Higher gold price more than doubles cash operating profit
Harmony Gold Mining Company Limited (NASDAQ/NYSE: HMY JSE: HAR) today announced its results for the June 2006 quarter. Cash operating profit increased from R305.6 million in the March 2006 quarter to R645.2 million (111.1%) in the June 2006 quarter. The main reason for this improvement was as a result of the revenue received, which went up by 19% and tighter cost control that did not go up commensurately with the increased volumes that were mined. Cash earnings showed a 109% improvement, from 78 cents to 163 cents per share for the June quarter.
On the revenue side the gold price received for the June quarter improved from R110 399/kg to R131 358/kg. This resulted in the cash operating margin improving from 15,9% to 28,5%. Gold production decreased with 1.3% to 17 243kg quarter on quarter. “Harmony once again demonstrated that we offer to our shareholders significant upside potential when the gold price rises. We have stepped up our development rates to give us more mining flexibility, which in turn will allow us to take advantage of the higher gold price. This is a process that will continue for the next 18 months, but we expect to start reaping the benefits by the end of the fiscal year.” Commented Bernard Swanepoel, Chief Executive.
The performance of the company is best highlighted in the following table:
| June 2006 | March 2006 | % Variance | ||
|---|---|---|---|---|
| Production | – kg | 17 243 | 17 464 | (1) |
| Production | – oz | 554 373 | 561 477 | (1) |
| Revenue | – R/kg | 131 358 | 110 399 | 19 |
| Revenue | – US$/oz | 631 | 559 | 13 |
| Cash cost | – R/kg | 93 968 | 92 914 | (1) |
| Cash cost | – US$/oz | 452 | 470 | 4 |
| Exchange rate | – USDZAR | 6.47 | 6.15 | 5 |
| June 2006 | March 2006 | |
|---|---|---|
| Cash operating profit (Rm) | 645,2 | 305,6 |
| Cash operating profit margin | 28,5% | 15.9% |
| Cash operating profit –Mar 2006 | R 305,6 million |
| – volume change | R 148,6 million |
| – working cost change | R 2,4 million |
| – recovery grade change | (R 172,3) million |
| – gold price change | R 360,9 million |
| – net variance | R 339,6 million |
| Cash operating profit – Jun 2006 | R 645,2 million |
South African operations
Quality assets – Underground tonnes increased by 6.3% to 1 618 million tonnes during the quarter, whilst recovery grades decreased by 7.5% to 5.26 g/t. The quality operations received an average gold price of R132 140, which led to a profit margin of 39.1%. Operating profit increased by 79.0% to R439.9 million compared to a profit of R245.7 million in the March quarter.
Leveraged assets – Volumes increased by 6.1% to 1 119 million tonnes and the recovery grade decreased by 10.0% to 4.26 g/t. The leveraged operations received an average gold price of R131 833 for the quarter, giving them a profit margin of 14,23%. The Leverage operations had an operating profit of R89.4 million compared to R36.3 million in the March quarter, an improvement of 146.3%.
Surface operations – Volume from surface sources increased by 34.6% to 1 054 million tones during the quarter, whilst recovery grades decreased by 32.7% to 0.66g/t. Gold production commensurately dropped by 8.6%. Costs were well contained and operating profit climbed up to R36.1 million, an improvement of 177.7%.
Growth projects – The Company remained focused on rebuilding its growth strategy on their projects. A total of R134 million was spent on capital projects and the forecast for the September quarter amounts to R209 million. The numbers reported includes a total of 39 000t of waste which was hoisted through the reef orepass system at Elandsrand compared to 43 000t in the March quarter. If this waste is excluded, the recovery grade goes up to 3.98g/t compared to 4.93g/t in the March quarter.
Australasia operations
Australia – The Australian operations generated an operating profit of A$ 12.5 million in the current quarter compared to A$ 7 million in the previous quarter. This is primarily the result of increased gold production from 49,608 oz in the March quarter to 59,286 oz this quarter in a continued high gold price environment.
PNG – The access road to Hidden Valley reached mining lease boundary during the quarter. The road will now be upgraded to final specifications, which will allow on mine earthworks to start.
The resource model for Wafi/Golpu has been upgraded with an increase in copper of 266 000t (20%) and an increase in contained gold of 700 000oz (35%). The new Golpu model has been reviewed and endorsed by mining consultancies RSG Global and SRK. The additional resource inventory has significant potential to positively impact the economical robustness of the Golpu project.
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.
For more details contact:
Bernard Swanepoel
Chief Executive
on +27(0)83 303 9922
or
Philip Kotze
Executive, Investor Relations
on +27(0)83 453 0544
Investor Relations Officer
Lizelle du Toit
Office: +27 11 684 0149
Mobile: +27(0)82 465 1244