Harmony sees the benefit of higher gold price
Harmony Gold Mining Company Limited (NASDAQ/NYSE: HMY JSE: HAR) today announced its results for the December 2005 Quarter. The company improved gold production by 6% to 20 316 kg and managed to reduce working cost in R/Kg terms by 3% to R83 154. The average gold price received for the quarter improved by 11% to R102 333. This led to an operating profit of R389.4 million, compared to a profit of R118.8 million during the September quarter, an improvement of 277%. The operating profit margin therefore improved from 6.7% in the September quarter to 18.7% during the December quarter. Cash earnings per share came to 99 cents and basic earnings per share moved from a loss of 82 cents in the previous quarter to positive earnings of 6 cents.
As a result of the improved operational performance and the disposal of the Gold Fields shares, the company’s cash balance improved from R971 million in September to R 2 914 million at the end of December.
At the Quality Mines underground tons increased by 8% to 1 574 million tons and recovery grades improved by 2% to 6.1 g/t. This led to gold production improving by 10% to 9 604 kg. Working cost in R/kg terms was reduced by 3% and came to R74 725/kg. Cash profit improved by 106% to R263.7 million.
The Leveraged Operations improved their volumes by 3%, but grades improved by more than 10%. Gold production was therefore up by 14% to 6 113 kg. Although real cost went up by 4%, unit costs came down by 10% to R90 074. As a result of improved volumes, grades and revenue received, a profit of R76 million was realised compared to a loss of R45.8 million in the previous quarter.
The production grades at the Surface Operations were impacted on by the Kalgold operations. Mining operations in the DZone was affected by a slip that took place on the eastern wall. The mining focus therefore moved to the AZone which was of lower grades than the DZone. It is expected that normal mining operations will resume during the June quarter.
On a shaft basis there were a number of shafts that performed much better than the previous quarter. The reintroduction of CONOPS in the Free State had a very positive effect on production volumes and shafts like Masimong and Tshepong improved their tons milled by 12% and 11% respectively. Bambanani which forms part of the Leveraged Operations returned to profitability when they could finally move back into the higher grade areas which were affected by fires during the March 2005 quarter. Bambanani made a profit of R28.3 million. Evander 2 and 5 shaft also managed to return to profitability during the quarter.
The Australian operations performed very similarly to the previous quarter and the impact of the improved gold price was not realized fully. Mt Magnet was the star performer with an increase of 11% in production volumes. Mt Marion at South Kal mines achieved 2 years lost time injury free shifts. Another 10 000 ounces was closed out of the hedge during the quarter.
All growth projects have continued as planned during the quarter. At the Hidden Valley project the road construction has reached the halfway point and it is envisaged that the road will reach the mine construction site by the end of May 2006. Preparation towards the completion of the prefeasibility at Wafi and Golpu is also continuing and it is expected to be completed by December 2006.
“Despite the low R/kg gold price environment that we had to contend with during the last two years and the major restructuring exercise we went through, Harmony has stuck to its strategy to invest in its growth projects. I believe the company is now well positioned to pass the benefits from the improved gold price and the increased profitability through to our shareholders” said Bernard Swanepoel, Chief Executive.
The performance of the company is best highlighted in the following table:
| December 2005 | September 2005 | % Variance | ||
|---|---|---|---|---|
| Production | – kg | 20 316 | 19 220 | 6 |
| Production | – oz | 653 171 | 617 902 | 6 |
| Revenue | – R/kg | 102 333 | 91 888 | 11 |
| Revenue | – US$/oz | 487 | 440 | 11 |
| Cash cost | – R/kg | 83 154 | 85 718 | 3 |
| Cash cost | – US$/oz | 396 | 410 | 3 |
| Exchange rate | – USDZAR | 6.53 | 6.50 | 0 |
| December 2005 | September 2005 | |
|---|---|---|
| Cash operating profit (Rm) | 389.4 | 118.8 |
| Cash operating profit margin | 18,7% | 6,7% |
South African underground working costs increased from the R1 391,4 million in the September 2005 quarter to R1 451,2 million in the December period on the back of improved volumes.
On a group basis, working costs increased by 3% or R42 million from R1 647,4 million to R1 689,4 million.
| Cash operating profit –Sept 2005 | R118,8 million |
| – volume change | R 86,5 million |
| – working cost change | (R 42) million |
| – recovery grade change | R 14,1 million |
| – gold price change | R212,0 million |
| – net variance | R270,6 million |
| Cash operating profit – Dec 2005 | R 389,4 million |
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
Vusi Magadana
Office: +27 11 684 0149
Mobile: +27(0)72 157 5986