to purchase or exchange or the solicitation of an offer to sell or exchange any securities of Gold Fields or an offer to sell or exchange or the solicitation of an offer to buy or exchange any securities of Harmony, nor shall there be any sale or exchange of securities in any jurisdiction in which such offer, solicitation or sale or exchange would be unlawful prior to the registration or qualification under the laws of such jurisdiction. The distribution of this communication may, in some countries, be restricted by law or regulation. Accordingly, persons who come into possession of this communication should inform themselves of and observe these restrictions. The solicitation of offers to buy Gold Fields ordinary shares (including Gold Fields ordinary shares represented by Gold Fields ADSs) in the United States will only be made pursuant to a prospectus and related offer materials that Harmony has sent to holders of Gold Fields securities. The Harmony ordinary shares (including Harmony ordinary shares represented by Harmony ADSs) may not be sold, nor may offers to buy be accepted, in the United States prior to the time the registration statement becomes effective. No offering of securities shall be made in the United States except by means of a prospectus meeting the requirements of Section 10 of the United States Securities Act of 1933, as amended.